Pricing, Promotions and Personalization: Some (Surprising) Insights From Global Shoppers
Following two groundbreaking studies in 2017 that surveyed consumers in the U.S., U.K., France, Germany and Brazil, Revionics decided to delve more deeply into shoppers’ preferences and attitudes around promotions and personalized pricing. The earlier research had produced some pretty riveting results: not only do shoppers feel accepting of frequent price updates as long as the prices are perceived as nonarbitrary and fair, but a whopping 78 percent of respondents said they trust dynamic pricing more than retailers to provide fair prices.
And if the definition of insanity is repeating the same behavior in the hope of getting a different outcome, then retailers are exhibiting some pretty insane promotional tactics. Fifty-two percent of the weekly or monthly promotions they offer go to customers who would happily have paid full price. This struck us as a shocking loss of margins in an era when every single dollar counts for retailers struggling to keep up with growing competition, complete price transparency, and an always-on shopper surfing every available channel for favorable prices and promotions.
The goal of the new study was to understand what sort of offers are meaningful to shoppers, helping to guide retailers to more data-driven strategies that both resonate with their customers and drive desired business outcomes. It turns out that peppering shoppers with unnecessary offers can actually backfire for retailers. Thirty-seven percent of respondents who received offers on items they would have paid full price for said the offer had neutral or negative impact, with more than half of those saying they would be less likely to shop that store or brand in the future or that they felt annoyed. The overwhelming majority of these unfocused promotions — 69 percent — came via email, a sign that retailers must be more vigilant about the quality and timing of their offers in every vehicle, even ones like email that they perceive as “free.”
Consumers also prefer offer frequencies that are synched to how often they shop for that product category. At the extremes, while most shoppers (70 percent) want grocery offers at least weekly, 50 percent want automotive offers annually or less, only when they’re in the hunt for that item, or not at all.
But how deep an offer should a retailer provide? Interestingly, shoppers indicated a clear preference for percent-off and money-off discounts, though they also responded well to BOGO offers on frequently purchased items such as groceries and personal care products.
When asked about personalized prices, consumers’ responses create tricky waters for retailers to navigate. Although 65 percent of shoppers said they appreciate prices personalized to their shopping habits, 47 percent said they get angry when someone else’s personalized price is lower than their own. The overriding principle is that shoppers want fair, rational prices: 59 percent said they would refuse to make a purchase if the price “doesn’t make sense.”
Armed with these results, what should retailers do differently to ensure they're providing prices and promotions that align with shoppers’ preferences? Increasingly, retailers are turning to field-tested artificial intelligence and machine learning science with algorithms that can precisely analyze shopper sensitivities as well as target segments and competitive elasticity to prescribe finely crafted prices and offers. Moreover, today’s key value item analysis and market basket analysis can ensure that aggressive pricing is focused where it matters most, while enabling retailers to recover margin elsewhere and structure for long-term business success.
It’s true that shoppers today report receiving a lot of misguided promotions and off-target pricing that threatens to undermine the retailer’s hard-won brand image. But with the benefit of shopper insights and modern technology, innovative retailers have proven that they can take the sane route and give shoppers what they want and enhance bottom-line results.
Cheryl Sullivan is the chief marketing and strategy officer at Revionics, a global SaaS provider of science-based pricing, promotion, space and competitive insight for innovative retailers.