Your customers’ relationships with pricing are complicated. Today’s buyers are fraught with anxiety over getting the lowest price, driving trends like the chaos of Black Friday, extreme couponing, hundreds of apps for comparison shopping, showrooming, and avoiding hitting the purchase button until they’ve searched for online coupon codes. At the same time, retailers need to find a way to stay competitively priced without cutting into revenue or margins, while intelligently responding quickly to competitor pricing and market forces. Having an effective pricing strategy isn’t optional: 67 percent of retailers in an IDC study said price is their customers’ first or second reason for purchasing.* How can you develop an intelligent retail pricing strategy that makes sure you’re not leaving money on the table, while minimizing markdowns and letting you out-price the competition?
How do you find optimal pricing for hundreds, even thousands, of products?
It’s important to understand how consumers learn about pricing cues and what that means for your pricing strategy. The Harvard Business Review notes that price perceptions often begin on an unconscious level for consumers, who associate certain signals with price. Researchers found that consumers assume factors such as an urban mall location, high square footage, and stock-outs signal lower prices. By contrast, they may assume that any frills – whether that’s a beautiful physical location, cutting-edge website or highly trained staff – comes at a premium price.
Sophisticated buyers have nearly unlimited paths to purchase and pricing information at their fingertips. Fifty-one percent of retailers in the IDC study felt that their customers’ knowledge of competitors’ pricing was eroding their margins.* Buyers can go into a store and try on an item, and then shop nearby retailers and online providers for the most competitive prices, generous return policies, or perks like free shipping. A buyer with a mobile phone can compare pricing while right in the dressing room.
Ninety-eight percent of retailers believe that pricing was crucial for their success and there’s little tolerance for error.* Today’s consumers are only becoming more price savvy, and pricing mistakes come at a big cost: 62 percent of retailers lost customers, 50 percent lost wallet share, and 40 percent lost margin due to their last pricing error.* What’s more, recovering was lengthy and challenging: 38 percent felt that it took six months to regain the ground lost from pricing mistakes.*
What’s Getting In the Way of Intelligent Pricing Strategies?
Forty-seven percent of retailers expect price to matter even more to customers in 2018, and 62 percent expect disruptive new pricing models to affect the market.* Today, as you’re developing your pricing strategies, a number of factors make it difficult to stay competitive in real-time:
Retailers are managing large inventories of products and it’s difficult to stay competitively priced across merchandise.
Omnichannel customers want consistent pricing and service across all channels, and the average retail technology toolkit makes it difficult to sync prices online and in-store.
Tracking competitors’ pricing is time-consuming, requires multiple tools, and takes valuable time away from crafting winning strategies.
Even with the information available on competitor pricing and market conditions, retailers are facing a lack of actionable data to fuel intelligent real-time responses.
It’s difficult to make price adjustments in real time, because you’re often working with a complicated mix of technologies, manual processes, and stakeholder approval chains.
Seventy-eight percent of retailers believe that it’s time to rethink their pricing strategies in view of dynamic online pricing models.* Today’s cutting edge retail tools are making it easier to stay on top of changes and make the most intelligent pricing decisions possible, with features like real-time market data, dynamic pricing orchestration, predictive analytics for actionable recommendations, and easy to use approval chains.
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