Some of the key takeaways from the video:

* A business that actually makes small improvements toward pricing can actually realize big impacts on their bottom line.

* If you happen to make an error in pricing, even a small mistake can actually have big negative consequences on your bottom line and a mistake in pricing can actually be long lasting and hard to correct.

* The biggest challenge is the cross-functional nature of pricing. It isn't done in a silo, and involves many departments -- marketing, sales, manufacturing, finance, and supply chain…

* Pricing touches everything and everything touches pricing.

* If you haven't thought through pricing... with a holistic and integrated approach… from a number of disciplines… you can easily drive mistakes which you never intended.

* Pricing initiatives are very quickly self-funding.

* Price execution. If you get everything else right about pricing but you can't do price execution well, it doesn't matter.

BOTTOM LINE FOR YOUR BOTTOM LINE

There is a massive amount of data available now that retailers need to mine for insights. Retailers need to constantly measure and monitor their pricing performance in the market. Retailers need to look forward and do some demand forecasting and econometric modeling so that they can get market-relevant prices and capture all of the value that they can in the market. Retailers need advanced analytics and price setting competency for a strong bottom line.  

How Retailers Can Use Data Analytics For Preparedness, Product Maximization, and Profits:

1. Predict Trends: When retailers track and analyze data in an ongoing way, e.g. re sales, prices, and assortments, you'll not only have live data on which to react in real-time, but you'll also be building a longitudinal record to see the data in a cumulative way to recognize trends, and identify competitors' strategies.

2. Anticipate Coming Demand: Analytics provide info on sales-driving products, so retailers can more accurately predict how an item will sell in the future. For example, data one year indicated that the demand at Christmas would be for fashion apparel, toys, and many consumer electronics products. "These are products that have a gross margin of 50% or more," so missing a sale is extremely expensive," says Marshall Fisher in his book, the Science of Retailing. Your pricing and assortment intelligence solutions and analytics will allow you to identify, plan for and maximize these high times.

3. Identify Home-Run Products: "Home-run products" are products you carry -- or should carry -- that would make great sales if you only knew it. In his book, Marshall Fisher tells about a retailer that didn't carry a certain tire because he THOUGHT his customers would find it cheap. However, when he added it to his inventory after determining it was missing, that tire became one of his best sellers.

4. Determine Which Products To Add (Or Eliminate) From Your Inventory: Big Data analytics let you be more scientific about getting rid of products that are not selling so well and add new products that will sell better. You can drill into your product reality, e.g. look at competitive activity, how priced, and other details. With analytics, you can now actually ask: "How is this shirt selling in the Ohio store in a large size today?" -- and get the details you need.

Inventory decisions, however, are not black and white. For, even if the product in question is not selling very well, it may be the favorite of some of your best customers and that's what brings them to the store. When customers can't find the product they want, they elect to shop elsewhere. If you get rid of it, you not only lose the sales on that product, but you may lose the customer and everything else they might buy. So don't add or subtract randomly. The secret is that you have scientific data on which to base these decisions.

5. Develop Speed And Flexibility In The Supply Chain: The old saying was: Do you want it slow and cheap or fast and expensive? One of the problems has been pursuit of low cost sources from Asian countries, which takes time to order, produce, and provide, but some retailers are finding creative solutions locally, i.e. flexibility in production, e.g. make a dress for you on order. Fisher describes three apparel firms that found ways to get back in stock on short notice -- by having patterns, fabric, and ability to create the item quickly, locally, if there was a demand. As a result, these businesses enjoyed immediate, ongoing sales and tremendous success.

Bottom Line For Your Bottom Line:

Using Competitive Price & Assortment Analytics, retailers can look at things in new, scientific ways and tap the available data for successful planning, inventory management; trend-watching; find out what the customer comes in for (whether a best seller or not); better match supply with demand; make more accurate forecasts; establish a more flexible supply chain; and identify home-run products.  

Quick Facts About The Proposed Internet Sales Tax Bill:

* The tax is supposed to generate $22 Billion to $24 Billion in annual revenues to state and local governments, although not all states want it.

* It's a tax that online retailers were supposed to be collecting anyway.

* Online retailers with annual sales below $1 million would not have to collect these taxes.

