Will personalized pricing ever make it to brick & mortar stores?
Through a special arrangement, what follows is a summary of an article from COLLOQUY, provider of loyalty-marketing publishing, education and research since 1990.
I doubt we'll reach a point in the near- or medium-term future when grocers will deploy personalized pricing at the point-of-sale for every item to each customer. The risk of a public protest would be just too great.
But the technology is there and the strategy is in practice — in fact it pretty much copies the targeted-offer tactic that Amazon.com has made an art of delivering.
So how can personalized pricing information capture as much value for the customer as well as the retailer while minimizing the potential risks? The answer exists, in part, in past practices.
While not exactly personalized, coupons have been made available to some customers and not others for years. And digital coupons are making this process more widespread and personalized.
Source: Apple App Store
Safeway's Just for U loyalty program gained significant personalization ground in 2012 with the addition of smartphone apps, which generate personalized digital coupons conveniently available to use at the point of purchase.
Just for U identifies products that particular customers like and then offers "Thank You" coupons for those products. These potential products can extend to items the customer likes as a result of affinities (bananas and cereal; soy milk and veggie burgers) or as a result of like-customer analysis (gauging similarities and differences in purchases among comparable shoppers).
In any case, the digital coupons persuade the customer to add new items to her basket. The upside potential of customers responding favorably to such technology is material, particularly with many mobile phone users indicating they're open to receiving promotions, specials or coupons.
Another factor that will play an important role is online ordering. When a shopper orders groceries online, he or she signs in to the grocer's website, at which point the retailer knows exactly who the customer is. Leveraging personalized pricing in this shopping context is much easier from a technology perspective. Anyone who has shopped on Amazon.com has likely seen the text "customers who bought this item also bought these other items." Layering in personalized pricing as part of this process is relatively straightforward.
The vision of personalized pricing making shelf prices irrelevant, as outlined by former Safeway CEO Steve Burd in 2013, may be way off into the future. But if retailers approach personalized pricing in an insight-informed and systematic way, I'd wager its presence might graduate to prevalence in the next few years.