Mobile and social apps and other factors have helped create a world of retail price transparency where price comparisons across multipe channels are easy and instantaneous. Retailers are meeting this challenge to e-commerce and brick-and-mortar pricing strategies in multiple ways: innovative and cross-channel pricing, targeted marketing and promotions, exclusive products and other technology-driven price optimization solutions.

1. • Cognizant 20-20 Insights
Responding to a Price Transparent
World: A Paradigm Shift for Retailers
Evolving technology and changing consumer behavior is creating
pricing transparency that winning retailers must come to grips
with to survive if not thrive in the near and long term.
Executive Summary enhancing their private label development
activities and collaborating with well-known
With the rapid adoption of smart phones and
designers to offer exclusive merchandise. This
tablets and the growing use of mobile applica-
can add to the uniqueness of the retailer’s value
tions, consumers are more aware than ever of
proposition, and make it harder for shoppers to
price differences, not only among retailers, but
make direct price comparisons. Yet at the same
across their various channels. They know where
time, retailers must continue to offer the quality,
the best deals are to be had and are armed with
features and value that their customers have
enough pricing particulars to force rivals to match
come to expect.
them. Retailers can no longer set prices and price
match policies for their brick-and-mortar and Given the languishing global economy, retailers
online channels in silos or with minimal regard for need to understand that many of today’s
competitors. They must face this new era of price shoppers are aggressively seeking the best
transparency head-on. price; therefore, price matching is becoming a
consumer expectation — and a core customer
In today’s boundaryless environment, retailers
service capability that retailers must embrace.
should anticipate that consumers have easy
They need to create a seamless and consistent
access to information and any discrepancies will
experience for providing information on product,
be noticed and exploited. Retailers worldwide
prices and services, and respond just in time to
face the same challenge — staying competitive in
customers’ price challenges. They must develop
a world of price transparency. In response, many
new ways to offer unique/customized offers by
are taking action, such as defining cross-channel
leveraging ever-increasing amounts of customer
pricing strategies, refining price matching and
data, so the shopping focus can shift from price
price adjustment policies and more explicitly
to a value exchange equally important to both
articulating their customer value proposition
consumer and retailer.
to proactively respond to consumers’ increased
awareness of price differences. In today’s dynamic retail environment, one of
the biggest challenges is to build and retain trust
Retailers are also focusing on creating differenti-
among customers. As a result, retailers must
ated and exclusive offerings to their customers,
cognizant 20-20 insights | july 2012

2. derive new ways to maintain the balance between sold every month in the U.S. alone,1 shoppers are
maximizing profits and creating and retaining increasingly turning towards a growing number of
customer loyalty by rethinking traditional pricing mobile apps and price comparison services to find
strategies and enhancing their promotion capa- the best prices while they are shopping in-store
bilities. and online. A recent study conducted by the
marketing and public relations firm Walker Sands
Price Transparency: Moment of Truth Communications confirms the growing usage of
A typical shopping scenario sheds light on mobile technology: traffic stemming from mobile
the growing challenges of price transparency. devices to various Web sites across industries,
Jennifer scanned a product for a price in a leading including retail, more than doubled, to 13% of
retail store; it was $180 on the shelf. Checking the total Web traffic in Q4 2011 from 6% in Q4 2010.2
price of the same product on the retailer’s Web
site using her smartphone, it was to her surprise Customer Shopping Behavior
only $115. So, she ordered it via smartphone for Shoppers are on a constant lookout for relevant
in-store pickup, saving $65 in the process! information such as prices, product specifi-
cations, and user reviews to assist them in
While this is a fabricated story, situations like making informed decisions. According to the
this occur more often than you think. Thanks to RIS/Cognizant 2012 Shopper Experience Study,
the rapid adoption of smartphones and tablets, competitive prices and promotions is the most
and the growth of mobile apps, shoppers today important influencer in both in-store and online
have access to price information anytime and purchase decisions (see Figures 1 and 2).3
anywhere in the world. With a million smartphones
Understanding Buying Influences
How much do each of the following factors influence your in-store purchase decisions?