* States must provide free computer software to help retailers calculate sales taxes, based on where shoppers live.

* States are supposed to establish a single entity to receive Internet sales tax revenue, so retailers don't have to send it to individual counties or cities.

If this legislation goes through, here are some of the ramifications for online retailers:

1. Fight For Customers And $$$ Will Intensify. Despite the convenience, customers no longer benefiting from not paying online sales tax could lose their incentive to shop online; and when they do (shop online) they may not buy as much.

* There'll be discount and loyalty battles between Internet and Brick and Mortar retailers to woo, win and keep customers.

* Brick & Mortar retailers will emphasize the advantages of actually touching, feeling, and seeing the products in their stores.

2. Pricing Competition Will Be A Major Factor. As this bill levels the playing field between Brick & Mortar and online collection of taxes, online retailers must watch costs and pricing more carefully than ever. Places to make up costs could be in inventory, marketing, or shipping.

3. Existing Online Businesses Will Be Squeezed. Low-profit-margin online businesses will have the biggest problem. Those selling high cost goods in high sales tax states will feel big effect. And low-profit-margin businesses which sell expensive products will also be hit. 

4. Internet Business Development Will Be Dampened. The Internet sales tax will deter online growth. New business will be discouraged at a time when our economy is so anxious for entrepreneurs to create jobs and economic activity.

5. Bigger Businesses Will Stifle Competition. Big retailers will have big advantage in being able to spread the cost of compliance over their larger sales base, while smaller retailers (those making just over $1 Million and up) will struggle.

6. It Will Be Complicated. Although supporters say the bill makes it relatively easy for Internet retailers to comply, the tax bill is complex. If the system isn't simplified across the board, businesses will be forced to wade through potentially hundreds of tax rates and a host of different tax codes and definitions.

7. It Will Cost Online Retailers Time And Money. The states are supposed to provide tax-tracking systems for collecting the taxes, but launching, administering and maintaining these systems will be expensive and time consuming for online retailers.

8. Federal And State Governments Could Abuse Their Powers. Opponents point out that it gives the federal government and state government too much power over this issue and could subject online retailers to a slew of state and local audits.

Why Brick & Mortar Stores Are Happy About The Internet Sales Tax Bill:

As far as Brick & Mortar stores are concerned, this sales tax will level the playing field, give them new life, help them get over the showrooming effect; focus on expanding their brand, product offerings, and service; and force more fair competition.

Bottom Line For Your Bottom Line:

As competition grows keener, the use of advanced pricing intelligence solutions will be more esential than ever. Retailers will have to sharpen their competitive pricing tools, stay aware of their competitors' pricing, and continue to develop winning strategies to make wiser- and more-competitive-than-ever pricing decisions. 

The only good news for online retailers is that it will take a number of months to implement the legislative and administrative changes needed to enforce the legislation after the bill is passed.  

Marketplace Fairness Act: What does the Internet sales tax bill mean for you? By Dominic Rushe, The Guardian, May 8, 2013

For years retailers have complained that their online rivals in the US have an unfair tax advantage because they do not always collect sales tax. On Monday, amid intensive lobbying from retailers including Walmart, the Senate took a step closer to "leveling the playing field" by voting through the Marketplace Fairness Act. The act is supposed to simplify the byzantine sales tax system across the US. But critics charge it's unfair and have vowed to fight on.

What is the Marketplace Fairness Act?

At its basic level the act grants states the authority to compel online and catalog retailers ("remote sellers") with gross sales over $1m a year to collect sales tax at the time of a transaction - just as local retailers are already required to do. A version needs to pass in the House for it to become law.

Who pays sales tax and how much?

Sales tax rates vary widely and range from less than 1% to over 10%. There are myriad exemptions and exceptions and rates vary across types of goods and services as well as cities and even counties. Clothing and footwear under $110 is tax free in New York City, for example. But buy something worth more than $110 in Manhattan and the item is subject to a 4.5% city sales tax and a 4% state sales tax. Sales taxes are collected in 45 states, the District of Columbia and Guam. Five states, including Alaska and Montana, do not collect sales taxes.

How much money is at stake?

States depend on sales and use taxes for an average of 20% of their annual revenue. According to the bill's backers states were unable to collect as much as $2bn in revenue for the 2012 tax year alone.

