Price Matching Strategy: Implications of Consumer Behaviour and Channel Structure

Price-matching has become a ubiquitous strategy for retailers both in product and service industries, especially with the growing ease of checking prices online. With this strategy, retailers promise not to be undersold and match competitor’s lower price (if any). Price-sensitive consumers tend to be happy with this since they potentially can get the lowest price at their “favourite” retailer. A relatively under-researched topic in this context is the fact that this price convenience normally comes with a number of conditions. We analyze two of the most common ones—the product must be available at the lower priced retailer (availability condition) and the price-match extends only to a competing retailer and not to a direct-to-consumer manufacturer (channel condition)—and investigate their implications for the channel and consumers.