4.4
Competitive price and promotions 4.4
Right product selection 4.2
4.1
Fast, easy check-out 3.7
3.9
Quality of customer service 3.9
3.7 ■ Specialty Products
Visibility and accessibility of products 3.6 ■ Consumable Products
3.6
Ease of returning products 4.0
3.5
Compelling loyalty program 3.2
3.3
Other customers’ online ratings and reviews 3.3
2.7
Comments about the product on social media 2.6
2.3
0 1 2 3 4 5
Not an Influence Extremely Influential
Source: RIS/Cognizant 2012 Shopper Experience Study
Figure 1
How much do each of the following factors influence your online purchase decisions?
Competitive price and promotions 4.3
Right product selection 4.2
Ease of returning products 3.9
Fast, easy check-out 3.9
Ease of accessing customer service 3.7
Other customers’ online ratings and reviews 3.4
Consistent experiences and information 3.4
online and on mobile devices
Compelling loyalty program 3.3
Personalized experiences 3.0
0 1 2 3 4 5
Not an Influence Extremely Influential
Source: RIS/Cognizant 2012 Shopper Experience Study
Figure 2
cognizant 20-20 insights 2

3. In the current boundaryless shopping world, researching a product while in a physical store
consumers are becoming increasingly price- they look for competitive prices on Amazon. An
sensitive and less loyal, continuously trolling for equal number replied that they look for com-
the best deals and more aggressive in seeking/ petitive pricing at online retailers other than
asking for a lower price. The Amazon.5
The shopping shopping journey is becoming • A study by AlixPartners found that 37% of
more omni-channel and
journey is becoming nonlinear in nature. Shoppers smartphone owners used a mobile price search
app while in a store, and 25% of those that
more omni-channel may begin their journey at used an app then went on to purchase the item
and nonlinear a store, use a smartphone/ from a nearby store at a lower price.6
tablet to check online prices
in nature. and deals, read reviews and The use of price comparison tools/apps is also on
social “likes” on the product, the rise. A survey conducted by L.E.K found that
go online again to make a purchase and then a substantial number of consumers used a price
go back to the store to pick up the product. comparison tool while standing in store aisles.7
This growing trend is exposing the customer to Popular price comparison apps such as eBay
different prices by geography and channel within Inc.’s RedLaser and TheFind had 16 million and 1.4
a retailer’s chain and it colors their impressions million downloads, respectively, in 2011. TheFind
and experiences with the retailer. reports that its mobile app averaged 18 to 20
million price checks each month in 2011, up from
The Norm, Not the Exception 13 to 15 million checks per month in 2010.8
Numerous studies highlight the fact that shoppers
are becoming increasingly active in comparing Retailers’ Challenges
prices. Among them: According to research conducted by RSR in 2011,
retailers believe that “increased price transparen-
• A study conducted by consultancy IDC Retail cy” is among the top business challenges driving
Insights reveals that roughly 45% of shoppers pricing strategies. Moreover, its importance
with smartphones used them to perform due jumped markedly from 2010 to 2011 (see Figure 3).9
diligence on a store’s prices.4
Retailers’ abilities to use price as a key differentia-
• “The 2011 Social Shopping Study” published by
the e-tailing group notes that mobile phones tor and to price differently across channels is being
are one of the most popular influencers in seriously compromised. The Internet and mobile
shoppers’ purchase decisions. Approximately apps have conspired to break down the four walls
36% of respondents mentioned that when of the retail store. Shoppers know what and where
Transparency Drives Pricing Strategy
46%
Increased price senstivity of consumers 58%
Increased pricing aggresiveness from competitors 38%
48%
Increased price transparency — the impact of 11%
comparative pricing shopping 40%
Need to protect our brand’s price image 28%
38%
N/A ■ 2011
Increased promotional intensity of competitors 32% ■ 2010
6%
Need to provide consistency in price across channels 32%
7%
Need to provide more localized pricing 14%
Respond to segment blurring 16%
10%
0 10 20 30 40 50 60
Source: Optimizing Price in a Transparent World, RSR Research Benchmark Report 2011
Figure 3
cognizant 20-20 insights 3

4. the lowest price is and are willing to ask for it with dependence of prices and policies in different
the expectation of receiving it. The ability for store channels and locales. Rather than just setting
associates to match prices is the second most a chain price for all channels, or having each
desired area of store associate improvement, after channel set its prices independently, retailers
“better customer service skills,” and far ahead of are taking a holistic view of pricing and policies
the third place choice (see Figure 4). across the enterprise, and are understand-
ing what their competitors do in different
Also, according to research conducted by the channels, even though they may not directly
online review site Digital Trends in 2011, the search compete in all channels. Pricing, price-match
for better pricing is a major reason for online cart and return policies must be complementary
abandonment. The findings indicate that 27% of across all channels, rec-
shoppers abandon their cart to compare prices ognizing that from the Technology has
on other sites and 25% abandon due to the price customer’s standpoint it’s
being too high.10 Today’s connected consumers all one company.
