Dynamic Pricing, or high-frequency pricing, is a growing trend in the retail industry. It is being driven by the digital explosion, hyper-competitive environment and the ever-connected shopper who is non-private, no longer loyal to any retailer, brand or product and where price is the primary driver of their purchase decision.
Amazon has been employing dynamic pricing for quite some time, changing prices every few seconds with as many as one to two price changes per day on a single item. With the growing shift of sales to e-Commerce across all categories including grocery, the need for retailers to adjust their pricing on a more frequent basis has never been greater. According to the NRF(1), online retail will grow 8% to 12%, suggesting that e-Commerce sales are poised to fall between $427 billion and $443 billion based on Census Bureau data.
But what about the brick-and-mortar retailer? Surely, they are exempt from this growing phenomenon, or are they? News flash: you no longer compete just with the retailer down the block! You now compete with retailers around the world and you are only one stop on the shopper’s path to a purchase.
Brick-and-mortar retailers have been leveraging Price Optimization technology for several years. This sophisticated technology combines shopper behavior and competitive pricing data, with self-learning science that understands shoppers and competitive price elasticities, pricing policies and strategic objectives to determine the optimal price that a shopper is willing to pay while maximizing retailer margins. This can be done for every item in every store in a matter of minutes. Yet, due to labor constraints, retailers merely take a fraction of recommended price changes, leaving untapped margin on the table and customers at risk.
The days of getting away with limited price changes are gone. Today, progressive in-store retailers are combining the power of dynamic price optimization with technology that has been around since the late 1990s — Electronic Shelf Labels (ESLs). They are now making mass price changes every night to keep up with the shopper and competitive pressures. This doesn’t mean they are changing prices on every item in the store. Dynamic pricing solutions monitor the market for shifts in shopper demand and the competitive landscape, only recommending a price change for an item when it’s warranted.
So what do shoppers think about this? According to a recent Forrester study commissioned by Revionics(2), 78% of shoppers said they are okay with retailers using data science if they are offered a fair price — one they are willing to pay. And contrary to popular belief, that fair price doesn't mean they demand the lowest price or want the exact price of a competitor. According to the Forrester study, only 17% of shoppers claim to buy products at the cheapest price or demand price matching.
To survive in retail today, all channels are fair game when it comes to competing for the shopper's basket. With agile technology infused with machine-learning science, retailers can come up with the optimal price at any frequency necessary to compete and win at retail. Don't get left behind because you want to employ the traditional retail practice of being first at being second. In today's hostile competitive environment, only those who move first will be around long enough to play the second inning of this game.
(2) A commissioned study conducted by Forrester Consulting on behalf of Revionics, May 2017.
Cheryl Sullivan is Chief Marketing and Strategy Officer for Revionics. She is a proven retail & CPG product management executive with 20 years of experience in driving product strategy, product management and program management. Prior to joining Revionics, Sullivan was Senior 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.
Delhaize America Utilizes Data-Driven, Shopper-Centric Pricing
Delhaize America Utilizes Data-Driven, Shopper-Centric Pricing
Delhaize America Utilizes Data-Driven, Shopper-Centric Pricing.
— April 14, 2014
Delhaize America is streamlining its capabilities to execute data-driven, shopper-centric pricing, promotion and markdown strategies with the adoption of Revionics’ Life Cycle Price Optimization suite. The software will help the supermarket chain enhance its price image, foster stronger customer loyalty and…
Winning Shopper Loyalty Through Social Commerce Promotions & Pricing Strategies
By Kathy Beck, Senior Director of Product Marketing, Revionics
The world is changing fast, and with the advent of social and mobile the retail shopper is more demanding than ever. In an omnichannel world, shopping and shoppers create a new level of complexity due to increasing numbers of competitors to be tracked, hyper-competitive pricing and promotions, the variable path to purchase due to channel and touch point proliferation, pricing and assortment transparency, and the shoppers’ need for immediate gratification.
Winning retailers have recognized a key part of the new shopper dynamic is to communicate effectively, and with relevant content and offers, in order to earn loyalty and drive shoppers to the point of purchase. A key to earning loyalty is to engage and motivate shoppers at their preferred touch points and channels to create real intimacy thru personalized interactions. Engaging the instrumented shopper through digital channels is essential to developing a relationship that goes beyond a mere transaction. Understanding their product, touch point and channel preferences empowers retailers to engage wherever and whenever the shopper wants and provides them with relevant, targeted offers.
For example, a leading privately held supermarket chain is revolutionizing grocery loyalty by utilizing social and mobile as never before in this very traditional channel to power an effective and measurable social media rewards program. They are providing customers with compelling, time sensitive, and limited quantity offers through social media channels, such as Facebook, to fuel social advocacy and amplification, strengthen shopper engagement, drive in-store traffic and recruit new loyal shoppers to their shopper loyalty program.
The retail industry’s latest social commerce solutions are capable of creating and extending relationships by providing relevant offers that resonate with loyal shoppers and their social graph due to a deep understanding of past purchase behavior and social interaction. Digital coupons and offers that are optimized across online, mobile, and in-store channels can be used to drive traffic either online or in-store and can be tracked along the entire path to purchase to measure current, and improve future, program effectiveness.
Recent studies have shown that although many shoppers state that price is the most important component of their purchase decision process, shopper actions do not support those statements. Shopper loyalty is driven by delivering the shopping experience that most satisfies shopper needs — including not only the right product, price, promotion and place but extending the experience to include the right service levels, atmosphere, shopping assistance, etc. The ability to drive shoppers to the register through the timely delivery of targeted pricing and promotional offers that resonate is a far better way to drive loyalty than to engage in the downward spiral of price and promotion competition that may drive a single transaction but leaves no lasting impression.
Shopper engagement that flies under the radar of internet price crawlers and competitor sweeps provides a means of stealth combat and a strategic competitive advantage. Waiting on the sidelines for competitors to create their own loyal base is a dangerous and potentially lethal way to play a zero sum game. Retailers must embrace and engage the growing population of connected shoppers by utilizing all available data points to profitably drive loyalty and register rings.
Kathy Beck is the Senior Director of Product Marketing for Revionics. She has more than 25 years of experience in the retail industry working in planning, pricing, promotion and consulting. For the past eight years, Beck has been involved in the development and implementation of lifecycle pricing and assortment and space optimization strategies and tactics. Previously, Kathy was responsible for merchandise planning at several specialty retail chains.
