With the compounding issues retailers currently face, it’s important to remember that becoming fluent in exceptional pricing strategies is achieved through small but purposeful steps.
We’re all fluent in something. Beyond speaking your native language, you may have learned a second one, or mastered a computer programming language. Fluency is a learned skill. It takes time, effort, and work, immersing yourself in situations where you’ll put that skill into practice. Like language, pricing in retail is a similar learned skill, and one that evolves at a faster rate. While the pricing best practices understood last year or even a decade ago are still relevant, pricing fluency requires a dedication to continuous improvement.
As the industry changes, retailers need to commit themselves to becoming a pricing-fluent organization, one that leverages predictive analytics and emerging best practices to build sustainable pricing strategies.
Flexing one-and-done strategies to get competitive quick, making tactical decisions to gain margin – these approaches simply won’t cut it. And with all of the challenges we now face with stress in the supply chain and inflationary cost increases, teams need the ability to be dynamic and agile, reacting quickly to the realities of the market. Most importantly, there needs to be a unified and centralized pricing strategy for the organization, instead of every merchant doing their own thing.
Becoming pricing fluent is an organizational effort
Pricing fluency is something we talk a lot about at Revionics, and it was the topic of conversation in a recent webinar we hosted with RetailWire. The panel discussion was moderated by RetailWire CEO and Co-founder Al McClain, and Revionics’ Sr. Director Retail Innovation, Matthew Pavich, was joined by Steve Luoma, Senior Director of Retail Pricing for Academy Sports + Outdoors, and Carol Spieckerman of Spieckerman Retail.
The first questions tackled in the discussion were centered around the hurdles retail organizations face, and how teams can ensure they don’t lose traditional merchant skills and historical pricing know-how. From our perspective, the biggest hurdle is seeking cohesion as a business to make sure that everyone on the pricing team is flying in the same direction and collaborating on price.
Maintaining institutional knowledge will be a total organization effort, so the focus should be on cross-functional collaboration. As Matt pointed out, it’s important to elevate the role of the pricing analysts. Once they have organizational buy-in, everyone will be better able to address the winds of change, such as inflationary cost increases or inventory issues, and then strategize most efficiently on price.
Marketplace challenges can’t be dealt with in isolation
Continued disruption due to the pandemic is affecting every industry and aspect of our lives. In the current retail context, as mentioned, supply chain problems are prevalent, which is forcing retailers to reevaluate their pricing practices.
One thing that resonated with me from the discussion was when Carol described these dynamics as “mutually reinforcing and mutually accelerating.” She went on to say, “You can’t deal with them in isolation.” Whether it is the turbulence of inflation, the frustration of the labor shortage, or whatever disruption is still unseen, retailers have to be sure their organization is on the same page to respond with the appropriate pricing moves.
As Matt pointed out, becoming a great pricing organization and knowing how to change the flight path will be incumbent upon listening to and understanding the customer. How has demand grown or shrunk for a particular product? What are the new key items? What were once background categories that are now true traffic-drivers?
Looking at what the data reveals in each of these queries should drive next-steps in pricing changes. Pricing is one of the quickest ways to shift demand from one brand to another, or from one category to another. This is why its critical demand is understood, so that you can flip the script and work backward to determine an ideal price.
As a retailer, Steve has had lots of experience putting this into practice in the last 18+ months. “At the end of the day, we want to service customers. From a pricing perspective, it made us be very sharp in what we did and how we did it. It comes down to knowing what the customers are expecting and reacting to… and using the tools at our disposal to understand what the customer reaction could be before we act on changes.”
Future-proofing your pricing takes just one step at a time
Achieving pricing fluency will take time and effort. The great news is that because everything has changed, there exists a great deal of low-hanging fruit. Get started now by looking at the data, and you and your teams can future-proof the organization in small but meaningful ways.
Evaluate the competitors you’ve been tracking against and determine if they are still relevant. The key items from three years ago may have decreased in importance. Regularly promoted products may not matter as much to customers. Ask yourself “When was the last time we assessed our zone structure?”
Your right next step is to seek small opportunities for improvement, and then start to gain momentum. Take it one step at a time. As you go, be sure you’re staying strategic so that your journey leads to where you want to be in the end – profitable, competitive, and trusted by consumers on price.
To listen to the full discussion, visit our website for on-demand viewing. You’ll hear Steve provide real-world examples of how Academy is strategically approaching its pricing strategies, and how they started with what they felt “was the easiest to bite off.”