Will Target’s dynamic pricing strategy erode customers’ trust?
In a two-month investigation conducted by Minneapolis TV station KARE, it was uncovered that Target changes its prices on certain items depending on whether you are inside or outside of the store.
In one example, Target’s app price for a Samsung 55-inch Smart TV was $499.99, but in the parking lot of one of their stores that price suddenly increased to $599.99 on the app. This test was done on 10 products and found that four of the 10 jumped in price from the parking lot to the store. The price jumps were not insignificant either — a Dyson vacuum went up $148 and a Graco car seat jumped $72. In fact, the in-store price was $262 higher for the four products vs. the parking.
University of Minnesota Marketing Professor George John, interviewed for the story, stated, “Somebody at Target programmed in an algorithm which says someone who is 50 feet within the store is willing to pay more. The most reasonable explanation is that you just revealed your commitment to buying the product, you’re in the store, or in the parking lot. If you are further away, you haven’t quite committed, so I’m going to give you a juicier deal. That’s why the price went up when you got closer to the store.”
Of course for this practice to take place, Target customers must have their location services enabled for the app.
Target released a statement for the story saying, “The Target app shows in-store pricing while in store, and online pricing while on the go. If a guest finds any item for a lower price across any of the ways they can shop Target, we’ll price match it.” This, of course, puts the onus on the customer to go through the exercise of checking prices prior to every Target shopping trip.
The station also tested whether other retailers are using this practice, including Best Buy, Walmart and Macy’s. Pricing was consistent across all three, regardless of location.
For retailers that offer different prices for products bought online or in stores, a study from the Harvard Business School published in 2018 found that “self-matching” — enabling associates to match a retailer’s lower online price in the store — has a beneficial business effect.
- The Target app price switch: What you need to know – KARE 11
- Should retail prices in-store be the same as online? – RetailWire
- Does it pay for retailers to price-match their own websites? – RetailWire
DISCUSSION QUESTIONS: Do you think Target’s practice of varying online vs. in-store pricing will erode customer trust? What recommendations would you have for Target, now that this practice has been made public?