But I already pay tax on online purchases

Sometimes. If an online retailer has a physical presence in your state, they already have to charge the local sales tax as if you had bought it in the store. Buy a pair of pants from Gap.com, for example, and the chances are they have a store in your state and you will be charged sales tax. Similarly if an online-only retailer has a physical presence in a state, e.g. a distribution center, the same rule applies. Amazon, the largest online retailer, has "fulfillment centers" in 14 states and "customer service centers" in another three.

Also you are supposed to declare the fact that you have not paid tax on goods bought out of state or online and then pay that tax with your state taxes. A lot of people either don't know this or don't do it which is why the bill's backers want to pass the tax collecting duties on to the retailer.

This sounds complicated

It's worse than it looks. If the burden of collecting the tax is passed to online retailers, they would have to deal with more than 9,600 tax-collecting jurisdictions, including state and local governments. The act says states will only be granted this authority after they have simplified their sales tax laws. At the moment 24 states have signed up for the streamlined sales and use tax agreement (SSUTA) - an attempt to simplify sales tax for retailers, especially those operating in multiple states, whether they sell on or offline.

States who are part of SSUTA, including New Jersey, Ohio and Wyoming, would have the authority to collect online sales taxes under the new act shortly after implementation.

States that have not signed up for SSUTA would have to meet five "simplification mandates" including the provision of free software for retailers to manage compliance with the new system.

Why is it so complicated?

The sales tax regime was built when interstate commerce was less common and internet shopping didn't exist. The US supreme court has ruled twice on the issue, once in 1967 and once in 1992, and concluded that out-of-state retailers should be protected from the obligation to collect local sales tax because it would place too much of a burden on their businesses.

The bill's proponents argue that technology has superseded that view. Shoppers now cross state lines at the click of a mouse. At the same time cheap, readily available technology exists to allow retailers to deal with the tax consequences of that change.

So who's in favor?

President Barack Obama for one. Also Republicans including Senator John McCain. Brick-and-mortar retailers, including Walmart, who have complained the internet has been getting a free ride, have been pushing hard for the bill. As has Amazon, once a fierce critic of online sales taxes and now the bill's most active online proponent.

And who's against?

You are. A recent Quinnipiac University poll found 56% of voters were against the tax and only 37% were for it. Senior Republicans including senator Marco Rubio, potential presidential hopeful, are also against it as are the usual anti-tax groups including Americans for Tax Reform. Smaller online retailers are against the bill, as is eBay, which argues the complexity of implementing the bill will unfairly penalize its sellers.

What happens next?

The Senate passed the bill, but it is likely to face stiffer opposition in the House where anti-tax Republicans are likely to take a tougher stance against the bill. The bill does, however, have the backing of many cash-strapped states – even Republican ones. No date has been set for a hearing or vote yet but expect a lot of shouting from both sides before this bill becomes law.

END OF GUARDIAN ARTICLE

Bottom Line For Your Bottom Line:

The Online Retail Sales Tax Bill: States want it, customers don't. Storefront retailers want it, online retailers don't. If passed, the bill will have serious ramifications for online retail and online retailers. My Next blog post: How The Internet Sales Tax Bill Will Affect Online Shopping and Online Retailers regarding costs, collection, competition, customers, pricing, and much more.  Thanks.  Gilon

In the video, How to Price: Lessons from a Hooker, Mark tells how he met a nice-looking woman on the street as he was walking to his hotel. Mark talks to her and gets a wonderful lesson in pricing:

"So what do you do?" he asks a woman who is walking in the same direction as he is.

"Anything you want," she answers.

That's when Mark realizes what kind of work she does.

The next thing Mark blurts out:

"I'm a pricing expert, can I ask you some questions?"

"Yes," she answers.

1. What do you charge?

$500.

Do you ever take less?

No, but I have names of friends who will accept less.

Pricing Lesson #1. Know your value.

*****

2. Do you ever charge more? 

Yes, if they appear to be well-to-do, I start at $800.

Pricing Lesson #2. Segment your pricing

*****

3. (During Mark's "interview," she takes a phone call and asks the client if they want her and a friend to come over).

"What do you charge for this?" Mark asks.

