Customers today are savvy, and they know how to get the most for their money. They’re comparing prices online while shopping in stores, they have apps that give them discount codes, and they’re fiercely loyal to retailers that give them the most bang for their buck.
This makes your price optimization strategy incredibly important to a healthy and growing bottom line. Unfortunately, many retailers are still relying on old-fashioned pricing practices, using past trends or even gut instincts to set their product pricing. But it doesn’t have to be this way.
Price optimization has come a long way, with the advent of retail CRMs, ERPs, and pricing analytics software platforms designed for retailers like you. These platforms and the insights they provide empower businesses to make data-driven decisions and take their operations to the next level. This is why a retail price optimization plan is essential for your business.
Benefits of Price Optimization in Retail
1. See ROI Immediately
According to PwC, for 60% of consumers, price is the number one reason they buy anything. This kind of power can’t be ignored, and the price optimization plan you have for your retail business can make or break your success.
In the early stages of a new and improved price optimization strategy, retailers should focus on a few of the key factors in pricing that can make an immediate impact:
- Current price point
- Margin of sales
- Competitor pricing
- Promotions & Discounts
These factors can be changed and updated in real time, so retailers can see the impacts and adjust according to their goals. Retailers who determine their pricing goals based on past data and analytics will see the most immediate impact on their revenues.
2. Forecast Your Customer’s Behavior
Imagine having a crystal ball that allows you to see the exact price point that will both maximize your revenue and make your customers happy. With retail price optimization tools, you can get pretty darn close.
Predictive pricing, a feature of many pricing analytics platforms for retail, allows you to track market pricing, adjust your pricing, and make data-driven pricing decisions based on your customer data – automatically. Using the power of advanced marketing algorithms and the trove of data you already have, you can forecast the impact specific price changes and price points will have on sales.
Always balance the advice of the algorithm with your own business intelligence. Avoid looking for one singular price that caters to all customer preferences, but rather one that targets specific behavior patterns of customer groups. According to a report in Retail Info Systems, “when customer segmentation is omitted, forecast accuracy goes out the window.”
The power of these analytics systems allows you to get granular with data and use your insight to target customer demographics based on the optimal price point for them.
3. Automate Your Operations
Automation is seemingly taking hold in all industries, so there’s no reason it shouldn’t be part of your retail price optimization strategy. Manual price tracking, forecasting, and adjusting are simply too time-consuming and costly, as you’re losing out to competitors who are updating on the fly to maximize profit margins.
MIT Sloan Management Review published a report stating, “the ability to automate pricing extends [a retailer’s] capacity by allowing companies to optimize pricing for more products than most organizations currently find possible.” Automating aspects of your pricing strategy helps to:
- Avoid common man-made errors that impact sales/revenue
- React to market trends in real time, maximizing potential sales/profits
To implement pricing automation, find a machine learning program that helps with price automation, but can also be configured to work with all other retail applications you’re using.
“The ability to automate pricing extends [a retailer’s] capacity by allowing companies to optimize pricing for more products than most organizations currently find possible.”
MIT Sloan Management Review
4. React to Market Changes Faster
Price optimization in retail will help you react to market changes faster than ever before. Having a strategy in place – and a program that helps you execute it – will put you step ahead in terms of analyzing purchasing trends of your customers and what they’re willing to pay.
Some brick and mortar stores are finding success with electronic shelf labels and signage that can be updated in real time based on continuous data input. Manually creating and updating prices and signage has been costly in the past, but modern POS systems and mobile apps allow store employees to make immediate, impactful changes to your store’s pricing structure.
The results: Fast and accurate pricing decisions that keep you up to date on market trends and on par with competitor pricing. No more being undercut by tricky price changes.
Why You Need Retail Pricing Analytics
Pricing analytics in the retail industry allows businesses to set optimized pricing for specific products, seasons, and stores by using data to analyze lost sales, inventory turn, selling patterns, and more. Pricing analytics even impacts inventory, allowing you to better manage your inventory based on inventory data, demand data, and seasonal changes.
At Hitachi Solutions, we have a robust retail software suite that covers everything from customer relationship management to the data and analytics your company needs. Our retail pricing analytics programs will help you:
- Identify products that could sell at higher prices, and products that should be priced lower for a multitude of reasons:
- Capture lost sales
- Increase inventory turn
- Capitalize on “hot sellers”
- Utilize captured data to provide specific direction on who, what, where, when, why, and how to increase revenue
- Refocus your pricing on selling patterns both organizationally and geographically
- Access real-time information when and where you need it on any device
Like any tool, retail pricing analytics only work if you put them to use. Many retailers make the investment, but don’t understand the full capabilities of their analytics solution. If you have any questions about price optimization in retail, or retail software platforms, please reach out today. We have thousands of experts across the globe who are happy to help.