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Why not Price Optimization in LATAM?

Thursday, 02 March 2017 00:00

Author: Carlos Rodriguez, Vice President, LATAM Sales for Revionics

Price is just one aspect of value – others being quality, retailer brand reputation, immediacy, service, and of course relevance. However, price has a direct impact on Revenue and Gross Margin that it inevitably dominates the attention of both for shoppers and for retailers.

In LATAM, companies with Pricing teams spend more than 60% of their time processing data (competitive data, sales data, inventory data, cost, new products, etc.), about 30% of their time validating rules and restriction and less than 10% of their time in analysis. Generally the main pricing strategy is very competitor-centric, putting them in the position of being in reaction mode. Most pricing teams can only review some key items every week based on competitive intensity and cost changes, and many items’ prices are not evaluated nearly often enough to keep up with the complexity of fast-changing market, competitive and customer trends.

Retailers will not be able to perform meaningful and timely analysis of prices without the aid of technology enabled analytics such as what price optimization solutions bring to the table. Today’s science-based systems allow them to quickly and accurately determine optimal prices by zones and channels, down to the store-item level considering consumer price sensitivities, competitive elasticity, cost, commercial rules and restrictions, different price strategies, cannibalization, affinities, seasonality, inventory, etc. – take a look at what Farmacorp has done with its award-winning use of data-driven price optimization.

So how can retailers in LATAM take advantage of what technology can offer, to enhance revenue and gross margin, promotional lift, and inventory utilization?

In a world where competitive pressures are only likely to increase, retailers must find a way to sell their products profitably. Retailers need to abandon a price management practice based primarily on competitor-centric reactivity and move to a more customer-driven strategy. Price Optimization can help retailers to implement strategies to build sales and improve gross margins, manage prices more dynamically and more scientifically and offer products at the right price in the context of the customer, more tuned to specific segments and sensitivity of the customers in all channels – which is why market innovators like Home Depot Mexico and Drogaria Araujo have made the decision to adopt the technology.

So the question for retailers in LATAM is not why price optimization, but why NOT price optimization?


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