Feature: The Price is Right
Retailers will need to first arrive at getting answers to their pricing strategy, and then follow that up with the implementation of new dynamic pricing systems.
Dynamic Pricing Systems in the New Era
Many retailers are at the early stages of evaluation and implementation of new dynamic pricing systems. The best of these implementations will combine the collection of accurate, comprehensive data with well-tested models and automation to sense what consumers are willing to pay, and then prices accordingly instead of merely price matching. The best models include competitive price elasticity analytics that help retailers identify which competitors actually impact their sales and which products they're actually competing on.
The not-so-good examples of implementation, however, are characterized by incomplete data, poor quality of data and over-reliance on human effort where automation would be better.
As retailers get clarity on their overall pricing philosophy and strategy, and take suitable steps to develop new dynamic pricing capabilities, brands also need to start taking notice and take steps to get a better understanding of channel pricing. Brands, especially those that have a minimum advertised price (MAP), will learn quickly that their current methods of MAP monitoring are on the way out as retailers start implementing more sophisticated pricing capabilities that enable dynamic pricing, pricing differently (e.g., by style, color and/or size), in-cart pricing and personalized pricing.
Change, as we all know, is good, and this new era of disruption will ultimately be better for consumers at the end of the day. Retailers and brands, however, will need to embrace all of the changes taking place and make sure to take quick action to develop dynamic pricing capability. However, they should only embark on this after they have a better handle on their strategy.
Mihir Kittur is co-founder and chief commercial officer for Ugam, a leading next-generation data and analytics company.