Using science as the key to actionable insights buried in big data, retailers have found they can effectively manage their inventory, set and get the right prices year-round, minimize markdowns, and, ultimately, perform profitably. To accomplish this, a Price Optimization Playbook is in order. Retail technology solution developer, Dr. Shai Geva, discusses relevant research by his company on this subject: "Our research showed that, in the past, retailers had been... too quick to cut prices, relied too much on promotions, and held far too many sales... which were unnecessary -- and led to innumerable lost profits as well as erosion of overall brand," Geva states. (See Free Giveaway: “300,000 products hint at promotion strategies for the 2015 holiday season”... and blog post, “Fewer promotions in store for Holidays 2015”).
Price optimization software melds big data, science, historical information, and other objective elements to help retailers manage inventory in the most accurate, timely, and profitable ways, maximize the profit potential for each product, adjust prices for maximum profitability (on an as-needed basis in real time), and, ultimately, control and manage the need for markdowns and promotions.
Harnessing big data empowers retailers to align decisions and actions with business goals, adjust to deviations from sales forecasts, understand the lifetime value of products, move and manage inventory in a principled, logical way, and optimize markdowns to the fullest extent, says Dr. Geva (who is CTO and Co-founder of Upstream Commerce Retail Intelligence Company).
Now, in addition to considering the competition, retailers can view reports on their own performance, benchmark their own progress and adherence to their business goals -- and can correct inconsistencies and fine-tune strategy for future plans and decisions.
Besides learning to control and manage the need for markdowns and promotions and other ways to get rid of inventory that wasn't planned well or moved in a timely fashion, retailers are also making shoppers feel their favorite brands are delivering value.
With this orientation, retailers have also learned the value of spreading decision-making and accountability among different departments and levels of responsibility, making for a stronger, more coherent company strategy and execution.
How to choose a killer pricing intelligence solution AND vendor
When you're looking for a price intelligence solution, carefully examine the software AND the vendor's track records. Is the software built on a strong, unassailable platform? Is it easy to understand and work with? Is your discipline (e.g. retail) the vendor's only focus -- which is a positive -- or is the vendor spread across other disciplines?
Accuracy of the data (i.e. accuracy in matching) remains the most important element of price optimization. If you don't have accurate matching of characteristics, you're wasting your time, energy, money, and hopes -- and you're not even near the ballpark. "Having poor quality data that you think is good is disastrous for the retailer," says Dr. Geva.
Scalability. The vendor you need can compare from one- to one-million or more SKUs, product-by-product, accurately.
Platform. The ideal cutting-edge price intelligence technology is based on a strong platform that facilitates and integrates the collection, assembly, and dispersal of the data.
Quality Control. The highest quality vendor will have the highest quality assurance, knowing that "any mistake, mismatch or error takes you out of the game."
Retail intelligence is not a venue for weak solutions. Only pros who have been in the trenches working with real clients, real data, real pricing, real products, real profits & losses and real results know the benefit of data science.
Furthermore, the technology, its vendors, and client support should be altruistic and user friendly, easy to adjust, easy to share, and easy to update.
The ideal vendor will be friendly, helpful, supportive, empathetic, creative, interested in your specific problems and solutions, and available when you need them.
Absent these qualities, many vendors with airy promises have already bitten the dust.
Bottom line for your bottom line
* Retailers now have the capability to react appropriately and objectively, in a timely manner, in line with pre-determined objectives -- while maximizing profit potential for every single product.
* Having the highest quality competitive pricing data and vendor makes the retail job easier, more manageable, more actionable, more effective, and more profitable.
* By integrating predictive and dynamic pricing solutions, combining the insights of science with competitive data and the company's honed knowledge, retailers can anticipate consumer needs, adjust prices on an as-needed basis, and find the most profitable pricing.
* Choose an industry leader who is easy to work with, flexible, technologically-fast-forward, and who meticulously and caringly supports the data gathering, analytics, and pricing and inventory decisions integrated with your goals for company success. The technology must function accurately and smoothly to provide retailers the fuel for wise decision-making and execution and for concentrating on optimal results.