proven to be both a
know how to find the price they want to pay! curse and a blessing
• Innovative pricing
Responding to Increasing Price strategies: During the for retailers.
Transparency 2011 holiday season,
several retailers offered innovative price-
Technology has proven to be both a curse and
matching and price-adjustment tactics.
a blessing for retailers. For example, while
For example, Walmart launched a special
social media assists retailers in reaching out to
time-based price adjustment program in
and connecting with their target customers in
advance of the 2011 holiday shopping season
real-time and innovative ways, conventional Web
and Amazon generated interest for its “Price
and mobile apps are exposing price discrepancies
Check” application by offering shoppers a
within their own channels. In today’s multichan-
5% discount (up to $5) on up to three items
nel retail world there are few places where tradi-
purchased. Most of these solutions are only
tional localized/zonal pricing can be camouflaged,
temporary however, as price-matching and
reducing the effectiveness of these strategies.
price-adjustment tactics are in most cases
To keep their customer base intact and retain the easily copied.
pricing and services high ground, retailers are • Targeted marketing: With the advent of social
responding in the following ways: media, retailers have additional opportunities
to conduct targeted marketing initiatives on
• Cross-channelpricing strategies: Retailers their core customers. In a recent RSR study
have begun to explicitly recognize the inter- surveying 65 retailers, 75% of the respondents
Consumer Pricing Expectations
Which of the following would you MOST like to see improved among store associates?
Improved customer service skills 35%
Ability of store associates to match
29%
competitive prices (e.g. online)
More store associate engagement in the aisles 14%
Better electronic access to product
10%
information, inventory location and ordering
Better product knowledge enabled by technology 7%
Equipped with mobile check-out tools 4%
0 5 10 15 20 25 30 35 40
Source: RIS/Cognizant 2012 Shopper Experience Study
Figure 4
cognizant 20-20 insights 4

5. agreed that targeted promotions offer an respond to the new strategy.
opportunity to overcome the challenge of price
transparency.11 Sears Holdings has vastly increased its online
offerings in recent years and presents competi-
• Offering exclusive products: Retailers are tive prices, yet has under-invested in its brick-
investing heavily in offering exclusive products and-mortar stores and has reported year-over-
to consumers, as these can be less vulnerable year declining sales.13 The company recently
to price comparison. Branded items that have announced plans to close 100-plus stores in a bid
been slightly modified in features or packaging to revitalize its business and reduce expenses. The
make it more difficult for customers to conduct Sears experience suggests that to play in multiple
an exact feature-to-feature assessment when channels retailers can’t lag in any single channel.
comparing prices. Many department stores and Not having a compelling shopping experience
specialty retailers have been private labeling in one channel — whether it is product-, price-,
exclusive products for years. Price transparen- service- or ambiance-oriented — extends to all
cy increases the potential value of these types channels.
of items and programs.
In a nutshell, retailers must develop proactive
• Advanced price optimization solutions: With
the explosion of channels, competitors and solutions that can help them to create and
information, and the speed of change, retailers maintain the balance between maximizing profits
need better tools to make timely decisions. The and creating and retaining customer loyalty.
value of advanced price optimization solutions,
for initial pricing as well as markdowns, is
Our Point of View
increasing. These tools provide fact-based We believe there are a few key concepts that
analyses of customers and competitors, sifting retailers must embrace if they wish to continue to
through vast amounts of data quickly, helping succeed in a price-transparent world.
