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What is a Price Guarantee?

Article Details
  • Written By: Felicia Dye
  • Edited By: Heather Bailey
  • Last Modified Date: 19 November 2016
  • Copyright Protected:
    2003-2016
    Conjecture Corporation
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Prices are one of the most influential factors for consumers. It is a factor that can attract consumers to a business or it can discourage them from patronizing a business. Aware of this, merchants sometimes offer price guarantees, which are also referred to as price matches. Although the terms of a price guarantee can vary from one business to another, the general idea is to assure customers that they will always get the lowest price.

In some instances, a merchant will sell a product or service at a price that he considers the lowest. If he offers his clients a price guarantee, they may be afforded two opportunities. First, the merchant may communicate to his clients that if they can find the same product or service elsewhere for a lower price that he will also provide the item at the competitor’s price. Second, the merchant may allow his clients to bring in proof of lower prices for identical products or services after they have already made a purchase. In these cases, the merchant will usually offer a credit or issue a refund for the difference between his price and his competitor’s.

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Part of the rationale behind a price guarantee is that consumers do not have to patronize various businesses. Instead they can be loyal to a single merchant and get the same prices as a bargain shopper. A price guarantee is not always used to secure the lowest prices with regards to competitors, however. Some businesses offer price guarantees for their own products and services. This is especially true when a business has stores and a website. Many businesses offer lower prices on the Internet, but when they have a price guarantee they will allow online shoppers and in-store shoppers to take advantage of the lowest prices regardless of where they are.

Usually there are several stipulations to such offers. To begin with, the services or products must generally be identical for a person to qualify for price guarantee benefits. The lower price a consumer offers as qualification for such benefits generally must be a public price, which prevents people from comparing regular retail prices to bulk, specially discounted, and auction prices. In some cases, the area from which the competitors are considered is limited, meaning that a price in New York cannot be compared to a lower one in Texas.

It is not feasible for all merchants to offer a price guarantee. For some, it could have devastating effects on their businesses. This is because smaller businesses often operate with smaller profit margins. Since they may pay more for goods and have fewer items or services and a smaller consumer base, it is not as easy for them to reduce prices in this way.

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