Is Price Matching Table Stakes?

Best Buy wants to eliminate price as a decision factor for customers.

But CEO Hubert Joly says the chain will match its competitors’ prices so that cost will not factor into where consumers decide to shop.

The company already warned on Tuesday that stiff price competition during the holidays would likely eat into its profit margin for the fourth quarter, calling price matching “table stakes” for competing during the holidays.

Taking price out of the customer decision making is a noble goal, you want them to decide on differentiated value you deliver over any other alternatives available to them. But if taking price out of the equation means matching price cuts that is a game of chicken one does not want to play.

Mr. Joly adds,

“The game has changed, price is off the table”.

He highlights Best Buy’s product mix, knowledgeable staff and services like Geek Squad and ship-to-store as ways to draw crowd into stores.

There in lies the contradiction. If all those value add do not turn up as better prices, it really means customers are deciding only on price.

Price cuts to match competition, especially the most irrational competitor, is not table stakes. It is the fastest route to Circuit City.

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