For example, today’s European retailers are facing the impact of Brexit, which is causing the cost of certain imports to rise and igniting economic uncertainty; therefore, retailers have to re-think their pricing and promotional strategies to ensure they sustain their profitability, while still offering shopper-acceptable pricing. In addition, in today’s omnichannel world, retailers are also dealing with demanding consumers who are always expecting complete price transparency and are not brand-loyal. In fact, according to PwC, 56% of consumers stated that they would shop an out-of-country retailer if better prices were available.*
For this Part I blog article, I will highlight some key takeaways from my session.
Crawl, Walk, Run: a step approach to self-financing your pricing investment
Price remains king with consumers rating price as a top priority for their purchases in certain retail channels – 89% for web, 67% for mobile and 62% for in-store**. And today’s shoppers are extremely empowered with 90% of shoppers surveyed stating they would leave a store to buy someplace else due to price***. According to a Retail Touchpoints 2017 study, 70% of consumers surveyed stated that price drives purchases over brand loyalty and 45% of women need markdowns in order to enter a store.
How is this resonating with retailers? According to a RSR Pricing Study, retailers identified their top three strategic pricing challenges as: (1) 50% stated increased price sensitivity; (2) 48% said increased price aggressiveness from competitors; and 3) 45% stated increased price transparency, which is greatly impacting comparative price shopping.
Retailers are discovering that adopting science and data-driven price and promotion optimization solutions can help them execute a better omnichannel pricing strategy, which increases margins and offers shoppers highly competitive prices.
We recommend a phased approach for adopting a price strategy, which includes:
Crawl (Insightful): Obtaining analytical insights, which spotlight margin and revenue opportunities, identifies KVIs, provides insight into Halo/Cannibalization and develops pricing strategies and conducts competitive price monitoring/insight.
Walk (Predictive): This price management phase, which provides rules-based pricing, manages items relationships and pricing policies, and provides predictive analytics, forecasting and trending along with localized pricing.
Run (Prescriptive): This is the Price Optimization phase, which includes machine-learning science and prescriptive analytics, determines the prices shoppers are “willing to pay” and provides competitive response science.
By following this phased approach, each stage funds not only itself but also the next stage, so it becomes self-financing. Our customers can see an incredible 8-18x ROI throughout these phases, which is a substantial financial result that positively impacts their bottom-line and enhances their ability to compete while also strengthening customer loyalty.
*PwC Total Retail 2016, February 2016
**The Foresee Experience Index – 2015 Retailer Edition
*** Cognizant & RSR Research