4 Steps to Winning at the Retail Pricing Game
Pricing continues to be a major influencer of change in retail. Customers are a powerful driving force of that change. According to a recent Google mobile research study, 84% of smartphone shoppers use their phones in-stores for pre-shopping activities, including making price comparisons, finding promos, and searching for product information.
One in three shoppers prefer to use their smartphones to find information instead of asking store employees. It’s clear that the buying process has fundamentally changed — from how customers research products to what influences purchase decisions to where, when and how they ultimately buy. Since customers are digitally armed with product and pricing information before they even enter the store, retailers need to be able to act quickly and dynamically to address questions and concerns to make the sale.
In its 2013 Annual Pricing Benchmark that surveyed over 100 U.S. retailers, Retail Systems Research (RSR) set out to determine how retailers are responding to an increasingly transparent pricing industry. RSR found that some of the top challenges for retailers are increased consumer price sensitivity (57%) and competitor price aggressiveness (41%). Other concerns included the need to get a better return on inventory investment through pricing (40%), the need to protect their brand’s price image (34%), and the increase in customer comparative price shopping (33%).
According to RSR, 60 percent of retailers believe that competitor pricing information is crucial to compete in this transparent pricing environment, but many of those retailers don’t have the ability to do so. Forty-two percent of retailers site lack of clean price, competitor and purchase data as the most significant barrier to implementing an effective pricing strategy.
Clearly, there are some new challenges facing retailers. The good news is there are now tools to help retailers re-level the playing field with consumers. Here are four simple ways retailers can win today’s pricing game.
1. Get clean, real-time, accurate and complete competitive pricing information to respond quickly to competitors’ price changes. Price intelligence gives retailers the real picture of how their pricing and assortment stacks up to their competition. Without it, retailers are simply speculating on their strategies.
2. Maintain a consistent, but dynamic, pricing strategy. Instead of having a pricing strategy set in stone, retailers should aim to have a strategy that is not only long-term, but also interactive and dynamic. Price intelligence helps retailers see their own strategies in action. Pricing activities in the retail market are constantly moving, and retailers must move along with it. With pricing data, retailers can decide at the moment the competitor changes price whether to respond and match or beat that price. Retailers should establish rule-based protocols for competitor price changes. For example, if a retailer’s pricing strategy for TVs is to always be 15% below the competition and a competitor’s price dips below that, there should be an established protocol on how to respond in order to maintain the best price.
3. Turning showroomers into buyers. Showrooming is no longer a scary concept for retailers who are armed with price intelligence data. Retailers can ensure their store associates are equipped with pricing data so that they can more effectively convince browsing shoppers that they have the products they’re looking for at the best price. If a customer is testing a digital camera in the store, but tells the store associate that it’s more than they wanted to pay, the store associate can accurately communicate current competitor prices and product details in order to show they have the best deal—and keep that customer from buying at the competition. Alternatively, the associate can suggest a more cost competitive substitute.
4. Keep tabs on Amazon and other retail leaders. Amazon has an aggressive pricing strategy—that’s no secret. Retailers everywhere can get an inside look into the prices that retail leaders such as Amazon broadcast to their customers with price intelligence technology. It’s imperative to stay on top of retail leaders’ pricing strategies in order to avoid falling behind — retailers can actually learn from monitoring retail leaders’ pricing habits, as well. The retail industry now has access to competitive pricing data as a way to optimize prices. It can be the key to enabling retailers to make faster, fewer and smarter pricing decisions — putting retailers back in control of their pricing strategies and giving them the insight they need to win the pricing game.