The three essential pieces you need to unify and optimize pricing across multiple channels
80% of independent businesses that added new channels during the pandemic say they plan on keeping them. One essential piece of selling successfully across all these new channels is pricing. Retailers can no longer rely on disjointed or merchant-led pricing strategies. Instead, they need a cohesive omnichannel lifecycle pricing strategy.
Omnichannel Lifecycle Pricing
The shopping behavior shakeup over the last couple of years has left retailers scrambling to meet a wider range of consumer habits and demands. Now, customers expect the freedom to shop however they want, using whichever channels they want, and those preferences may even change day by day.
53% of brands are currently investing in tools that will allow them to sell anywhere. We would argue that a lifecycle pricing solution is one of the most important omnichannel tools retailers should be investing in right now.
But before you go investing in new tools, it’s important to understand the basic factors that form an omnichannel lifecycle pricing strategy: market-aware pricing, data-driven pricing architecture, and science-based promotions and markdowns. All three of these need to come together to make a strong omnichannel pricing strategy. Let’s look a little closer at each one.
The Three Factors for a Successful Omnichannel Pricing Strategy
Market-aware pricing includes the most fundamental information to build an omnichannel pricing strategy. To have truly market-aware pricing, retailers need a comprehensive picture of the biggest internal and external factors influencing pricing, including Key Value Items (KVIs), consumer purchasing behavior by zone and channel, and competitive pricing moves.
Your KVIs are the products customers care about the most, and therefore they are also the products about which your customers are more price aware. These items will drive how customers view the value your brand provides and how you compare against competitors. Knowing your KVIs helps you understand where it is more important for you to be priced competitively,
It’s also important to look at your consumer purchasing behavior across different zones and channels. A one-size-fits-all pricing strategy misses opportunities to provide more tailored pricing for your consumers and leaves money on the table. On the other side, completely separated, merchant-led pricing can be detrimental to creating a united price perception.
In order to create a stronger omnichannel pricing strategy, retailers need to optimize pricing by channel and zone while still moving towards a cohesive goal. An AI-powered pricing solution can help you identify those trends and make the right pricing moves.
Another important piece of market-aware pricing is competitive data. A comprehensive picture of your competitive landscape is about so much more than just what their prices are set at. You also want to see how often they are changing prices, who is changing prices first and who is following. Not to mention, your competitor list may have changed with new online players coming onto the scene.
It’s a fine balance to get the right price in the right channel for the right item at the right time for the right customer. Some of the inputs to consider can change daily or even hourly. That’s why retailers need a sophisticated analytics solution that can monitor all the important market data, identify trends and changes, and dynamically adjust as necessary in order to stay ahead of the market.
AI allows retailers to consider all the various factors to make the best possible pricing decisions — not just merchant-driven data or data that is siloed from the rest of the business.
Data-driven pricing architecture
Your pricing architecture should fit the purpose and goals of each product or category, leveraging data to establish the best gaps and relationships. A pricing architecture can be used to shift demand, which makes it a powerful tool to have in a retailer’s pricing belt.
Retailers must think through which opportunities to leverage to find the right structure. Considerations include demand patterns by channel, how much margin each permutation of size, flavor, or brand is getting, and where further opportunities may lie to optimize for certain business objectives. A strategic pricing architecture can be used to push people toward a brand that may be more profitable or has a higher supply, or can even be used to move demand to your private label.
AI allows retailers to see what is happening in the market to adapt appropriately and optimize to drive the right results. Say, for example, the optimal pricing gap between two brands shifts from 10% to 7% due to the evolving market. Not only will AI pick up that this shift is necessary, but it will also suggest the appropriate price changes for all brands impacted by the gap adjustment.
Science-based promotions & markdowns
With all the changes in consumer behavior, last year’s promotions and markdown plans are outdated and suboptimal. In fact, widely accepted estimates suggest that 50% of promotions are ineffective. Promotions are complex, and evaluating their success or deficiency is often difficult. But AI and advanced promotion analytics can help you analyze all the indicators to truly know what’s working, and what’s not.
Markdowns is another area where retailers commonly short-change themselves instead of relying on predictive analytics. For example, take seasonal items for a holiday, like Valentine’s Day. It’s a common mistake to simply push off discounting all the red and pink heart décor and candy until after Valentine’s Day. But in doing so, retailers are waiting until after demand is gone, and moving any remaining units will require a deeper discount.
An AI-based pricing solution can identify ineffective promotions and cut out the wasted labor effort to maximize sales and margins. AI also allows businesses to find surprising markdown opportunities and drive increased sell-through with optimized markdown cadences and depths.
Leverage Revionics for Omnichannel Lifecycle Pricing
The three basic pieces of omnichannel pricing are all difficult enough to manage on their own, but to optimize and unify all three requires an advanced pricing solution and dedicated pricing partner. Embracing AI-based solutions for omnichannel lifecycle pricing helps retailers optimize pricing across various channels more effectively and efficiently than human intelligence alone.