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Debunking The Black Friday Discount Myth: Retailers Need a 24/7/365 Pricing Strategy

Black Friday and Cyber Monday ― best known for glittering price offers and festively wrapped deals — attract gift-minded customers like a wreath to a front door. But these purchasers aren’t one-and-done shoppers: They’re cost-comparing and buying 24/7/365, clicking into their mobile phone apps and searching out the best deals wherever those deals happen to be. What’s more, these apps let shoppers save this price information for future reference.

What are shoppers finding with their new sleuthing technology? Between November 20th and December 24th, 2011, Gazaro analyzed a sample basket of 40 products in multiple categories that were expected to draw well on Black Friday/Cyber Monday and through the holiday season. Comparing the data to other months in 2011, Gazaro found that in68% of the cases, prices were actually lower in the months preceding Black Friday. 

While this may be new information for a surprising number of retailers, many shoppers knew this already. According to the digital research firm comScore, Inc., two-thirds of the 87.4 million U.S. smartphone audience use their devices to shop; almost half of those do so because their sophisticated apps make it easy to compare prices and find the best deals — and not just on Black Friday or Cyber Monday. They’re ferreting out deals all year long.

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So why aren’t more retailers taking advantage of this same technology to stay one step ahead of shoppers and defend their sales and market share? Some are, but too many aren’t; the consumer is taking control of the selling process, using the “bricks and mortar” stores as showrooms for their online purchases — and doing so on their own timelines. For the tech-savvy shopper, every day is Black Friday. 

Exposing The Truth

To avoid becoming the tail that wags the dog, retailers have to start using more innovative approaches to their pricing. The old cost-plus formula to set prices no longer fits in today’s price-transparent marketplace. Retailers need to see what their customers now see, or they can’t level the playing field by optimizing their pricing and product mixes.

A price intelligence solution is needed that collects data in near real-time for millions of products, across multiple channels and competitors, and presents that data in such a way that informed decision making can be made on a weekly, daily and, sometimes, hourly basis. With this kind of visibility, retailers can identify threats and opportunities to better affect customer acquisition and retention.

We have witnessed the success of this model again and again. For example, using our advanced price intelligence service, one national retailer was able to determine that it was over-priced on certain promotional items and precisely by how much. Further analysis revealed that the retailer’s premium products were under-priced, which meant lost margin and revenue. The discoveries triggered a new pricing strategy that allowed the retailer to re-coup sales, improve margins and increase revenues — before the bottom line suffered unnecessary duress.

But don’t just take our word for it: In a report from Retail Systems Research, Getting Back to Good: Retail Pricing 2010, 50% of retailer respondents increased gross margins when they proactively controlled price and product mix and 24% kept gross margin steady.― during and despite a three-year sales decline.

Sure, Black Friday and Cyber Monday account for a large chunk of annual sales, but pricing has become a 365-day-a-year activity. Customers now are realizing that Black Friday deals are happening all year long. To stay competitive, retailers need to be proactive every day of the year, using comprehensive price intelligence that integrates external market, channel and competitive data with internal data to successfully calculate the most profitable course for their businesses. 

Alexander Rink is the CEO of Gazaro, a leading supplier of Price Intelligence that provides retailers complete market, competitive, channel and pricing visibility to successfully calculate their path to profit. For more information about Gazaro, visit www.price-iq.com  or email Alexander at ceo@gazaro.com .

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