Will Google Price Extensions Lead to Dangerous Price Wars?

By Zach Heller

For the uninitiated, Google has been slowly rolling out a variety of “search extensions” over the last several years in an effort to give searchers more information on the results page and increase their likelihood of clicking on an ad.

One of the latest extensions is called “Price Extensions”. Price extensions are exactly what they sound like – they give advertisers the ability to showcase prices (up to 3) within ad copy.

See an example here.

Is this a good thing? It depends on who you ask.

Google is a public company with a profit motive, so the move is an attempt (above all else) to increase clicks on ads, which is how they earn the majority of their money. If it does this, it’s a good thing for Google.

For searching shoppers and advertisers, the question is not so easy to answer.

To understand why, we have to think about the concept of pricing, and where it fits in the marketing or selling strategy. Price is an important lever that marketers have in order to increase demand for their products and services, but it is not the only one. That’s why you don’t see every company out there actively advertising their price. They advertise those things that make their offering unique.

When one advertiser in a market starts using price extensions to show their prices to searchers on Google, it may benefit them initially. But when their competitors start copying them, and all the ads show prices, the consequences could be dangerous. Suddenly, consumers are picking a company or product based on the prices listed in the ad instead of fully comparing the benefits that each offer.

Price becomes the one thing that consumers shop on (more so, in my opinion, than it is right now).

That favors the lowest priced competitor, obviously. The lowest price extension will get the most clicks, which may cause the higher priced products to consider lowering prices to match or beat, attracting more clicks.

This is a slippery slope for advertisers, who will feel pressure to “keep up” with lower prices and may adjust their offerings to match the need for a lower price. And this hurts consumers, who suddenly have worse options (cheaper options) to choose from.

Lower price does not mean better value. And I fear that price extensions, while they might be a short-term boon for Google, may do damage to the marketplaces they are used in most.

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Source:: Business2Community