As retailers struggle with lagging consumer sentiment, an expert has shared some practical tips to help you get the price right.
With hefty global competition, the growth of e-commerce and the rising cost of living, finding the price that’s right for consumers is more difficult than ever.
But retailers can leverage digital tools to gain invaluable insights into price points that will resonate with the market and give them an upper-hand against competitors, according to Claire Mula, COO of Invigor.
“Data can help retailers identify margin-preserving or volume-driving pricing strategies within the context of the market and what their competitors are doing.”
Data can also help retailers to more efficiently manage prices by automating routine repricing decisions, and predicting outcomes of new pricing and promotional strategies ahead of any investment, she says.
Analysing products sold at different price points and promotion prices to see if there’s any uplift in sales is a great, practical way to test the waters, according to Ms Mula.
“Ideally, any reduction in price has a positive impact on sales volume, sales value and gross profit. However, this is not always the case. It may differ by product or by seasonality,” she said.
With the rise of e-commerce, finding a competitive price is crucial for retailers, Ms Mula told Retailbiz.
“Pricing information is so easily available online that consumers can research prices well ahead of any store visit. This transparency has laid the foundation for more dynamic price monitoring and responsive pricing strategies among most leading retailers,” she said.
But pricing is not just about having the lowest prices, Ms Mula says.
“Good data-driven pricing decisions are both proactive and reactive. On the one hand, it’s important to be highly responsive to competitor activity where it is effective. Short-term discounting across the board is not the path of a successful retailer. They need to take into account their pricing strategy, who they compete with on price, and when and where they should be responsive or not.”
Data is also essential to help retailers get a sense of the pricing of products from their competitors, which can then help them determine their profitability in the market.
“Most retailers do not operate in monopolies, so, understanding competitors’ strategies, promotional patterns and price movements is crucial in defining the best pricing strategy for a business over time. This will differ for each business due to differences in competition, business objectives and positioning.”
Price matching, in some industries can be a particularly useful way of gaining a competitive edge against competitors, she says.
“Another pricing strategy may be to price match, which means having an everyday low or lowest price in market. The retailer will therefore compete with every other player on price, becoming a price-taker, because of that promise to consumers. Being responsive to competitor price becomes paramount, such as in the case of Dan Murphy’s in the liquor industry.”
Promoting loyalty through specific pricing promotions targeting consumers who, for example, subscribe to your loyalty program can be a critical way of maintaining a loyal customer base.
“Retailers are also increasingly targeting or offering special prices to different segments of customers, such as loyalty program members. Promotional tactics like discounts or cashback via coupons, always-on rewards, and more are all examples of a move towards more flexible pricing,” according to Ms Mula.
But pricing decisions are not always just about discounting products, and retailers need to think long and hard about their customer’s demographic before making any pricing decisions, she says.
“It’s important to note that value and elasticity in pricing are different for different products. For example, where margins are tight, excessive discounts can become loss-making for retailers.”