6 Retail Pricing Intelligence Strategies for Brands and Retailers
The need for pricing intelligence is not a new concept, but in an omni-channel world, it has never been more important for brands and retailers. To effectively compete in the disruptive dynamics of retail, having the right visibility and strategy toward wholesale pricing, competitive pricing, MAP pricing, promotional pricing, and MSRP pricing is essential information.
Real-time visibility to pricing information encourages aggressive price shopping, with showrooming and webrooming becoming the new normal. With the competition just a click away, retailers must win the battle for the customer’s heart and wallet with each and every purchase. And, as retailers need to be more aggressive in their approaches and deploy various repricing strategies, brands need to have a pulse on what retail channels are doing with their brand name.
Here are 6 strategies to be considering or staying ahead of to effectively leverage pricing data to intelligently optimize margins and profits.
1. Understand Your Pricing Position in a Product across Categories and Channels
Retailers and brands need to understand their pricing position for a given product across Categories and Channels. Each channel will have a different category taxonomy and may have more than one product offer listing for that product. There is power in understanding a products price position at an aggregate and specific channel level.
Manually discovering that information and then aggregating and managing it by spreadsheets is not only ineffective, but it will not provide the deep learning and insights that can be drawn by a big data set that is appropriately architected so you can focus on getting the answers to the questions you are asking
2. Leverage Competitive Data for Smart Pricing Decisions
With more products, more sales channels, and more dynamic pricing, the amount of competitive pricing data available to retailers can be staggering. Just 10,000 products with 10 competitors in 5 different channels can create over 5 million data points in one month.
Big data brings big opportunities, but also big challenges.
The key to success is turning competitive pricing data into smart operational decisions that best position your prices against the competition in every category, at every sales channel, throughout the product lifecycle. Trying to make sense of such vast amounts of data without the right tools is a recipe for failure. To turn competitive pricing data into actionable insight, you need a tool that allows you to visualize the data, slice and dice it by competitor, product, and channel, assess the impact of competitors’ prices on your sales, and evaluate multiple what-if scenarios for your competitive response.
3. Combine Pricing Data with Internal Data and Sales Velocity
The real power of competitive pricing data is realized when this information is laid against your internal data.
Product cost information is fundamental, allowing you to understand what your margins are for each product and where you need to take action to maximize profit opportunities.
Cross referencing competitive pricing information with sales data allows you to understand the real impact of competitor prices on your business. Armed with this information, you can better pre-empt and respond to the moves of the competitors that really matter. It also allows you to identify low converting items that may require more competitive pricing.
Keeping an eye on inventory levels and velocity allows you to adjust your pricing decisions accordingly. It allows you to identify items that are performing below expectations due to non-competitive prices. At the same time, you may be able to raise prices and capture higher margins on products that are low on inventory and hard to replenish.
4. Track the Pricing Lifecycle
Understanding the product lifecycle and applying the right pricing strategies at each stage is one of the qualities separating winners from laggards. Retailers who are winning are twice as likely to address end-to-end price lifecycle management compared to the industry’s laggards.
Each stage of the product lifecycle—from introduction to growth, maturity, and decline—brings its unique pricing challenges and opportunities. Each stage calls for different actions, requiring a different set of tools. Understanding competitive pricing through the product pricing lifecycle will help you continue to compete in a category and channel.
5. Control Your Sales Channels
Further complicating matters is the proliferation of sales channels and online marketplaces. A retailer may have one set of competitors offline, a different set of competitors online, and yet another on Amazon or Walmart.com.
Prices in these marketplaces can vary from those in the retailer’s own channels, adding yet another level of complexity that can challenge even the most sophisticated retailer: Who is the competition in each of the channels? Which products should we sell through each channel? What is the right pricing strategy for each?
Retailers and Brands need to know MSRP and MAP pricing thresholds and track pricing trends against those so they can understand how well they are controlling a particular sales channel and also recognize any cross-channel conflicts that are being created, as they arise.
Retailers need to know if there are any cross-channel impacts that are significant enough to alter a Purchase Order decision on wholesale price or quantity ordered. Brands need to know if cross-channel impacts related to MAP price violations or Product Line listing violations are damaging their other retail trade partner relationships.
6. Understand Who Your Real Competition Is
Knowing which competitors actually impact your sales for each product and category is paramount to a successful competitive pricing strategy.
Retailers tend to have a different set of competitors in each category, and sometimes even within the same category. For example, an office supply retailer can have one set of competitors impacting sales for printers and another for printer ink.
That’s where competitive elasticity comes into play:
Price elasticity helps you understand how customers react to your price changes. Competitive elasticity gives you the ability to understand at a product/category level how your sales are impacted by changes in each competitor’s price.
Correlating competitive pricing data with your own sales data (both online and offline data) gives you the insight you need to effectively adjust your prices to meet volume and margin goals.
With the ease of comparison shopping, retailers must fight like uber-smart sharks for the consumer’s purchase but be as friendly as kittens. And, while retailers fight for the consumer’s eye balls and ultimate purchase, they need to be in lock step with their important brand trading partners.
Point solutions to get little snapshots of data won’t be enough for retailers or brands. They need a full view of the channel landscape, their positioning against competitors, and their own results. When retailers and brands understand their pricing in the collective commerce graph, they achieve the necessary visibility and deep learning to take actionable steps in the science of pricing intelligently.
