06/23/2014 Increases Margins with Pricing Intelligence

Through the use of pricing intelligence and traffic management solutions online retailer has seen conversion rates at some of its sites soar as high as 7% — overall conversion across the brand is an eye-opening 3.5%.

At the Retail Executive Summit, president and founder of the home improvement site Christian Friedland discussed his company's pricing strategy and how the use of pricing intelligence software from 360pi has helped increase margins and improve conversion rates.

To it is not about just getting visitors to the site, it is about getting the right visitors to the site at the right time. Through the use of traffic management tools the e-tailer has been able to boost its relevant traffic, and has seen conversion rates increase.

"Traffic is obviously important but as customers become more sophisticated pricing strategy needs to become more sophisticated as well," Friedland said. "Retailers need to get as intelligent with pricing as they have been with web analytics."

A successful pricing strategy does not revolve around just being the lowest price — in a race to the bottom no one wins. Ideally, a pricing intelligence solution will allow retailers to discover areas where they are overpriced and just as importantly underpriced. By pin-pointing SKUs that are priced below market, retailers can discover lost margin opportunities and maximize revenue.

No two retailers have the same pricing strategy but Friedland insists that regardless of strategy, advanced pricing intelligence is necessary. His pricing intelligence solution must haves include: cart-level site crawling, ability to upload raw data into BI solution, daily or hourly web crawls, and SaaS based.

Price management has evolved greatly over the past 15 years. In the early 2000s weekly, manually controlled price changes were the norm. By mid-decade, semi-automated price changes began to make their appearance. Currently the industry is changing prices by the minute and adjustments can be made fully-automatically.

"Dynamic pricing adds a new element of challenge to those selling commodity products in online retail," Friedland said. "It has created a trading floor environment."

Pricing intelligence is still in its infant stage. As it continues to evolve Friedland sees even greater opportunities to price right and increase margins.

"Now we have data and our people are acting on it," he says. "The next stage is for tools to start pulling in analytics based off of our pricing rules. We will be able to eliminate more people from the process and go beyond what we are doing today.

To see how other top retailers are leveraging the power of pricing intelligence to price their products right and increase margins download RIS News pricing strategy report here.