Do retailers need to make price optimization a priority right now?
Through a special arrangement, presented here for discussion is an excerpt of a current article from the blog of Aptos.
While price transparency was tough for retailers pre-pandemic, the challenge has only intensified as personal financial strain and economic uncertainties place even greater emphasis on price during purchasing journeys.
Here is a reminder of why price optimization needs to be a top priority for retailers in 2021:
The impact of price on demand (and the role of elasticity) cannot be ignored.
The fastest way to generate demand is with pricing. When a product’s price goes down, sales go up. Considering price elasticity adds some complexity. If a product is elastic, price changes have a higher impact on demand. If inelastic, price changes have a relatively low impact. An AI-powered price optimization solution effectively calculates millions of elasticity values and dynamically adapts as demand shifts. The result: more value generation, improved forecasting capabilities and the optimal balance of price increases and decreases to drive profitable demand.
Will dynamic pricing be your competitive advantage – or your competitors’?
Adoption of dynamic pricing, riding the online shift, is likely to be accelerated by COVID-19. Yet the benefits can only be fully realized if you move faster than your competition. If your competitor can change prices every day of the week and you only change them weekly, you will lose an entire week of price perception before you can react. While you shouldn’t make huge pricing shifts, small changes should be able to be made quickly. Improving your price perception is highly dependent on your capability to price more frequently than your competition.
Controlling your price perception starts with a centralized strategy.
The global pandemic makes it necessary for pricing best practices to be more urgent, more actionable and — most of all — more strategic. While a lot of lower-priced discounters and premium retailers put strategic emphasis on how they want to be positioned in the market and price accordingly, many more retailers struggle with establishing a pricing identity. A centralized strategy with strong leadership, adoption and governance can drive improved price perception while achieving financial objectives at the enterprise level.
DISCUSSION QUESTIONS: Will the COVID-19-driven shift to online shopping accelerate the adoption of dynamic pricing and use of price optimization tools? What do you see as the advantages and potential challenges of using such technologies to address consumer demands for pricing transparency?