retailers balance customer loyalty and satis-
faction with maximized profits. It is becoming • Increase your price intelligence: Price intel-
ligence can give retailers a strategic competi-
increasingly important that
tive advantage through insight-driven pricing
In a price-transparent retailers anticipate, not just decisions and an optimized product mix across
react to pricing trends and
world, retailers cannot market changes. channels, which ultimately helps increase con-
versions, sales and customer acquisition and
afford to follow their
However, only retailers retention. A robust price intelligence solution
competition blindly or with strong fundamen- should integrate market, channel and competi-
let pricing strategies tals will be able to survive tive data with internal data in a near real-time
environment. It allows retail management to
be solely driven by today’s cutthroat market-
place. Apart from competi- gain a deeper understanding of what each
margin goals. tive pricing, the growing competitor price change means for margin and
number of well-informed, market share, and how to formulate meaningful
tech-savvy and bargain-hungry customers are responses.
perpetually seeking the right product, right price, • Rethink traditional pricing strategies: In
knowledgeable sales associates, comfortable a price-transparent world, retailers cannot
store ambience and an overall pleasant shopping afford to follow their competition blindly or let
experience. pricing strategies be solely driven by margin
goals. Rather, they must create pricing policies
JCPenney’s recent launch of its three-tier “Fair
which are in alignment with their brand image
and Square”12 pricing strategy is no doubt in
and business goals and allow them to respond
part a reaction to growing price transparency.
to competition. Traditional pricing strategies
In a heavily promotional environment, having
such as HiLo, EDLP, Loss Leader, etc. will con-
the lowest — or at least a “competitive” — price
tinue to attract a certain segment of customers
that can be viewed by the shopper or comparison
and cannot be ignored – retraining customers
apps at any point in time is hit or miss. This is
typically takes time. Retailers should meld their
especially true for occasional shoppers. The new
existing strategies with new cross-channel strat-
strategy may give the company a higher position
egies to ensure they do not negatively impact
on price rankings, but it remains to be seen if its
existing customers’ expectations and percep-
traditional customer base can be retrained to
tions.
cognizant 20-20 insights 5

6. • Train and equip store associates: When and recognizes the price elasticity of each
customers go to a store, they still expect to find customer.
informed and accessible store associates. At the
same time, they find it hard to understand why
• Increase private label or “customized” prod-
ucts/packaging: Price comparisons for private
associates do not have the same technology label or customized items have been difficult
and access to the same information they due to the lack of explicitly identical products.
have. As noted in our white paper “Building However, comparisons to similar products may
the Intelligent Store,” retailers need to rethink become easier with the advent of image-based
the concepts of selling and customer service.14 search launched by Google and Amazon. With
Retail associates need to be equipped with this new technology, shoppers can submit a
technology that is on par with the customer’s. hosted or uploaded photo and the search will
Associates need to be trained to articulate return images and text.
the store’s value proposition and the pricing
it drives, and policies/procedures need to be Conclusion
streamlined to allow easy price matching while Price transparency is a hard reality for retailers
at the same time having proper controls and to master. Today more than ever, “the customer
monitoring. is king.” New technologies and intermediaries
have given them more control over the shopping
• Target promotions by customer rather journey; the ease of comparing prices plays a big
than channel: Retailers must avoid creating part in that.
noticeable price conflicts. Loyalty-based
pricing allows a retailer to differentiate prices But in the midst of this changing paradigm,
between regular customers and occasional retailers should not lose site of the fact that there
shoppers in an open, yet personal “my price” is almost always something consumers value
way. By using this technique, a retailer can alongside price. The challenge is to find the right
differentiate between loyal and non-loyal value exchange and imbed it in the company’s
customers and pass additional benefits to loyal business objectives so that it flows within the
ones. It also allows the retailer to deliver on the organization and becomes a part of anything and
brand promise in the way that best resonates everything which the retailer does.
