The top ways pricing organizations can set themselves up for pricing success this year
It’s a new year unlike any other we’ve seen before. While the retail market is still reeling from the whiplash it suffered from COVID last year, pricing teams have the unique task of establishing a pricing strategy for a year that is largely still To Be Determined. We asked the pricing experts on our Strategic Consulting team what retailers can do to start their pricing off right for 2021.
Understand Trend Shifts
As your pricing team begins the new year, it’s important to understand how the shopper’s purchasing behavior evolved over the last year. Retailers must adapt to the new shopping habits customers have adopted during pandemic. For example, offerings once viewed as niche – such as delivery-only grocery stores or home gym equipment – will continue to expand in 2021. Successful retailers are the ones who adjust to cater to these new buying behaviors and provide competitive prices in the space.
Retailers should also analyze how consumer behavior changed during the 2020 holiday shopping season. Look at whether your customers bought similar kinds of products and categories as previous years, or if there were underlying shifts. Did consumer price perception change for key holiday product categories? Understanding the differences in the trends can help get a perspective on what to expect in 2021.
Update Key Items and Categories
Ideally, pricing organizations should already be updating their key value items at least once a year. This is particularly true with all the market shifts we’ve seen over the last year as a result of COVID. The start of a new year is a great time to get a good view of your key price perception items and see if any have changed. As customer trends and consumption continue to evolve, updating your KVIs is essential to maintaining a great price perception and competitive prices.
You’ll also want to think ahead to what items or categories could become more important as the market changes. With COVID vaccines ramping up, we have a glimmer of hope that things will start returning to somewhat normal this year. With this in mind, certain categories may come back stronger than before due to pent-up demand.
Reevaluate Your Competitive Strategy
The competitive landscape shifted dynamically in 2020 with consumers more likely to shop alternatives and try new brands. The best retailers are figuring out who their new threats are and building strategies to elevate their value proposition in a market that looks completely different than a year ago.
This also needs to include online retailers that may not have been considered in your top competitors before COVID. To start your pricing off right in 2021, you’ll want to revisit your competitive pricing architecture and validate that the pricing rules and relationships still make sense.
Realign with Business Objectives
Many retailers start their fiscal year in February, meaning you are likely wrapping up your yearly planning in January. While thinking through your pricing goals for 2021, now is the time to make sure they align with your company’s overall objectives for the new year. What should your pricing team focus on (margins, price index, traffic, units, etc.) to best support the company’s goals?
This is essential not just for shaping your pricing strategies, but also for establishing KPIs. Too often we have seen KPIs set for individual merchandising or store managers that are actually counterproductive to the enterprise’s objectives. There needs to be total alignment from top to bottom to ensure an impactful pricing strategy with strong adoption.
Preparing to align your strategy and KPIs now will also help your pricing organization respond more quickly to management asks on driving specific business objectives.
Get a Free 2021 Pricing Strategy Checkup
These other tips to start your pricing off right for 2021 are a great beginning point for reevaluating and preparing your pricing strategy. However, no matter what goals you set for the new year, your pricing organization can obtain major benefit from personalized recommendations from our pricing experts. Reach out today for your free pricing strategy checkup with our Strategic Consulting team.