"$2000", she answers.

Pricing Lesson #3: Have a product portfolio

*****

Final Question: "How much did you make last year?"

"I worked almost every day and I made over a million dollars," she answers.

*****

Final Lesson from Mark:

If you want to be a millionaire, learn these three pricing lessons: 

#1. Know your value.

#2. Segment your pricing.

#3: Have a product portfolio

Bottom Line For Your Bottom Line:  

The takeaway here, according to Mark (or was it Matthew Balfour?) is to remember that pricing shouldn’t always stop with the single price. Try and think of ways that pricing segmentation could be used to maximize your sales and profits. Learn more at MarkStiving.com 

"Price matching is a necessary evil today,” said a managing director of a brand consulting firm, "because once one retailer offers it, others are almost inevitably forced to follow… but how it’s done is important." Retailers have to price match because everyone sees everything (transparency). The store has to do it quickly (because it happens right at the checkout lane), and you have to give the consumer the benefit of the doubt because you want that consumer to be loyal to you.

Price Matching has turned out to be a risky strategy because:

1. The programs are difficult to manage.

2. Discretion to match or not is often left to store workers.

3. Store workers don't understand how the price-matching policy works.

4. The Ad Match Guarantee is inconsistently applied from store to store within the same retail chain.

5. Price matching programs vary widely from retailer to retailer. For example, Best Buy lets customers match prices if the rival store is located within a 25-mile radius. Wal-Mart allows managers to define the size of their trade area.

6. Differing interpretations of "local". Customers have complained that stores of the same retailer in neighboring towns cite different price-matching rules.

7. How price-match requests are handled may come down to the needs of individual store managers. Store managers are “empowered” to decide how to implement the policy and the “expectation is that they’re making the decision with the customer’s interests in mind.” “Some might not want customer complaints,” so they match whatever prices the shopper asks for. Others think more about their profit margin and don't want to give away the store, so to speak.

8. Mistakes in matching products correctly.  Some Walmart stores reluctantly matched (or refused to match) competitors’ prices on seeded oranges, for example, when the point was missed that Wal-Mart’s oranges were seedless and more expensive. Or they matched a lower price on ground beef that wasn’t as lean as the beef sold at WalMart. In some stores, the workers were told not to price-match those types of items at all.  (P.S. This is a good ad for using a top price matching solution). 

9. Shoppers Can Get Confused. They get the stores mixed up, and there are different policies -- even in the same store if you go to different cashiers.

10. Shoppers get angry. If shoppers are not treated well, they "vote" with their feet (out the door).

The Problem:  

The company policy may be well intended, as advertised, but the reality is quite different and sometimes arbitrary.

Example: Several clerks at Best Buy gave different interpretations of the policy: “Spot a lower advertised price? We’ll Match it.”

Example: Toys “R” Us workers didn’t know how to implement the retailer’s price-match guarantee.

Example: Walmart said store workers would receive “extensive” training “to ensure the price-match policy is executed consistently across all stores,” which apparently hasn’t happened yet.

Solution: Retailers have to:

-- Get their national "act" together.

-- Don't advertise a policy it if you don't mean it. 

-- Discontinue overly broad claims or post the limitations.

-- Get ALL their stores on the same program, and don't let a few get by that aren’t executing the match the right way.

-- Make sure that policies are consistent and clear, to both your workers, AND to the public.

-- Make sure that the policies are being executed correctly, accurately, and quickly.

Bottom Line For Your Bottom Line:  

Is price matching a good strategy because it entices customers to come in? Or, is price matching a risky strategy because it chases customers away when their expectations are not fulfilled?  Retailers overall could use sophisticated retail pricing intelligence and assortment matching technology on a real-time basis to know specifically what is happening with their competition on a specific product at any given time. And maybe it's not too far off that we'll see retailers install a price matching solution tool at each cash register. 

Do you think Price Matching is a Risky Strategy or A Good Strategy?

Contact me and give me your comments at LinkedIn. Thanks. Gilon

As ALL retailers  look to improve their ability to consistently drive greater performance, they'll do well to emulate what it is to be a RETAIL WINNER. Here are what today and tomorrow's retail winners are doing:

1. Retail Winners Are Innovators.

They know that it's a new world. Winning retailers have gone from being reactive to proactive; lead at adopting innovative technologies and channels, analyzing customer behavior and preference trends. Remember, leaders innovate, if you're a follower, you're (already) a loser. (RSR Research).

