A step-by-step guide to optimize your pricing strategy: Part 3
In this final post in the series, I’ll be exploring the relatively new area of using artificial intelligence (AI) and machine learning in retail and how you can incorporate this technology into your grocery pricing strategy. In case you missed my previous blogs, you can catch up on step 1 and step 2 in the Shopportunities column.
The future is now
Imagine being able to know in advance which products to discount, the ideal time to discount them and the exact price you should charge for them. This is possible thanks to AI technology that can quickly synthesize your transactional, competitive, market and loyalty customer data to simulate future buying behaviour.
AI technology has the power to automatically change data into insights at a scale that leads you to the best path for pricing and promotional campaigns–and offer shoppers the added “personal” value they’ve come to expect. Today’s shoppers are making ultra-informed choices and retailers have to be more agile than ever, especially when you have big players such as Amazon setting a higher bar with dynamic pricing. Welcome to the new normal.
Out with the old …
Online shopping has given customers more choices than ever, pushing expectations sky high and quickly making traditional pricing tools obsolete. To compete, retailers are having to reinvent their operations including processes, roles, analytics and technology. Having to change pricing daily and intra-day based on product, market/zone and ever-changing customer preferences means moving towards real-time changes that respond to market and competitive factors in a personalized way. In our recent global survey conducted by IDC and commissioned by Precima, it was determined that grocery retailers would spend $6.3 billion in 2019 and $8.7 billion in 2020 on AI and machine learning technology.
… and in with the new: Enter AI and machine learning
Why should you integrate AI into your operational decision making? Simply put, it’s not possible to make pricing decisions at the speed or scale that’s required simply by using traditional analytic tools. The advances in AI allow retailers to respond to the continually changing landscape in ways never before possible. You now have the power to swiftly:
- Establish strategies for pricing and promotions
- Identify objectives, business rules and constraints including target price position, how to price to market, set sales and margin targets, define role of private brands, etc.
- Personalize every aspect of engagement
The wide scope of AI’s capabilities means it can do the heavy lifting. You can leverage this technology to update pricing to meet your objectives, rules and constraints, while adjusting in real-time without any need for human interaction. AI also excels at finding patterns and correlations. For example, it can identify which products and categories are best suited for everyday price investments and which will perform best through promotion or personalization. It could also suggest which products would likely be purchased together–giving retailers an added advantage. Precima currently works with clients to deliver 25 million price recommendations weekly, and we’re now moving towards changing prices of millions of items daily. This is an exciting time for grocery retailers.
The future is here
With AI and machine learning outstripping the capabilities of traditional analytics, more and more retailers are embracing this new technology. And we’re only just beginning to capitalize on this opportunity.
Don’t wait: The key is to start building your AI platform now. The sooner it’s a part of your pricing strategy, the quicker you can react to product and shopper trends. It’s important not to be left behind, especially with more and more grocers successfully integrating AI into their business strategies.
Reinvent your grocery retail business: AI can be customized to fit your business objectives. Use it to optimize price and promotional strategies and investments, and drive toward full personalization of the shopper experience across all channels in real-time – this is the future of retail and it’s coming soon!
The grocery retail world is becoming more competitive by the day, but with the right tools, success is within reach. To stay up to speed on pricing and total store strategy, take a look at my previous blogs and visit www.precima.com.