According to a survey sponsored by Pricerunners.com, 89 percent of respondents have heard of lowest price guarantees and 65 percent have made a purchase from a particular store or website at least partly because of this type of guarantee.
Of the 65 percent buying on low-price guarantees, 38.3 percent said they did it "once or twice"; 17.6 percent, "several times"; and 9.6 percent, "many times."
After buying, nearly 60 percent said they have looked for a price on the same product somewhere else and 47 percent said they did actually find a lower price. Of those purchasing a product offering a "lowest price guarantee," 38 percent said they have successfully received money back after showing a lower price.
Amplitude Research surveyed 1,000 people nationwide from April 6th to April 9th on behalf of PriceRunner.com.
"These results indicate just how proactive consumers can be when it comes to researching and comparing prices on products. They will shop around for the best deal," said Martin Andersen, general manager of PriceRunner US, a price-comparison shopping site, in a statement.
The survey comes after an article in the New York Times earlier this year by Hal Varian, a business professor of business, economics and information at the University of California at Berkeley, concluded that price-matching guarantees don't drive down prices as expected, but actually discourage price cutting.
In his example, East Side Tires cuts its tire prices to $45 from $50, prompting West Side Tires to enact a promise to match any lower price. With the guarantee, those who find West Side Tires more convenient bring in the East Side ad and get the discounted price but West Side Tires doesn't cut prices across the board. For its part, East Side Tires attracts no new customers with its price cut and actually loses more money by cutting prices across the board.
"So, a vendor that offers a low-price guarantee takes away much of its competitors' motivation for cutting prices," wrote Professor Varian.
The professor also concluded that price-beating guarantees and guarantees that only apply to advertised items may lower overall prices, although the evidence proved inconclusive.
A check of retailers by Retailwire found a number of majors touting price-matching guarantees (i.e., Home Depot, Best Buy, Office Depot) as well as a more than a few promising 110 percent refund guarantees (i.e., Lowe's, Circuit City, Zappos.)
Discussion Questions: What do you think of low-price guarantees as a traffic driver and a competitive pricing tool? Why do some retailers use price-matching guarantees, others use price-beating guarantees, and some don't have any price guarantees? What do you think is the best method?