2. Retail Winners Unlock Big Data.

Today's abundance of data is a priceless resource. Last year (or was it last month?) retailers were looking at Big Data from the outside and wondering what to do about it. Now winning retailers have the keys to the information and details they need to run their business better and more profitably and compete more effectively in the global marketplace.

3. Retail Winners Maximize Technology Use.

 Winners have insight into emerging business and technology trends and use it to drive improved business results. Armed with advanced technology and more scientific approaches, winners can do what they need to do: manage their inventory and their supply and demand, use competitive intelligence solutions, set the right prices, maximize their marketing to individuals, track sales on granular levels, personalize to customer, competitive price and assortment tracking, mobile and social media marketing, maximize omnichannel opportunities, and much more.  

4. Retail Winners Use Analytics To Personalize To The Customer.

Available data helps retailers detect patterns, make new associations, and acquire a deeper understanding of customers as individuals -- thereby enabling new methods of personalized engagement, the ability to make relevant offers that reflect customer context.

5. Retail Winners Are OmniChannel Oriented.

Winners/leaders excel at leveraging information across virtually every channel: web, call center, social media, mobile, and face-to-face.

6. Retail Winners Involve And Expand The Role Of Other Departments In Their Retail Organization.

Winners effectively tap their personnel -- not only for feedback, but to have them understand, support, and contribute to the company's business goals and strategy.

7. Retail Winners Measure What Matters.

Winners now have the data and analysis capabilities they never had before, to demonstrate the benefits (or warnings) about assortment and inventory management, every touch point, interaction, and outcome.

8. Retail Winners Collaborate With Their IT.

Leading retailers integrate what they have with what they need.

9. Retail Winners Stay True To Their Company Strategy.

Retail winners always know "who they are" and where they're going in order to map the most effective, most profitable ways to get there.

Bottom Line For YOUR Bottom Line:  

"Retailers are drowning in numbers, but lacking in insight" was a sign in a merchandising technology VP's office a few years ago. No more, as retail winners gather, analyze and use hard data to discern across-the-board effectiveness and make fact-based decisions.

If you want to be a retail winner, learn from the leaders -- but do them one better. You have to lead and supersede what the others are doing. The rich combination of engagement, innovation, measurement, and collaboration -- enabled by technology -- leads retail winners to top performance, especially financially.  

In August 2012, I wrote about Why Pricing Technology Tools & Assortment Solutions Are Vital for Retailers Today. At that time, retailers were recognizing the need they had to evaluate, acquire and utilize pricing technology tools. It seems that day has come, says RSR.  

Here's the 2013 RSR Graph On Evaluating/Selecting Solutions 

Source & Permission: RSR Research April 2013  

This is where 50% of the respondents in the "laggards" category indicate that they are looking at, considering, or evaluating a rules-based pricing engine. 

Other categories that are important from a pricing and assortment intelligence viewpoint include inventory management/availability as a price driver; regular price optimization; regular price planning, forecasting, and management; price intelligence; rules-based pricing engine; and end-to-end price lifecycle management. 

My point is that if retailers "price right" and price more efficiently through the necessary use of pricing and assortment intelligence solutions, will they diminish the need to worry as much about promotions and markdowns after the fact?

The RSR Figure on 2013 Pricing Technology Adoption 

 Source & Permission: RSR Research April 2013 

While the Pricing Technology Adoption category allowed answers for "Fully Deployed, Piloting/InRollout, Evaluating/Selecting, Exploring/ Budgeting, and No Plans, let's take a look at the breakdown in the "fully deployed" column.  It appears that when it comes to "Fully Deployed", less than one-third have deployed customer data warehouse; and ten percent end-to-end price lifecycle and management, and Markdown optimization.  (In case the numbers are hard to read):

Fully Deployed: 

