February 22, 2016 | Written by: Asad Ahmed
Categorized: eCommerce & Merchandising
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Retailers love shoppers like me. I don’t research much, so they don’t have to put in any extra effort to earn my purchase. It’s simple—I don’t browse multiple websites and check out different stores, nor do I like to wait for days for the products to get delivered. Frankly, I love to visit the store. The fact that you can actually see your product and get a first-hand feel of it makes all the difference to me, and to do that I don’t mind paying a couple of bucks extra! Am I old fashioned and out of tune with times? Perhaps.
But like it happens in most cases, my wife is the complete opposite of me. At any given time she is always on her phone browsing through her favorite shopping apps. She carefully researches across multiple retailers and she selects one which gives her the best deal. She does this for almost everything!
For example, we just returned from a trip to Australia, and my better half wanted to order a photo album online. She created a nice one with all our pictures… and then she never ordered it! She couldn’t make a decision—one vendor was offering a 25% discount on the photo album but she really wanted to buy only from her preferred retailer. So she decided to wait around for a good deal. As our retailer saw a dip in their demand as a result of the competitive campaign, they responded with a 25% off plus free shipping offer—just the deal my wife wanted! Even though it was delayed, my wife was still happy to order the album from her preferred photo site.
Clearly, this was a win for the retailer, but is there a way the brand could have won her business earlier in the buying cycle so she didn’t have to wait? Had the retailer used Dynamic Pricing, they would have been able to spot her price sensitivity earlier in her customer journey, and give her the price she was waiting for—before a competitor could lure her away. With Dynamic Pricing, retailers can intelligently adjust prices based on internal & external factors such as competitive offers, demand, social sentiments, competitor prices, inventory availability, or even the weather.
It is an enormous challenge to plan out a strategy to serve such a large number of shoppers who are so different from each other. Today’s consumers have more choices than ever before and are armed with phones that send out notifications whenever a product goes on sale. But even though things are complex for retailers, there are a whole lot of tools have come up to tackle these challenges. It’s just a matter of using the right one to their advantage.
Let’s consider the online merchandiser’s point of view—we call her Olivia. You can read more about Olivia here where she is trying to use IBM Commerce Insights to make better decisions.
Olivia has many tasks at hand. She has to decide on how to merchandise her categories to her customers while ensuring prices are competitive. While trying to accomplish this goal, Olivia is likely drowning in spreadsheets as she tries to ensure that her prices are competitive enough to appeal consumers who change loyalty with one click. With so many market players, she has a tough time deciding how, when, and if to respond to competitive price movement. Which prices should she adjust, and by how much? And how will any online decisions affect sales in her company’s stores?
This is where Dynamic Pricing can help. Dynamic Pricing not only helps Olivia manage pricing in a more automated way, but also recommends what prices to change, when to change them, and by how much. Olivia can always review and overrule the recommendations if they fall beyond the thresholds she has set. At least now pricing isn’t based on guesswork.
While my wife and I battle it out over where we should order our next couch, IBM’s Dynamic Pricing helps online merchandisers like Olivia to smartly manage prices across products and bring about sanity in this chaotic and changing retail landscape.