Questions to Ask When Evaluating Price Optimization Vendors

Key questions to ask of price optimization vendors you are evaluating to help ensure the ROI of any price optimization investment. 

As a follow-up to my previous post, “What to look for in a price optimization solution,” I thought it would be helpful to examine a handful of key questions to ask of any price optimization vendors you may be evaluating. These questions have been derived from our two decades of experience helping retailers optimize their pricing strategies. We have seen, time and again, how the answers to these questions play a big part in determining whether their investments in price optimization deliver the desired results.

Is pricing their main focus?

This is the first question you must ask. And if the answer is no, proceed with caution. Price optimization is not a “module” within a merchandising solution. It is a complex, sophisticated science that requires deep subject matter expertise and specific use-case experience.

Every dollar invested in R&D should improve lifecycle pricing capabilities, and every investment should be evaluated and prioritized based exclusively on its ability to enhance the way prices are optimized.

Successful implementations require a relentless, company-wide focus on the ever-changing dynamics of retail price optimization. If a vendor offers anything less, I’d be wary.

Are retailers with business models similar to yours currently using the specific solution you are interested in?

No two retailers are exactly alike. Every retailer has its own unique brand promise, assortments and experiences. However, while none are exactly alike, many are similar. They have similar assortments and similar pricing strategies. Doing business with a price optimization vendor that has experience supporting retailers with business models similar to yours can greatly accelerate your time to value.

Their data models will have already learned from scenarios similar to yours, and those models will more readily adapt to the unique nuances of your business. Their implementation teams will have specifically relevant experience to draw on when guiding you through the implementation lifecycle, helping shorten project plans and bring your business live on the solution more efficiently. All of which will lead to better outcomes for your business, your brand and your customers.

Also, ask for references. And not just any references. Ask for references from clients with similar business models using the solutions and technology you are evaluating. The last thing you want to do when evaluating pricing optimization vendors is speak to a reference about how well the merchandising solution solved their assortment management issues!

Does the solution support the full pricing lifecycle?

Supporting products across the entire pricing lifecycle is critical to optimizing both revenues and margins and delivering a consistent customer experience. Doing so while simultaneously managing price image requires striking a complex balance that can only be achieved with visibility into your entire assortment at every stage of the product lifecycle. Base price decisions simply cannot be optimized if they aren’t made within the context of concurrent promotions and planned markdowns.

Having different solutions to manage for different parts of the pricing lifecycle adds more complexity for the teams making pricing decisions: Without the ability to execute pricing decisions across the entire product lifecycle, finding the balance between revenues, margins and price image will be difficult at best.

How does their solution show ROI?

In the world of pricing technology, ROI is a loaded term. This is because many price optimization vendors define ROI based on the capabilities (and limitations) of their solutions. In reality, ROI in the price optimization world is pretty straightforward: The critical levers are revenues, margins and units. Visibility into the impact on these levers from both price recommendations taken and those not taken can provide meaningful insights into the ROI of your price optimization investment. Additionally, we believe that regular ongoing ROI measurements integrated into the ongoing optimization process provide much greater value than one-time measurements that evaluate performance.

So be sure to ask every vendor you evaluate to define exactly how they will help improve these three key metrics and how (and when) they will demonstrate these impacts. Anything else is merely a distraction from what we believe is the core value proposition of pricing optimization technology.

Can the vendor’s solution scale to meet your volume requirements?

This simple question is really several detailed questions combined into one overarching query. And the only way to answer the larger query is to answer the detailed questions first.

How many categories are you planning to manage with the solution? How many SKUs are within those categories? In how many stores? Across how many countries? How much history is available? How much history will you maintain going forward? 

The answer to each of these questions can have significant implications for the performance of the pricing optimization engine. The answers should also lead you to ask more questions of your prospective price optimization vendors, such as:

• Do they work with other retailers similar in size or larger?
• Is the platform architected to scale as my business evolves?
• Who does the solution provider partner with for critical architecture components?

Also, dig deep into each vendor’s ability to manage scenario planning at scale. Scenario planning is an extremely important part of the price optimization process and can put pressure on system resources. It’s critical that scenarios are run quickly so that decisions can be made and executed in a timely manner.

Examine each vendor’s answers to these questions carefully. Because if the solution can’t perform, it certainly can’t optimize.

Can the vendor meet you where you are on your journey?

Looking to enhance your optimization strategies for better performance? Ready to move from a rules-based approach to true optimization? Still using spreadsheets and merchant-led pricing? Wherever you are on the price optimization journey, you need a partner that can help you take the next step or even get started.

So be sure to inquire about each vendor’s ability to understand and adapt to wherever you are on your journey. Because every journey is, in fact, unique, and the most successful implementations are those where all stakeholders are able to adapt and adjust to each individual situation.

Revionics: The Leading Price Optimization Solution

With more than 20 years of dedicated retail pricing experience and an unmatched portfolio of top retail customers in several verticals and dozens of countries, Revionics is the leading global price optimization vendor. We help retailers optimize the entire pricing lifecycle with clarity and confidence derived from our deep retail pricing experience, innovative science and technology designed to scale.

Reach out today to ask us the tough questions and explore how the team at Revionics can be your guide on your unique price optimization journey.