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In a current article, Wirtschaftswoche examines the pricing of companies that are perceived by consumers in a survey as Germany's cheapest service providers. Among those interviewed was pricing expert Prof. Riekhof, who has specific strategic recommendations for companies.

Wirtschaftswoche on Germany’s Price Favorites 2024: Pricing Expert Riekhof Recommends More Price Flexibility

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Which service providers from various areas of life offer the cheapest prices? For the second time, people were asked this by the analysis and consulting company ServiceValue and WirtschaftsWoche, a total of 213,000 people. The leaders in a ranking of “Germany’s Price Favorites 2024” according to the evaluation are the drugstore chain dm, closely followed by the discount chain Lidl.

In their current article “Germany’s Price Favorites 2024 “Cheap can anyone”: What really makes traders customer favorites” (06.02.2024), Wirtschaftswoche asks what makes these companies so popular in terms of pricing and what other companies can learn from them in this regard.

Pricing specialist Hans-Christian Riekhof advises companies to have more price flexibility

Interviewed by Wirtschaftswoche, Professor Hans-Christian Riekhof, expert for strategic pricing, points to the factor of price flexibility. Companies should learn to act much less generally when adjusting prices. Top performer dm provides a good example of differentiated pricing, explains the pricing specialist, who has developed and conducted numerous pricing studies.

The drugstore chain dm announced in 2019 that it would control its own prices for each store individually from now on, depending on its location and the competition on site. This means that if there is competition nearby, dm has the cheapest prices – in regions with less direct competition, the prices are then also gladly higher. The drugstore chain, according to Riekhof, takes advantage of the fact that consumers’ objective knowledge of prices is much lower than is usually assumed.

Although such pricing practiced by dm requires expensive resources such as personnel and IT, which smaller companies do not necessarily have at their disposal, it is also worthwhile for these companies to pursue more intensive pricing policy within their means, according to the pricing strategist in Wirtschaftswoche.

Read the full article of Wirtschaftswoche, in which he provides further detailed recommendations, under the following link:
https://www.wiwo.de/unternehmen/handel/deutschlands-preisfavoriten-2024-billig-kann-jeder-was-haendler-wirklich-zu-kundenlieblingen-macht/29627844.html

Learn more about the pricing studies:
https://www.unicconsult.com/publikationen/forschungsberichte/

 

Regionale Einheitspreise sind in der Regel suboptimal. Zunehmend werden daher in vielen Branchen Preise systematisch nach regionalen Kriterien differenziert. In einer (noch unveröffentlichten) Studie untersuchten wir, wie das in der Praxis gehen kann. Hier verraten wir die ersten Ergebnisse, die durchaus überraschen.

Pricing-Newsletter No. 54 (2021): How does regional price differentiation work in practice?

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Regionale Einheitspreise sind in der Regel suboptimal. Zunehmend werden daher in vielen Branchen Preise systematisch nach regionalen Kriterien differenziert. In einer (noch unveröffentlichten) Studie untersuchten wir, wie das in der Praxis gehen kann. Hier verraten wir die ersten Ergebnisse, die durchaus überraschen.

Jetzt kostenlosen Zugang erhalten zu allen unseren Pricing Studien, zu unseren Pricing News und zu unseren mehr als 70 Pricing-Newslettern, mit denen Sie zum Pricing Experten werden können.

Until now, dm relied on permanently low prices. Now the drugstore market leader is changing course and raising the prices of many of its products. The background is a change in pricing strategy. In an industry dominated by fierce price competition, the price swing is causing surprise, but also irritation.

dm surprises with changed pricing strategy

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The Lebensmittelzeitung reports (Paywall) that surveys have shown that the price of more than 1000 products has been increased in the past three weeks. This applies especially to the online shop, but adjustments have also been made in some stores. This includes popular products like Balea soap, Kneipp shower gel, and Ariel detergent. The extent of this surprises, writes the Wirtschaftswoche. Although prices at dm have never been static, there have usually only been occasional shifts.

Until now, dm relied on permanently low prices. Now the drugstore market leader is changing course and raising the prices of many of its products. The background is a change in pricing strategy. In an industry dominated by fierce price competition, the price swing is causing surprise, but also irritation.

Unlike competitor Rossmann, who drastically cuts prices on branded products and own brands every week to attract customers to the stores, the drugstore giant operated with “permanently low prices”. Also, to keep other aggressively acting competitors at a distance. Aldi, Lidl and Co. have been poaching in the territory of the drugstore markets for some time and offer well-known products like Nivea, Pril, Pantene and Pampers at discount prices. Online giants like Amazon and Zalando are turning the market upside down – the fiercely contested market is becoming more difficult.

dm goes on the offensive in a fiercely contested market

“With the new pricing policy, dm is moving away from its claim to price leadership”, explains an unnamed trade manager. The decision was made to realign the pricing strategy in-store and online, confirmed CEO Harsch to LZ. The new pricing strategy means different price levels depending on the location of the stores and the competitive situation on site. Depending on which dm store customers shop in or whether consumers order online, they will find different prices in the future. Stores that are close to discounters or other direct competitors are supposed to offer lower prices than stores that have little competition. The individual markets should decide independently about the pricing in the regional environment.

Uniform prices are not always the optimal strategy

For pricing expert Professor Hans-Christian Riekhof, this is not really a surprising step. “That uniform (and thus undifferentiated) prices are economically anything but optimal, readers of our Pricing Newsletter have known for a long time. Some may also remember their own business studies, where a long time ago there might have been talk of price differentiation.

If the drugstore chain dm now moves away from the strategy of uniform prices, then obviously the realization has prevailed that the willingness to pay of customers is obviously not always the same. “Regional differences in purchasing power, temporally different preferences or even superficial product modifications can be used to implement price differentiations”, says Riekhof. “But what should be kept in mind: the increasing complexity of pricing must be reflected in internal processes and systems. Complexity to the outside is ok, to the inside rather not.”

Photo: Kettler Communication

Further links:

Wirtschaftswoche:
https://www.wiwo.de/unternehmen/handel/neue-strategie-dm-verabschiedet-sich-vom-einheitspreis/24960714.html

Fokus
https://www.focus.de/finanzen/news/unternehmen/konkurrenz-koennte-nachziehen-drogeriekette-dm-aendert-preisstrategie-mehr-als-1000-produkte-werden-jetzt-teurer_id_11091617.html

Stern
https://www.stern.de/wirtschaft/news/dm-erhoeht-die-preise—das-steckt-hinter-der-neuen-strategie-8882910.html

Chip.de
https://www.chip.de/news/Viele-Produkte-ploetzlich-teurer-Drogerie-Riese-dm-aendert-die-Preisstrategie_172673785.html

Lebensmittel Zeitung (Paywall)
https://www.lebensmittelzeitung.net/handel/Kurswechsel-dm-aendert-Preisstrategie-142296?utm_source=%2Fmeta%2Fnewsletter%2Flzammorgen&utm_medium=newsletter&utm_campaign=nl4709-basic&utm_term=dc7d39d780fb1e3ac6d007ebfe83e0cc