RSR Executive Perspectives: Build vs. Buy for Retail Price and Promo Optimization

Brian Kilcourse, Managing Partner at Retail Systems Research (RSR), recently published an Executive Perspectives paper that explores the "build vs. buy" decision as it relates to retail pricing and promotions optimization. With Brian's permission, we've published an excerpt from that paper below. To read the full paper, click here.

In today's retail technology environment, instead of business processes being defined by a software solution's limitations, they are enabled by highly flexible and adaptable on-demand capabilities.

As a result, the growth of the business software and services sector has been impressive. According to Statista, the global enterprise software market alone is expected to grow from $165 billion in 2016 to $402 billion by 2029.

One of the many software application types that are contributing to the sector growth is price and promotion optimization.

Pricing and Promotions

Pricing remains one of the most important things for retailers to get right in their merchandise planning and execution. Consumers have consistently said that pricing matters more than ever; when RSR surveyed over 1,100 U.S.-based consumers in late 2023, we were once again reminded that retail prices are almost a gateway to other value attributes, like service and selection — i.e., if a retailer doesn't get price right, then nothing else matters (Figure 1).

But in 2024, when RSR asked approximately 175 fast-moving consumer-goods and general merchandise retailers how well they manage price and promotion processes, RSR found that they struggle to keep up with consumer expectations or with competitive pressures (Figure 2).

Ineffective price, promo, and optimization capabilities put retailers at a strategic disadvantage. Consumers have the power of information with them 24-7 via always connected mobile devices, and they are both keenly aware of high prices and poor promotions and unforgiving when retailers get it wrong.

Consumers do not care about retailers' internal struggles with old processes and systems. This represents a perfect opportunity to adopt a commercial pricing platform.

Moving Forward

Retailer decision makers need to be ruthless in differentiating between what's important and what's merely interesting. Pushing past a "not invented here" mindset is critical to being able to take advantage of what modern commercial business solutions delivered as services have to offer.

For many retailers, the two greatest inhibitors to moving forward are (1) organizational inertia and (2) a deep-seated but out-of-date preference to "own" the solution. To overcome those internal challenges, we recommend the following.

Get Outside Expertise

Retailers know their internal processes and capabilities inside and out. What they may struggle to see is how other companies have taken advantage of what modern technology can do to foster innovation. This is a process more than a technology issue. Outside expertise is available to help retailers get up to speed more quickly.

Collaboration Is a Key Objective

Within the enterprise, the adoption of new pricing and optimization processes and supporting technologies fosters greater collaboration between category managers, price analysts, financial analysts, and sales channel operations. Promotion optimization fosters greater collaboration between merchants, marketing, and sponsoring vendor partners. Breaking down the silos between those entities has proven to be a positive by-product of solution adoption.

Seek Out a Strategic Business Partner

Adopting commercial price, promotion, and optimization solutions is as much about business expertise as technical prowess. Retailers should look for a partner that will be there for the long haul — a company that will keep up with changes in both the business practices and the underlying technologies. Successful solutions providers add to their body of knowledge with every implementation — and each succeeding retail client should benefit from that accumulation of knowledge.

For additional insights on this topic, view the paper Retail Price, Promotion, and Optimization: Isn't There a Commercial Solution for That? here.