The retail world is currently facing rapid evolution. Market trends are fluctuating at an unprecedented pace, prices are as competitive as they’ve ever been, and customers are holding companies to ever-higher standards. The only way to keep up is with a pricing analytics software that enables you to strategize in a manner that optimizes for these factors.
Because relying on the outdated methods of yesterday is not enough anymore, industry leaders are abandoning manual processes alone and adopting cutting edge AI tools to stay competitive. These tools utilize price analysis data from various channels of a company’s operations (i.e. marketing channels, eCommerce platforms). And with them, eCommerce leaders can make data-driven competitive pricing decisions while receiving a better ROI on each product.
What is Pricing Analytics?
Pricing analytics is an emerging field that provides companies with the tools and methods to better perceive, interpret and predict consumer behaviour. Because pricing power comes from understanding what consumers want, where they shop, which offers they respond to and how much they are willing to pay for a product or service.
From answering preliminary market questions to making real-time pricing decisions to prognosticating future outcomes, powerful pricing analytics is the greatest asset available to increase revenue for modern retailers.
Develop a solid understanding of customer needs and pain points first
Before setting your prices, you need to accurately hone down who you’re setting these prices for. Unfortunately, many retailers handcuff themselves by neglecting the inner workings of their target audiences. What they end up with, then, are strategies based on an imaginary user persona (and, thus, with prices that aren’t optimal for real users).
Before setting competitive prices, you want to answer two instrumental questions:
- What do your buyers truly value in their products and shopping experiences?
- What are they reasonably willing to pay for what you offer?
The answers you find will serve as a foundation for your pricing analysis. With them, you can confidently set win-win pricing that satisfies users while keeping your product margins in the green.
Optimize prices for your audience through segmentation and rule-based pricing
First, you start with segmentation – identifying the exact personas and corners of the market that you’re targeting. Based on an intelligent analysis of past behavior, your pricing analytics software can help you figure out which groups carry the highest sales potential (as well as which user bases deliver lower returns on your investments). This is how you answer the first question.
As for the second question, you tackle it by implementing rule-based pricing. This means extending your pricing analytics capabilities beyond user expectations and bottom-line margins to include product histories, competitor movements, and large-scale market conditions.
Overall, there is no shortage of details to rack, but getting a comprehensive view is essential to competitive pricing in today’s retail marketplace. Only once you’re fully armed with the power of ecommerce pricing analytics can you safely move on to the decision-making stage.
Benefits of Pricing Analytics
With a pricing analytics software guiding you, each decision you make boosts revenue
The next step is positioning your products in accordance with those price ranges and contextual intricacies. And part of what makes price analytics tools so valuable is that this step can be done in a way that actively aligns with your immediate goals.
Often, we see real-time adjustments in the form of dynamic pricing. Nothing gives you a leg up on your competition quite like the capability to adapt prices to market demands in the present moment. No matter if changes occur in your products’ values, your competitors’ offers, your stocking situations, or any other number of variables, you can always be on top of them. And where pivots are necessary, they’ll be reflected across all sales channels.
On your pricing analytics dashboard, you’ll also undoubtedly have avenues for other immediate quick fixes. More often than not, retailers are completely unaware of products that are overpriced, underpriced, or otherwise positioned poorly. These mistakes may be subtle, but shoring them up is often a quick and painless way to optimize revenue.
Beyond setting prices, you can use pricing analytics to identify sales opportunities
Once those pricing gaps are shored up, it’s time to take advantage of the many sales opportunities at your fingertips. Specifically, this is your chance to offer your customers smart promotions and discounts to further drive sales numbers.
We say “smart” because promotions are often treated as a haphazard guessing game or (even worse) a race to the bottom. Instead, they should be based on a concrete strategy; after all, price reductions have to serve a purpose. And your pricing analytics software will help you find that purpose by factoring in supply and demand as well as seasons and trends. Ultimately, product promotions need to support your brand identity and customer wishes on top of driving revenue.
Now, these are some lofty goals that we’re setting. But thankfully, the power of modern pricing analytics goes the extra mile in evaluating the effectiveness of these strategies.
Price analytics enables you to forecast a profitable future by analyzing the past
So far, we’ve seen how using a pricing analytics software can help you set prices that are optimized based on what was and what is. But perhaps the greatest impact is on your future-facing goals. Because, the puzzle wouldn’t be complete without considering your long-term objectives, such as profit targets, brand image, and operational efficiency.
Optimizing your ecommerce pricing strategy for these objectives starts with tracking measurements on the various decisions you make. Consider these questions: How effective are the promotions you run? Which price do points bring in the greatest sales? How is your pricing influencing brand associations and in comparison with your competition? And what are your per-user returns on acquisition investments? Pricing analytics empowers you to refine your strategies based on precise answers to these very questions.
This refinement can take many forms: Shifting individual product prices taking value into account, adjusting stock purchases to optimize inventory turns, improving the personalization of future offers, etc. Which brings us to the point that implementing intuitive pricing analytics is an iterative process. Since the industry is always fluctuating one way or the other, your mindset has to be one of fluidity and versatility.
And that’s the real power of Intelligence Node’s pricing analytics software : The freedom to adapt at will.