EPOS systems offer several benefits to smaller and medium-sized firms in hospitality and retail. The systems provide the necessary information to create flexible pricing strategies that will foster customer loyalty.
Why is it so important to retain loyal customers? According to research, it costs five times more to gain a new customer compared to retaining loyal customers. Therefore, small restaurants, retail stores and hotels without the marketing and branding power of their larger competitors should focus their resources on improving customer loyalty. Loyal customers will have more trust in the brand and as a result, are more likely to spend more. However, how do companies retain customers? By investing in flexible pricing strategies.
A flexible or differential pricing strategy means selling the same good to different people at different prices. Flexible pricing strategies work because different customers will value the same goods differently. An example is an auction, where people will bid different prices for the same good. Companies can use these differing valuations to maximise profits by offering different prices, for the same goods or services.
We already see companies in different industries use this method, from cinemas to major retail chains to museums. Each uses different variants of a flexible pricing strategy to maximise customers visits.
By using the right pricing strategies, businesses can make customers feel rewarded for making their purchase. Clever pricing strategies offer discounts for certain purchases, perks for spending a certain amount and more. When rewarded, customers will feel valued for their time and money and are, therefore, more likely to return. Certain loyalty schemes will give customers a goal to work towards.
For example, customers who have 100 loyalty points will get an additional bonus. Thus, they are more likely to shop repeatedly in one venue to accumulate loyalty points. Using the right pricing schemes ensures customers keep returning for repeat business.
The right pricing strategies will not just improve customer loyalty – they can expand the customer base. As mentioned before, customers are not willing to spend above a price point for goods and services. Therefore, a varying pricing strategy helps bring in customers who will buy the good or service, at a lower price point. As a result of this, it’s possible for businesses to bring in customers they would have otherwise had a hard time bringing in. We already see how this benefits businesses. For example, parks offer discount entrance rates for children, to encourage more families to visit.
Flexible pricing strategies come in different formats and will change depending on business objectives.
Differential pricing: Also known as multiple pricing strategies, a product will have different prices based on several factors like customer type, quantity ordered, delivery tracking, payment terms and more.
Dynamic pricing: Prices are changed in response to market demand. The adjustments are made with automated software and pricing bots. Changes are made depending on different factors like business hours, the day of the week, location and time. Dynamic pricing is used in a different setting – think hotels and airline ticket reservations.
Customer loyalty schemes: Probably the most common form of a flexible pricing strategy. Loyalty schemes encourage customers to purchase goods and services and, in return, they get points, which can be recouped for discounts and other bonuses. Most major retail chains around the world use these flexible pricing strategies to hook in customers.
Creating the right pricing strategy means giving due consideration to these factors.
Value-based pricing: Setting a price scheme based on how much customers are willing to pay for a product.
Different versions of the same good or service: Offering different versions like standard, premium and exclusive justifies different price points. We see this manner of pricing in hospitality, air travel and many other spaces.
Targeted product versions to meet specific needs: Offering different versions of the same product that addresses the specific needs of different customers creates strong grounds for flexible pricing strategies.
To create a flexible pricing scheme and to find different ways to foster customer loyalty, businesses need to collect a substantial amount of data on their customer’s purchases and habits. Major corporations use data analytics to collect customer information, but analytics is too expensive for smaller companies. Instead, most smaller firms can invest in an EPOS system.
An EPOS system collects a substantial amount of information on customer purchases. With that in mind, the information collected through your EPOS system can be used to create a suitable pricing scheme. This is just one of the many benefits and uses of an EPOS system.
EPOS systems offer several benefits to customers like email marketing, better stock inventory and more. Visit our blog for more information.
A standard EPOS system will only do so much in terms of functionality and will not have any features such as above. However, a good EPOS system can be very costly to purchase straight off. If you are torn between choosing between them, here’s a look at employing a recurring payment plan over a one-off payment.