With the increasing complexity in retail today, applying advanced analytics in areas such as pricing solutions is critical for retailers wanting to stay ahead in the market. A recently-released Deloitte report, "Going To Market With A Smarter Approach," notes the dynamic and unrelenting retail sector changes that we all recognize by now: That customers still hold sway, competition grows keener, and retailers seek new ways to tap into their data to improve performance and profits. As the questions become more complicated, retailers require in-depth insights to effectively manage and forecast future performance. For this, Deloitte says, retailers need to turn to Advanced Pricing Analytics, the portfolio of tools, techniques, and organizational capabilities that can be applied to specific decisions across a wide range of business concerns.
The report says retail categories where advanced analytics can be applied include Customer engagement, Marketing and media resource allocation, Pricing and profitability management. Supply chain efficiency, Risk and fraud detection, and Workforce development and management.
I, of course, choose to focus on pricing and profitability management through the astute use of Pricing Analytics. Deloitte says using Advanced Analytics, "pricing solutions can expect an immediate margin performance improvement of 2%–4% and a sales growth of 1%–2%."
However, identifying the “right” price remains a daunting task: Pricing too high will cost market share and erode customer loyalty, while pricing too low can cost margin and create possible price wars. So while retailers realize the critical importance of pricing to help drive profitability, the use of advanced analytics, such as price intelligence solutions, provide retailers the ability to set price points and anticipate the effect to their business by creating granular-level demand models using historical data.
Advanced analytics can also identify unmet customer needs for retailers to profitably fulfill; and enable retailers to set effective promotions.
These, in combination, are what allow retailers to optimize their everyday prices toward their sales, margin, and volume goals.
Bottom Line For Your Bottom Line
Retailers must use and leverage advantage price optimization analytics to deliver more informed decision-making, performance, and competitive advantage. Predictive Analytics help retailers extract value from disparate internal data sources as well as information-rich external sources. To swim with the numbers and not be drowned by them, Deloitte says retailers should demand more from their data. Advanced pricing analytics provide the platform to consistently set the “right” price at the right time for the right products across the entire product life cycle; this allows retailers to integrate effective pricing into the daily operation of their business — in real time as well as using benchmark data to always continue functioning in an ongoing, unremitting, unepisodic way.