Leverage AI Price and Promotion Optimization to Close the Retail-Shopper Disconnect
It’s no secret that the retail environment is intensely challenging: an increasingly diverse and aggressive competitive landscape, shoppers who take full advantage of the opportunity to check prices on all items in all channels instantly, and the rise of global discounters. At a time when retailers have unprecedented amounts of detailed data on their customers, they can’t afford to miss important shopper and competitor signals, and more than ever shoppers expect retailers to provide relevant, targeted pricing and promotions.
The secret to success? Leveraging Artificial Intelligence capabilities to deliver prices and offers that matter to shoppers on the items they care most about, while recovering margin elsewhere to sustain a long-term healthy business.
A recent Revionics-commissioned study conducted by Forrester Consulting shows some very interesting intersections – and disconnects – between retailers’ beliefs about their customers and shoppers’ actual perceptions. The study surveyed retailers in five different countries – the U.S., UK, France, Germany and Brazil – to provide global insights, and compared their views of shoppers’ preferences and behaviors with what shoppers themselves have told us in earlier studies.
Let’s look at the widespread practice of price matching, for example. Did you know that only 17% of shoppers say they demand price matches? Yet 76% of retailers say they aggressively message to shoppers when and where they undertake price matching. Who, I wondered, are these retailers trying to reach with their ballyhoo around price-matching? What DOES matter to shoppers is a fair, non-arbitrary price. And 78% of shoppers say they trust science-based pricing to provide those fair prices.
As a guest presenter on a recent webinar, Forrester VP and Principal Analyst Brendan Witcher talked about these and other points of disconnect. You can hear discussion from Brendan and Revionics Chief Marketing and Strategy Officer Cheryl Sullivan in the on-demand replay for full details. It’s an informative and fast-paced way to get some important insights.
It is interesting to learn that there’s strong convergence between shoppers and retailers on the importance and value of Artificial Intelligence (AI) in retail. Fresh off of NRF 2019, we heard loud and clear from retailers that they know they need to leverage AI in their businesses to maximize their success, but many just aren’t sure where and how to get started.
The good news is that many, many retailers already are leveraging AI with proven success and ROI in price and promotion optimization. These capabilities can help retailers provide targeted, segmented prices and offers that factor in shopper sensitivity and competitive elasticity, down to the store-item level.
Equally compelling is the fact that science can help retailers stop harmful margin leakage immediately just by understanding what not to do. On the webinar, Cheryl cited findings from the October 2018 study that showed 52% of shoppers get weekly or monthly promotional offers from retailers for items for which shoppers would have happily have paid full price. Fortunately, science-based promotion performance analysis can pinpoint promotional waste. Putting a stop to ineffective promotions can save retailers millions – instantly.
i Retail Success Requires Personalized, AI-Driven Pricing Strategies, a Revionics-commissioned study conducted by Forrester Consulting, October 2018
ii Understanding Retail Customers’ Pricing Expectations and Tolerances, a Revionics-commissioned study conducted by Forrester Consulting, May 2017.