Wondering if adjusting your pricing might bring more customers in to your bricks and mortar and online outlets this year? If you answered in the affirmative, you’re far from alone.
In retail enterprises up and down the country, business leaders are pondering the question of how much they should be charging for the various lines in their range.
The cost of doing business is rising, with everything from electricity and freight to office supplies becoming more expensive by the day. That leaves retailers with two choices: to pass those increases on to customers, in the form of higher prices; or to absorb them and see profitability suffer.
Combatting the cost-of-living crunch
Bumping prices up ‘willy nilly’ may be tricky, given millions of Australians are struggling to combat the cost-of-living crisis which soaring inflation and rising interest rates has created.
Research released by comparison site Finder in late 2022 found three in five Australians were taking action to give themselves breathing room from financial pressures.
Cutting back will be the norm for many folk, going forward, according to Finder head of consumer research Graham Cooke.
“Rising costs are leaving people facing some pretty scary deficits. We’re seeing massive increases in the cost of housing, groceries, energy and transport,” Cooke noted.
“Being frugal is a good way to rein in spending and provide some relief for budgets.”
The price is right – or is it?
Against that backdrop, getting pricing right may well prove ‘do or die’ for purveyors of anything which isn’t deemed an essential purchase.
If your business falls into this category, implementing a revenue management strategy could allow you to eliminate much of the guess work associated with trying to sell the right products to the right customers, at the right prices.
The term ‘revenue management’ refers to the process of maximising revenue, by analysing and adjusting pricing and inventory data. Data analytics technology is commonly used to examine and predict the behaviour of individual consumers, or segments of the target market. Successful revenue management occurs when a business offers the optimum product and pricing structure; thereby upping its chances of earning sales and repeat business.
Here are some of the benefits that can result from adopting this approach.
Improved understanding of customer expectations
Do you know what your customers are looking for when they hand over their money, and how satisfied they are with your current range? Unless your organisation polls them regularly, the answer is probably ‘not really’.
A revenue management strategy will remedy that deficit because it entails ongoing data capture and research. Increasing your understanding of your target market’s expectations will enable you to modify and enhance your offering and introduce new lines that customers need and want, at prices they can afford to pay.
That business intelligence can also be used to target potentially profitable new market segments and make your goods and services available to customers in different ways.
Rather than selling highly priced equipment or machinery outright, for example, you may choose to adopt a usage-based pricing model. That could see customers paying a minimum monthly charge, along with a separate fee based on their usage level.
Alternatively, you could choose to utilise the data you collect to introduce dynamic pricing. Just as ride sharing services such as Uber and Lyft switch on ‘surge pricing’ when customers are many and drivers scarce, you may look to offer prices that fluctuate according to market demand.
More competitive pricing
Diving deep into the data may also help you to decide what those prices should be, if you’re aiming to grow market share and increase profitability. This can be a delicate balance to strike and, depending on the nature of your enterprise and where it’s at in its business life cycle, you may decide to prioritise one of these goals, at the expense of the other.
Knowledge is power and having that knowledge at your fingertips allows you to make choices that will keep the registers ringing.
Tools to make the task easy
Obtaining this level of insight is impossible without the right tools. We’re talking cloud-based revenue management software that covers the revenue cycle from end to end and integrates seamlessly with any major ERP solution powering your business.
It’s foundation technology that allows you to capture and consolidate purchasing data and integrate it with systems to track and manage your customers. As a result, you’ll be able to extract actionable insights to inform your decision making – about what products you should be selling and how much you should be charging for them.
If you’re serious about maintaining sales and profitability through what’s shaping up to be a highly challenging period for the Australian retail sector, it’s an investment that’s likely to pay you back in spades.
Carl Warwick is regional sales director for Asia Pacific & Japan for BillingPlatform.