A step-by-step guide to optimize your pricing strategy
Today’s grocery retailers face many challenges when it comes to optimizing pricing strategies–namely, keeping up with digital-savvy retailers and the evolving expectations of equally savvy consumers. To help retailers stay ahead of the curve, I want to share the important steps you need to take in order to optimize your retail pricing strategy. Keep reading for Step 1 and check the Shopportunities column in the coming weeks for new blogs in this pricing strategy series.
Step 1: Embracing change–The first and most important step
Change is good
The first step in optimizing your grocery pricing strategy starts with getting over the first (and probably the biggest) hurdle that you face–embracing change.
Undoubtedly, today’s retailers recognize price optimization is important. And while many retailers have a pricing strategy in place, many are using outdated–and often manual–approaches and tools that are more category-centric rather than customer-centric.
But, the stakes have changed. As the world grows increasingly dynamic and competitive, with leading digital players such as Amazon moving to optimize all prices in near-real time, retailers need to find ways to keep up. It’s time to move away from traditional category-driven approaches to pricing and open our eyes to new solutions and embrace operational change.
Forget traditional category pricing structures
Why the resistance to change? For starters, many grocery retailers are working with very thin margins, increasing competition and price transparency. In the past, businesses relied on their experience as well as traditional category structure and pricing rules to inform their pricing strategy, rather than adopting more sophisticated data-driven optimization. These tactics may have worked before, but they are no longer enough for survival.
Customers are acutely value-conscious and want price transparency from retailers. Finding a happy medium between improving price perception and meeting performance targets is a challenge. Keeping up with consumer expectations is no longer an option–it’s a necessity.
Embrace real-time, dynamic pricing strategies
How can you keep up? If you recognize that traditional solutions like rules-based, category-specific pricing strategies are no longer sufficient–especially as leading retailers are moving to dynamic, real-time omnichannel price optimization–then you’re a step ahead.
Retail innovators have set a new standard by adjusting prices based on customer and market/competitive behaviour across all categories and items (every day moving to intra-day activation). The sooner you operationalize change, the closer you’ll get to the bar set by the front-runners and the further ahead you’ll be of those competitors who are not yet tapping into the full potential of this opportunity. Hesitant to invest in data analysis for pricing optimization in-house? You’re not alone. Read my previous blog to learn why successful grocery retailers are outsourcing analytics to get ahead.
Reap the benefits of real-time pricing
While it’s a considerable change to make, the results are worth it:
- Maintain profits and stay competitive: Taking a holistic, omnichannel and real-time pricing approach is proven to drive a 2% to 3% increase in sales and profit while improving competitive price position and perception.
- Inform optimal price recommendations: Next generation solutions can help you set optimal prices across the business, plus inform everyday shelf price and promotional prices.
- Meet customer expectations: Real-time pricing allows you to give your customers what they want, including transparency and prices that reflect their perception of product value.
If you’re ready to embrace change, it’s necessary to leave traditional pricing strategies in the past and start shifting to real-time pricing and transparency. Not only will this help you get the jump on your competitors, but it will also help you meet customer needs and expectations–and maybe even exceed them.
Ready for the next steps? Keep an eye out for my upcoming blogs where I’ll cover even more best practices for optimizing your pricing strategy.