Footnotes
1
“The Marketplace of the Mobile Consumer: What to Expect,” L.E.K. Consulting, Vol. XIII, Issue 14.
http://www.lek.com/sites/default/files/L.E.K._Marketplace_of_the_Mobile_Consumer.pdf
2
“Quarterly Mobile Traffic Report,” Walker Sands Communication, Q4 2011.
http://www.walkersands.com/quarterlymobiletraffic#info
3
“2012 Shopper Experience Study,” RIS/Cognizant, May 2012. http://risnews.edgl.com/retail-research/3rd-
Annual-Shopper-Experience-Study--Enabling-Retail-Without-Boundaries80337
4
”The New Era of Price Transparency,” Greg Girard, IDC Retail Insights, Dec. 2010.
http://online.wsj.com/article/SB10001424052748704694004576019691769574496.html
5
”The 2011 Social Shopping Study,” Lauren Freedman, President, the e-tailing group, June 2011.
http://www.powerreviews.com/assets/download/Social_Shopping_2011_Brief1.pdf
6
Financial Services Quarterly, Q1 2012, AlixPartners.
http://www.alixpartners.com/en/LinkClick.aspx?fileticket=YBdUg5n0eMg%3d&tabid=1426
7
”The Marketplace of the Mobile Consumer: What to Expect,” L.E.K. Consulting, Vol. XIII, Issue 14.
http://www.lek.com/sites/default/files/L.E.K._Marketplace_of_the_Mobile_Consumer.pdf
8
“Retailers Try to Thwart Price Apps,” Dana Mattioli, The Wall Street Journal, Dec. 23, 2011.
http://online.wsj.com/article/SB10001424052970203686204577114901480554444.html
9
”Optimizing Price in a Transparent World,” Benchmark report by Nikki Baird and Paula Rosenblum,
Managing Partners in Retail System Research, April 2011. http://www.sas.com/news/analysts/optimizing-
price-in-a-transparent-world.pdf
cognizant 20-20 insights 6

7. 10
”Abandonment Issues,” Digital Trends, March 2011. http://www.lixto.com/wp-content/uploads/2011/07/
Lixto-Reducing-Online-Abandonment-WP.pdf
11
”Optimizing Price in a Transparent World,” Benchmark report by Nikki Baird and Paula Rosenblum,
Managing Partners in Retail System Research, April 2011. http://www.sas.com/news/analysts/optimizing-
price-in-a-transparent-world.pdf
12
“J.C. Penney Says ‘No Sale’: Cuts All Prices, All The Time to Simplify Bargain Hunting,”Daily Finance, The
Associated Press, Jan. 25, 2012. http://www.dailyfinance.com/2012/01/25/j-c-penney-says-no-sale-cuts-
all-prices-all-the-time-to-sim/
13
”Holiday Sales Woes Cast Cloud Over Sales,” Miguel Bustillo and Ann Zimmerman, The Wall Street
Journal, December 28, 2011. http://online.wsj.com/article/SB100014240529702034791045771241519245
31994.html
14
“Building the Intelligent Store,” Steven Skinner and Deepthi Timmasarthy, Cognizant white paper, October
2011. http://www.cognizant.com/InsightsWhitepapers/Building-the-Intelligent-Store.pdf
About the Authors
Greg Kameika is a Senior Manager with Cognizant Business Consulting’s Retail Practice. He has over
20 years of experience consulting to retail clients in the areas of pricing, merchandising and inventory
management. Greg received his BA from Northwestern University and his MBA from the Kellogg School
of Management at Northwestern. He can be reached at Gregory.Kameika@cognizant.com.
Pooja K Khudania is a Senior Consultant with Cognizant Business Consulting’s Retail Practice. She has
over eight years of experience consulting to retail industry clients. Pooja received her diploma in retail
marketing and merchandising management from National Institute of Fashion Technology, Bangalore,
India, and is a commerce graduate from Delhi University. She can be reached at Poojakumari.K@
cognizant.com.
About Cognizant
Cognizant (NASDAQ: CTSH) is a leading provider of information technology, consulting, and business process out-
sourcing services, dedicated to helping the world’s leading companies build stronger businesses. Headquartered in
Teaneck, New Jersey (U.S.), Cognizant combines a passion for client satisfaction, technology innovation, deep industry
and business process expertise, and a global, collaborative workforce that embodies the future of work. With over 50
delivery centers worldwide and approximately 145,200 employees as of June 30, 2012, Cognizant is a member of the
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and fastest growing companies in the world. Visit us online at www.cognizant.com or follow us on Twitter: Cognizant.
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