Customer data warehouse - 33%

Product movement data warehouse - 30%

Regular price planning, forecasting - 29%

Promotions planning, forecasting and management - 26%

Regular price optimization - 23%

Inventory management - availability as a price 19%

Rules-based pricing engine -18%

Markdown planning, forecasting, and management - 16%

Price intelligence - 13%

Promotion optimization - 12%

End-to-end price lifecycle management - 10%

Markdown optimization - 10%

 Here's the 2013 Solutions "Fully Deployed" Category Broken Down Between "Winners" and "Laggards"

Source & Permission: RSR Research April 2013 

"Solutions Fully Deployed" compares winners' and laggards' degree of deployment of solutions. Winners lead laggards in customer data warehouse, product movement data warehouse, regular price planning, forecasting, rules based pricing engine, regular price optimization; and inventory management - availability as a price.

Promotions planning, forecasting, and management is the category where laggards lead, with 25% vs. 22%. Then the pendulum swings back to winners where the majority highlight price intelligence and end-to-end product lifecycle management. The rest is close between both winners and laggards on markdown planning, forecasting and management, promotion optimization and markdown optimization.

Bottom Line For Your Bottom Line:

One of the reasons RSR principles Nikki Baird and Paula Rosenblum called this research report "Tough Love" was because retailers seem to be reacting to perceived issues, such as the consumer being extremely price conscious, which isn't totally borne out at this point. And, while retailers cite needing a rules based pricing engine and other pricing solutions, they also spend a lot of time worrying about inventory, promotions-related issues, and solutions. Retailers seem to know they "need" and "want" tools and terchnology, but have to get their priorities straight on why they need them, how to use them, and what kind of results to expect. Meanwhile, more technology solutions are being created to help retailers deal with these issues.

One set of criteria for retail winners, noted by IBM, is that businesses armed with forward-thinking marketing organizations have three-year revenue Compound Annual Growth Rate (CAGR) more than 40 percent higher than that of other companies, and their gross profit is growing at a rate double that of their peers.   

RSR Research says it judges retailers by year-over-year comparable store sales improvements. Assuming industry average comparable store sales growth of three percent, RSR defines those with sales above this hurdle as “Winners,” those at this sales growth rate as “average,” and those below this sales growth rate as “laggards” or “also-rans.”

To understand the impact of winning management on business outcomes, IBM surveyed 362 marketing professionals from around the world across more than fifteen industries linking those responses to publicly available financial information to identify possible correlation between marketing sophistication and financial performance. 

Retail Winners, says IBM:

1. Perform better;

2. Are able to grow profit faster than revenue (suggesting they're able to maintain high margins and sell more products at full price instead of relying on discounts);

3. Demonstrate high marketing sophistication;

4. Demonstrate high financial performance;

5. Excel at engaging individual customers systematically;

6. Have the insights and organization influence to invest marketing resources to better coordinate the customer experience across their enterprise;

More Specifically, Winning Retailers:  

7. Demonstrate tangible returns on marketing spend.

8. Stand out because they place greater emphasis on measurement, tracking results and linking them to individual efforts.

9. Show greater efficiency in their use of marketing budgets.

10. Can show ROI on investments (which helps retailers to invest more intelligently).

11. Are positioned to guide marketing technology decisions and shape the customer experience across business functions.

12. Can focus on driving strategic growth and shaping the business strategy versus simply managing the mechanics of marketing.

13. Have (and use) the ability to gather, analyze and use hard data to discuss marketing effectiveness and make fact-based investment decisions.

14. Establish a system of engagement that can help drive quantifiable outcomes.

15. Deploy innovative technology and processes to automate, deliver, guide and accurately measure the impact of marketing actions across all channels.

16. Employ a more analytical and cooperative approach.

17. Make line-of-business peers part of the process, thus, they can provide valuable input and are involved with the whole process.

Being able to demonstrate results helps marketers build credibility and the financial justification and can enlist the support of other business functions in knitting together a common view of the customer across different points of interaction.

Retail Winners tap into the power of integrated, multichannel campaigns, and the system allows leading marketers to drive customer value at every interaction -- online, offline, ibound and outbound, across all channels.

According to the IBM white paper, the use of Pricing intelligence solutions like Pricing Rules, helped Spanish Company, Telefonica, deliver a 35 percent increase in the number of customers in just three months, by using techniques such as "next best offer" marketing).

