The Retail Price Optimization Resource Guide

Solving the puzzle of pricing in a complicated landscape with retail price optimization.

The past several years have put the strain on retail pricing.

At the beginning of the decade, consumers faced unprecedented uncertainty while retailers faced unprecedented disruption. The immediate aftermath created its own challenges: rapid inflation, increased priced sensitivity and brand disloyalty. Today, retailers live in a world where some things have gotten back to normal, while others haven't yet, and everything comes with a side effect. Even deflation.

This has put a spotlight on prices in the shopping journey. And the light is only getting brighter.

Retail price optimization has emerged as one of the most important tools of the 2020s. Competitive retailers are winning with sophisticated retail price optimization software. The best solutions give clarity to pricing decisions and build confidence with superior science, models and expertise.

Retailers who invest in retail price optimization get improved profit potential, increased loyalty and strategic advantage in return. So, let's walk through the fundamentals of retail price optimization.

What is retail price optimization?

Retail price optimization identifies the optimal prices for every product to meet business goals. Solutions run data and retail pricing analytics through models to hone in on the right price.

Efficient retail price optimization solutions consider various factors including demand elasticity, market conditions and pricing hierarchies. The best retail price optimization software uses sophisticated AI to drive prices that are dynamic, local and in tune with a customer segment's behavior.

Retail price optimization for the product lifecycle

However, a retail price optimization solution is only effective if it supports the entire pricing lifecycle.

Suboptimal prices leave retailers vulnerable to their competitors. And lifecycle price optimization strategies give retailers two of the most critical characteristics required today: a confident foundation built on data-driven base pricing recommendations, and the ability to adapt with promotions and markdowns.

Leading retail price optimization software generates value at every stage of the lifecycle. The rest leave value on the table. Here's what that looks like across the product lifecycle.

Base Price Optimization

Pricing remains a top influencer of consumer behavior. Base price optimization improves consumer price perception, increases profits and market share while boosting sales and revenue on everyday pricing.

Promotions Optimization

Promotions today are diverse, sophisticated, and complex. Promotions retail price optimization takes the guesswork out of promotional offers to confidently drive more sales, traffic and market penetration.

Markdown Optimization

Clearance doesn't have to mean lost money and opportunity. Markdown optimization helps you craft demand-driving plans that automatically and continuously adjust to maximize sales, margins and sell-through.

What are the benefits of retail price optimization?

The significance of retail price optimization is undeniable. In a market where consumers have more options than ever but are also more price sensitive than ever, pricing has an outsized influence on buying decisions. Retailers can stand out from the crowd through retail price optimization and improve profitability while they're at it. Benefits include:

Scalable pricing strategies

Powered by advanced AI and retail pricing analytics, best-of-breed retail price optimization software makes it easy to price products at any scale, including by location, assortment and more.

Dynamic, competitive prices

Competition is rising as consumers become more budget-conscious and less loyal. Retail price optimization leverages real-time data to set competitive prices for every product through every channel.

Balanced pricing architecture

Pricing hierarchies must manage affinity, cannibalization, business goals, consumer behavior and more. Retail price optimization takes control of pricing relationships, regardless of complexity.

Customer segment pricing

One-size-fits-all prices can put you at a disadvantage in our new competitive climate. With granular retail pricing analytics and AI, retail price optimization tailors pricing and promotions to customer segments.

Data scarcity solutions

Between new products, seasonal items and slow movers, data scarcity is as common as it is challenging. AI-powered retail price optimization software uses like items, like stores and business rules to overcome data gaps.

Evaluating retail price optimization software

Retail price optimization strategies win or lose on the technology that powers them.

Winning solutions use AI, algorithms and retail pricing analytics to enable confident, data-driven pricing decisions. They forecast for demand and solve for historical data scarcity alike. They adapt to real-time demand change dynamically. They orchestrate complex, segmented and granular pricing strategies at scale. Each contributing to optimal sales, loyalty and profits.

Here are the must-have features of retail price optimization software.

Artificial Intelligence

Nowadays, retail pricing is too complex for manual approaches. And retailers with legacy pricing software are being outpaced by those with AI-powered software. With AI, retail price optimization predicts, prescribes and adjusts prices that will perform optimally today and tomorrow.

Data-driven architecture

The better the data, the better the pricing strategy. The best retail price optimization software rounds out merchant data with market data, imbuing its models with all the factors it needs to make the best possible pricing decisions, adapt as necessary and drive results.

Flexible infrastructure

Any technology upgrade should be agile and flexible, allowing you to keep pace with the market and even get ahead of what's coming next. Retailers are also better positioned when their retail price optimization software integrates with 1st- and 3rd-party tech alike.

Science-based promotions & markdowns

Promotions and markdowns can often shortchange retailers. AI-powered retail price optimization solutions ensure retailers get the most value with science. Solutions identify and eliminate ineffective promotions and prime cadences and depths for sell-through.

Cloud native

Unlike solutions moved to the Cloud, solutions built for it have the inherent infrastructure to grow, scale and gain functionality. And with the Cloud, retail price optimization software providers have more top-level security measures at the ready to give you peace of mind.

Transparent recommendations

Your pricing team will be more open to a solution that provides visibility into why it is making certain pricing recommendations. And while you want your pricing team to be using and learning from your pricing tool, it should also free them to focus more on decision-making.

AI and the future of retail price optimization

AI has shifted the landscape of retail price optimization at a fundamental level.

Recent advancements in retail pricing analytics allow retailers to get more value from larger volumes of more granular data. This has helped them identify pricing patterns and capitalize on them with optimized pricing strategies.

Sophisticated science reveals more opportunities from customer behavior, demand patterns and market trends. The more agile user experiences that accompany modern AI tools allow retailers to make better decisions faster.

AI has opened up the pricing playbook for retailers. But it has also raised the competition.

In a landscape where everyone's trying to achieve more dynamic and customer-centric pricing, those with better retail price optimization software will certainly be among the top performers.

The quality of a solution's science and AI will matter more by the day.

Reach peak retail price optimization with Revionics

Revionics' retail price optimization software helps retailers make pricing decisions with clarity and confidence. Leading retailers worldwide drive more value throughout the product pricing lifecycle with our advanced AI and superior science.

That's why IDC named Revionics as a leader in retail price optimization — the only 100% retail--focused, full lifecycle price optimization provider on the list. It's also why Google awarded us a Google Cloud Retail Customer of the Year.