Does Two-Tier Pricing Have One Tier Too Many?
The other night, I stopped by my neighborhood multi-billion dollar retail store. (Name omitted to protect the maybe not so innocent — after all, their program is about the same as many others.) I needed to pick up a health care item for my wife who was a little under the weather and, along with that, her favorite specialty chocolate bar.
I wandered around the aisles and found the health item she needed. I had a choice of a national brand and the store brand, offered at a buy-one, get-a-second-for-half-price deal. Now if I had bothered to read the shelf talker fine print (maybe it wasn’t so fine, just not as big as the BUY ONE GET ONE AT 50% OFF message), I might have realized the deal was only for the store’s reward customers. Oblivious, I scooped up two house brands. Had it not been on sale, I wouldn’t have impulse bought the second one, but then that’s why I shouldn’t be out shopping by myself.
I wandered over to the chocolates, which I do buy fairly often. I know that the price of these bars varies by retailer — from $1.68 at the discount big box store, to $2.64 at our local grocery. But I was a little surprised to see a list price of $3.50. Not to worry — the shelf label noted that they were "On Special" at 2 for $4.00. Close enough. After all, nothing’s too good for an ailing wife. Again, had I read the shelf label more carefully I might have noticed the "2 for $4.00 for our reward members — everyone else gets ripped off" language. But then I just read the "sale" part. Probably missed the "caveat emptor" label as well.
When asked at checkout, I of course denied having a rewards card, and didn’t want to join at that very moment, so the cashier rang up the sale. The total seemed a bit high and, after leaving the store, I noticed that I ended up paying full price for everything — about a 30 percent premium on the entire basket. Not a lot of money really, but it did generate a lot of feeling … that I had just been the victim of false advertising and ripped off.
To make matters worse, since I was driving my wife’s car, I soon noticed, along with the other five bar code tag cards she carries on her key chain, the rewards tab for the store I had just left. I choose not to carry six tags on my key chain, and I also choose not to join every membership program in sight — but I never really meant to choose high prices.
Is two-tier pricing a friend or foe of loyalty building? Can retailers afford to ignore good customers who generally avoid the bother of loyalty programs, or are these people in the minority?