Dynamic Pricing and Personalization in an Age of Persistent Inflation

Amid soaring prices, retailers, CPG brands and consumers have to decide how best to thrive in an era of ongoing inflation. Consumers will opt to buy fewer products or postpone purchases when facing less spending power and concerns about a recession. Growing numbers of retailers and CPGs see dynamic pricing alongside personalization, when applied intelligently, as key strategies to boost the appeal of their products to highly price-sensitive customers.

Realizing the Benefits of Data-Driven Dynamic Pricing

Retailers and CPGs have access to huge amounts of internal data that can help to drive a deeper understanding of consumers’ buying patterns and how they shift over time — from what and how much they buy as well as when and where they make those purchases. Data platforms bring together a mix of this first-party data with third-party information sources such as demographic, weather and social media trend data.

Drawing on this combination, retailers and CPGs can adopt sophisticated flexible pricing models where they can adjust prices several times a day, or even on an hourly basis as well as in response to real-world events. They can take advantage of automatic price changes recommended by data-driven algorithms.

With the wealth of available public datasets, retailers and CPGs can test out theories on consumer buying behavior. For instance, they can assess the different purchasing patterns in communities where the amount of the COVID-19 virus present in the water supply is higher versus other areas where the level is significantly lower. They can also ensure that the data-driven decisions they are making are smart ones that draw on a variety of factors and filters. For example, a product may seem ripe for dynamic pricing, but if it’s a bulky or heavy item requiring expensive handling and shipping, the economics no longer make sense.


However, these models require that retailers and CPGs have access to real-time, accurate market data versus relying on historical trends. They also need to apply dynamic pricing consistently across their purchasing channels, given the ease with which consumers can comparison shop online. Retailers and CPGs must factor into their decision-making consumers’ expectations and tolerance for the frequency and range of pricing fluctuations and determine how to communicate their dynamic pricing strategies.

Applying Data-Driven Personalization

Consumers are increasingly comfortable with personalization, with 71% expecting brands to send them communications, products and services tailored to their individual needs. For many consumers, a personalized approach means a business is invested in pursuing a relationship with them versus a one-off transaction. For 78% of consumers, personalization is seen as a positive factor in their decisions to repurchase from the same brand.

Access to a broader set of more timely data is driving increasing sophistication, whether in modeling customer segments or in targeting an individual buyer. This approach can enable retailers and CPGs to provide personalized deals that can help move unsold inventory off the shelves or out of storage. As the concept of ‘data clean rooms’ catches on among retailers and CPGs, there’s the opportunity for securely joining together elements of customer data from different vendors without exposing any personal identifiable information (PII).

New channels are also emerging, such as live commerce, where personalization plays a key role. Consumers either purchase products as an attendee of a livestreaming video event, perhaps hosted by an influencer, or buy during a live one-on-one consultation with a retail specialist.

Lessons Learned

Consumers’ brand preferences and loyalties will rapidly shift when faced with product scarcity for basic essentials such as toilet paper, as seen during the height of the pandemic. There’s also an inverse relationship between the amount of time a consumer spends researching and searching for a product versus fluctuating pricing. This means that dynamic pricing is a less effective strategy in the nice-to-have or luxury goods categories.

Customers are much less focused on the price-per-item and more interested in the total end price of an online or real-world shopping trip. If a retailer is trying to target and encourage a consumer to buy all of their holiday party goods from a single location, they need to consider how to apply dynamic pricing to the whole basket of goods versus one or two single items. This caveat also applies to the total ‘out-the-door’ price for a single or multiple items to include all taxes, shipping costs and any other additional fees.

Rosemary DeAragon is the Head of Retail & CPG Go-To-Market for Snowflake, which involves building and executing the strategy to accelerate Snowflake’s adoption with retailers and consumer products companies. She collaborates with teams across product, sales, marketing, partnerships and more to build industry solutions to drive Snowflake’s product capabilities to the market. Prior to joining Snowflake in 2020, DeAragon held leadership roles at major global retail companies such as Walmart and Amazon, focusing on global data strategy and enablement as well as retail data analytics. In 2021, DeAragon was named to Forbes Magazine’s 30 Under 30 list for Enterprise Technology.

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