Change is constant. In retail, the speed of change is unprecedented. As pressures mount, retailers face daunting challenges. Among them:
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The path to purchase keeps getting shorter; consumers are more in control than ever and they want the right products for the right price RIGHT NOW.
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As Amazon and new market entrants like Jet.com continue to shake up the retail landscape with aggressive pricing and fulfillment, adopting real-time competitive insights and dynamic pricing is a must or retailers risk losing market share, competitive position, profits and shopper loyalty.
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In hopes of attracting more customers, retailers are responding with more promotions and competitive price matching, which results in a race to the bottom — margin erosion and leaky profits.
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Successfully executing dynamic pricing isn’t just about the velocity of price changes, but also about a retailer’s ability to be strategic versus tactical, gather real-time competitive and shopper data and insights and apply innovative science to ensure the pricing strategy, brand image and customer promise are executed successfully on those items that matter.
Consumers want a seamless shopping experience — and retailers must realize that the death of channelization has long passed. Instead, they must adhere to how the consumers view their journey. This means ensuring they have a true omnichannel strategy that aligns pricing strategies across all channels to deliver convenience, transparency and consistency, to compete with speed and scale against online and brick-and-mortar giants.
We’ve co-authored an eBook with Retail TouchPoints titled: “The Five Tenets of Dynamic Pricing: Don’t Just Cut Prices, Craft Them,” to help retailers truly harness the power of dynamic pricing within their business, and what that means to their customers. Here’s a brief teaser, and I invite you to download the eBook and explore in more detail.
The Five Tenets of Dynamic Pricing
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Understand Your Customer — Consumers’ overall price sensitivity can vary by store, region, season, weather, type of item and competitive influence. There are myriad factors driving consumer behavior that retailers need to take into account. It’s critical to uncover the real customer signals and be able to separate them from the noise.
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Identify Meaningful Competitors (and Your Customer’s Affinity for Them) — Combining consumer price perception and sensitivity with competitor analysis gives retailers a holistic view of their business and category, determine which competitors are influencing consumer demand by category and selling channel, and ultimately, determine which products they should change prices on. Conversely, you need to understand how those competitors respond to your price changes.
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Be Strategic, Be You — Retailers need to collect and analyze data and be clear about the value proposition they deliver. They must define the role of the category, the items, and the stores and align their pricing strategies accordingly. They need to continuously monitor those strategies, model new ones and understand when it’s time to make a change.
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Use Data, Science and Technology — Optimal dynamic pricing solutions provide boundaries around competitive price reactions based on an understanding of which competitors are important and what a meaningful competitive price change is, and empower retailers to forecast the financial outcome of price changes before they’re rolled out.
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Make Intelligent Decisions in Real Time — For retailers to be confident of any change, they need to understand the context and reasoning behind the recommendations they are acting on. Best-in-class science-based solutions not only build recommendations based on a myriad of data points, but provide the transparency necessary to deliver them as actionable insights that validate pricing recommendations.
CPO Commerce Gets a Competitive Edge with Dynamic Pricing:
The eBook also explores the benefits CPO Commerce gains from Dynamic Pricing, including:
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Leveraging internal and external Big Data to make more profitable pricing decisions at the product or category level;
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Conducting what-if scenario planning to predict the need for strategy adjustments and predict financial outcomes prior to implementing;
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Predicting and measuring bottom-line impact of price changes; and
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Providing insight on when to match, lower, or disregard price changes due to competitive pricing.
Today’s Retail Imperative: Craft Prices Continuously and Intelligently
We believe retailers must leapfrog beyond knee-jerk price-matching and craft prices in ways that deliver value to their customers while protecting their margins and profits. Speed is undoubtedly key; it is more important than ever for retailers to anticipate and actively respond to competitor price changes and shifts in consumer demand.
However, retailers need to understand when to respond and why, and under what conditions that don’t leave a big mess to clean up. Only then will retailers be able to make intelligent, data-driven pricing decisions that drive sales and maximize bottom-line results. For more details on how to successfully embrace dynamic pricing in your unique retail environment, please help yourself to our eBook.
Cheryl Sullivan is Senior Vice President of Product Strategy for Revionics. She is a proven retail and CPG product management executive with 20 years of experience in driving product strategy, product management and program management. Prior to joining Revionics, Cheryl was the Director of Product Strategy for Oracle Retail, driving vision, strategy and roadmap across all Category Management, Assortment, Pricing, Promotion, and Space solutions. The Category Management Solution was the 2nd-highest revenue generating product within Oracle Retail’s Merchandise Planning & Optimization solutions over the last five years. Prior to Oracle, she served as VP of Product Management for both ems and Spectra Marketing and VP of Category Management for Intactix and i2 Technologies.
