Leveling the Playing Field with Optimized Pricing Solutions

Price is often the first thing consumers consider when evaluating a purchase. Yes, the shopper experience matters, but there is a limit to how much customers will pay for it. Without competitive pricing to complement an engaging path to purchase, retailers will likely lose the sale, and potentially the customer. To ensure prices remain competitive on in-demand SKUs, while keeping margins healthy, savvy retailers are investing in optimized pricing software. These next-gen solutions allow retailers to change pricing on the fly while simultaneously improving their value proposition. Read on to see where your pricing capabilities stack up against the industry. Modern, feature-rich pricing solutions provide more than just the ability to change prices on in-demand SKUs at will. They deliver meaningful insight beyond the numbers and help retailers identify not only the ideal price for an individual SKU, but also accurately predict future demand and price elasticity. That insight is used to shape an effective pricing strategy and inform retailers’ price changes. Currently, around a quarter (23%) of retailers are changing the price of in-demand SKUs multiple times per week, with a small group of power users (6%) changing prices multiple times per hour (Figure 1). More than half of survey respondents (53%) change prices on a monthly and weekly (59%) basis. Interestingly, 20% of retailers reported that price changes multiple times per week would be ideal, and 13% name monthly price changes as the perfect interval. Twenty-five percent of retailers cited determining when to change prices and what to change prices to as one of their biggest pricing challenges (Figure 3). To effectively pinpoint ideal price elasticity, savvy retailers are implementing AI-powered solutions designed to take the guesswork out of price management, while simultaneously automating the process. In addition to competitive pricing (67%), retailers pointed to convenience (75%), product availability (69%), and exclusive products (58%) as the main benefits of equipping the modern supply chain with artificial intelligence (Figure 2). Price is one of the most important components to retail success. It must be in line with the competition if a retailer is going to have a chance to win their business, and many consumers shop on price only, making it increasingly important to get pricing right. We asked retailers their biggest pricing challenges and an overwhelming 61% cited consumer price sensitivity as a major challenge (Figure 3). Other top challenges include increased pricing competition (53%), real-time price changes (36%), forecasting the impact of price changes (31%), and pricing automation (31%). Setting competitive pricing is only part of the battle; retailers must be able to communicate their pricing positions seamlessly and effectively with consumers. The biggest price-related, promotional obstacle retailers face is choosing the right promotional vehicles, which was cited as a major challenge by 47% of those surveyed (Figure 4). Other key promotional challenges include getting the right offer type (44%), getting the price right (33%), and determining what items or categories to promote (33%). To meet these pricing and promotion challenges retailers continue to invest in next-gen pricing software. For this research retailers were asked their tech maturity, as well as future investment plans, for 11 key pricing technologies. Today, 57% of retailers report that they are up to date on their inventory management software, 43% are current with their price management solution, and 37% are sporting modern competitive pricing intelligence and markdown management solutions (Figure 5). When asked which solutions they are currently in the process of upgrading, 29% cited inventory management, 26% predictive analytics and product lifecycle management, and 23% named price and promotion management. Over the next 24 months, 23% will upgrade their competitive pricing intelligence, 22% will invest in promotion optimization, and 20% will improve their price management capabilities. As the competition for the hearts, minds, and wallets of today’s fickle consumers continues to rage on retailers are turning to optimization software to ensure products are priced right. Retailers were asked the biggest business problems pricing optimization software can help solve, and not surprisingly, improve margins was the most popular response at a whopping 81% (Figure 6). Other key challenges a sophisticated pricing optimization solution can help solve are creating a better value proposition (69%), efficient pricing processes (61%), and improve promotions (47%). While the benefits of optimizing pricing are plentiful, not every retailer is able to take advantage of the capability. Retailers were asked the key hurdles holding them back from effective price optimization (Figure 7) and they pointed toward not having the right technology in place (44%), change management issues (38%), a lack of clean data (32%) and the right staff not in place (32%). Methodology This research was conducted in May 2021. The survey was sent to retail executives at both large-scale and small regional chains. Sixty-seven percent of respondents hold director-level or higher titles (Figure 8). Most respondents (42%) are working in the store operations segment — the second highest core business function among survey takers is IT/technology at 17% (Figure 9). The respondent pool comes from across the retail landscape, with the biggest concentration in grocery/convenience/drug (55%), followed by specialty (31%) and mass market/general merchandise/discount (11%) (Figure 12). Conclusion Sophisticated pricing optimization solutions allow retailers to improve margins, provide a superior value proposition, and simplify and supercharge pricing processes. Despite the obvious benefits many retailers are still handling pricing operations with slow, antiquated software — or, worse yet, manually controlled systems. By upgrading to an AI-powered, automated pricing solution, retailers can ensure they won’t lose sales on in-demand SKUs due to price, while simultaneously improving the customer experience and building meaningful, long-term loyalty. Key Takeaways 23% of retailers change the price of in-demand SKUs multiple times per week, while 6% change prices multiple times per hour. Convenience (75%), competitive pricing (67%), product availability (69%), and exclusive products (58%) are the main benefits of equipping the retail supply chain with artificial intelligence. Retailers’ biggest current pricing challenges include consumer price sensitivity (61%), increased pricing competition (53%) and real-time price changes (36%). 57% report up-to-date inventory management software, 43% are current with price management, and 37% have modern competitive pricing intelligence. 23% of retailers will invest in competitive pricing intelligence, 22% in promotion optimization, and 20% in price management over the next 24 months. Not having the right technology in place (44%), change management issues (38%), and a lack of clean data (32%) are holding retailers back from effective price optimization.