9 of the Best Pricing Hacks for Retailers
(Why 9 and not 10? Because my mom told me to do more with less)
- Only lower prices if it improves the customer perception, demand or other strategic KPI: You need to be strategic and understand the effect of lowering prices, because lowering prices for the sake of lowering prices is a sure way to lose margin with no guaranteed gain.
- Understand which of your items your customers competitively shop: Identify your Key Competitive Items (KCIs), i.e., products that respond most dramatically to competitive price changes across a well-defined array of competitors as well as your Key Value Items (KVIs). KCIs offer high revenue opportunity and affect consumer perception of your competitiveness.
- Execute the right strategy to support the category objectives throughout the product lifecycle: Every category, product segment and item has a role to play in the overall success of the company, whether that is a traffic driver, margin enhancer, convenience, or other. Align your lifecycle pricing strategies to support your overall category role and strategies and manage them properly throughout the life of the product — from introduction to growth, maturity, and decline.
- Account for unified commerce by setting channel and location relevant strategies: Analyze how consumers shop and behave in different locations, using different channels across products categories. Identify and track competitor prices for all of them. Analyze your performance on and determine your enterprise, channel, and location-appropriate pricing strategies.
- Know who your real competitors are: Reacting to all competition is not a winning strategy. To stay ahead you need to identify which competitors truly affect demand and set your pricing strategies and tactics accordingly.
- Account for the entire assortment: Using intelligence, data, and science to implement winning pricing strategies across the entire product assortment – including the tail items that, for many retailers, comprise the vast majority of the assortment – can improve profitability dramatically. This is also true for brick and mortar stores as well. It’s important to optimize the full assortment even if you are limited in the number of price changes you can execute in your store. Items should be ranked by those delivering the greatest returns ensuring you maximize performance, whether that is 10 or 10,000.
- Consumer pricing is both a sprint and a marathon: In order to be effective and competitive in the digital world, consumer focused pricing has to be and agile and performed at a high frequency. With the market in a state of continuous change, the underlying science to support your pricing needs to continuously learn and adapt. It should highlight when a strategy is no longer appropriate. Retailers need to ensure they are modeling the impact of different strategies, and quickly implement new ones when necessary.
- Avoid the race to the bottom: No matter what your pricing strategy, an approach of price cutting is never good for profit margins and the health of the business. It’s crucial that retailers are leveraging pricing tools that understand which items consumers want lower prices, which ones they will tolerate increases, as well as be able to predict how competitors will respond to those changes. (Yes, this is similar to #1. But if something is worth mentioning, it’s worth mentioning twice.)
- Know when to ignore: As hard as it may be, there are times when you don’t need to drop. You can ignore that competitive price adjustment. By evaluating your financial and demand forecast, there are times when the best response, is no response.