In a retail landscape that is finally pivoting towards a post-pandemic reality, retailers must strategically recalibrate their pricing strategies for what lies ahead. One thing is clear: Many shoppers who flocked to online channels during COVID will remain digital and retailers need to shift their thinking accordingly. Buyers affected by the economic shocks of the pandemic remain in a state of heightened price sensitivity, and they are much more likely to shop around before making a decision than in a pre-pandemic period. This has made it imperative for retailers to offer attractive prices on the items that matter most to shoppers. The science of full lifecycle pricing has been available to retailers for decades, making real, proven capabilities available on the road every step of the way, from daily pricing and promotions to discount and clearance.
A recent global consumer study discovered a permanent shift towards online shopping. Before the pandemic, 78% of consumers said they “often” or “almost always” shopped in-store, while after the pandemic, only 49% expected to shop “often” or “almost always”. always ”, with only 28% of consumers. consumers saying they would buy in-store (before COVID, 58% said they would buy in-store). Fortunately, data science harnessing machine learning (ML) and artificial intelligence techniques can accurately separate true demand signals from noise and make price recommendations that take into account buyer expectations and elasticity. at the channel level, or even more granularly based on buyer location, demographics, and other attributes.
Likewise, shoppers are now geared towards responding to promotional offers in their smartphones, mobile apps or on a retailer’s website. The same study found that 55% of shoppers say they are “very likely” or “extremely likely” to respond to a promotional offer on their smartphone or in a mobile app, while only 42% feel the same about of a mail delivered to their home, and 41% are very or extremely likely to respond to a flyer in store. Then again, science can provide in-depth and accurate information about promotion effectiveness, enabling retailers to create offers that matter with the vehicles that generate target response rates.
A clear advantage of pricing science is the ability not only to come up with compelling prices and offers on the items that matter most to shoppers, but also to know where retailers can safely reclaim their margin to maintain a pattern. healthy business. There is good news here for retailers, as more shoppers than ever are buying private label products, which typically generate relatively high margins. Not only are shoppers more likely to purchase private label products today than before the pandemic, but in a reversal of perceptions from earlier eras, they perceive private label to be of high quality. The recent global survey found that 81 percent of shoppers perceive private labels to be of higher or similar quality compared to national brands. Using scientific information, retailers can plan scenarios to set pricing and promote their private labels to more effectively attract and retain customers while meeting overall financial goals.
With buyer, competitor and market behaviors evolving faster than ever before, and even with once-stable fundamentals like Key Value Elements (KVIs) constantly evolving, innovative retailers have the opportunity to move beyond approaches. manual at the human speed of lifecycle pricing. By embracing science, retailers can automate processes and respond intelligently and nimbly to changing behavior on a very granular level. Modern science goes beyond previous universal approaches to apply the best science to every retail situation. The result: flexible, adaptable and efficient pricing while delivering better overall performance.
Geoff Pofahl, Ph.D., is Scientific Director at DemandTec, a single-vendor providing lifecycle retail pricing solutions for retailers, delivering the deepest depth and breadth of proven lifecycle pricing solutions in the market.