Bottom Line For Your Bottom Line:

Winners think differently, plan differently, and respond differently. Winners are quicker to incorporate location data and embrace new marketing models such as social/local group buying and creating engaging apps that run on sites like Facebook. Leaders innovate. Others merely follow trends! Laggards fail to re-invent themselves when it becomes obvious their existing business model is no longer working.

Retail success has to do with a retailer's ability to invest effectively, making results-based allocation decisions that maximize the return on marketing spend.

Are you an innovative retail winner-leader or a lagging loser?  

 Top 3 Organizational Barriers Impacting Ability To Implement More Effective Pricing Practices

Source & Permission: RSR Research, April 2013

In citing their Top Three Organizational barriers impacting ability to implement more effective pricing practices, 42 percent of respondents cited the lack of clean price, competitor and purchase data; and 42% cite resistance to change from stores or other channels, as well as 40% citing the need for better skill sets to improve execution. The puzzling aspect, according to the RSR Research, a plurality of respondents report they can neither predict the impact of price changes they make, nor truly analyze the effectiveness of those price changes after the fact. Twenty-nine percent, the lowest choice, said they're worried about "the possibility of negative customer reaction to changes in our pricing strategy."  I'm sure they're cautious about pricing strategy changes after seeing what happened at JC Penneys.

Top Three Operation Challenges In Setting Prices

Source & Permission: RSR Research, April 2013

Operation Challenges Cited By Respondents Include:   

1. Forecasting the impact of potential pricing -- 48%

2.  Measuring the impact of executed pricing -- 45%

3. Maintaining visibility into promotional -- 37%

4. Making sure that stores change prices - 35%

After that, of more importance to those of us in the pricing solution business, is "getting access to robust competitive price data", cited by 27% as one of their top three challenges. Then, "inability to effectively manage all pricing rules" - 24%.

Pricing Data Elements: Value Vs. Use

Source & Permission: RSR Research, April 2013

The Value Vs. Use Pricing Data Elements & Customer Data Elements that were of interest to us:

Competitors' prices - Very Valuable, 60%,; Major Role, 49%.

Customer purchase history - Very Valuable, 54%; Major Role, 38%.

Market Basket data - Very Valuable, 49%; Major Role, 28%.

Customer demographics - Very Valuable, 40%; Major Role, 29%.

Then the respondents switch emphasis, citing the following as playing a major rather than very valuable role:

Current inventory levels - Very Valuable, 39%; Major Role, 49%.

Planned inventory levels - Very Valuable, 38%; Major Role, 44%.

Customer sentiment gathered from socal media -- Very Valuable, 25%; Major Role, 13%.

Bottom Line For Your Bottom Line: 

Retailers need pricing technology/pricing intelligence tools and assortment solutions to know what's happening in the marketplace; to know what your competitors are doing; and to know your competitors' assortment. To help guide your company to pricing for profit, I prescribe price monitoring software, competitive price analysis, and product assortment intelligence solutions. 

"You can't be competitive if you don't practice competitor price monitoring, check your competitions' prices every day, and price right." (Gilon)   

In their RSR study, Nikki Baird and Paula Rosenblum note a kind of dissociation, in that retailers don't have a lot of information about the potential impact (results) of changes to price, and they also lack retail data analysis with which to predict the actual impact of tactical price changes. "What we hope retailers will consider instead (of focusing on promotions)," say the study's authors, "are some key ways they can turn pricing into a strategic advantage." 

1. The Competition Is Growing By Double-Digits.

The Infographic shows a growth chart for 2012 vs. 2013 for the US, China, United Kingdom, Japan and Germany -- or, as the Infographic states: If you grow more slowly than the market -- you are losing market share.

2. eCommerce Is Outpacing Brick & Mortar.

We knew that. In the past year, the share of total retail coming from eCommerce grew from 4.8% to 5.4% - claiming nearly $6 billion from physical stores.

3. Some Products Are On Fire.

Digital content and subscriptions grew by 26%, consumer electronic 19%, apparel and accessories 17%, event tickets 16%; and computer software, 16%.

4. eCommerce Is Becoming More Effective:

The massive investment in web analytics is finally coming to fruition. I'd say that is an understatement. Conversion rates increased by 6% from Q4 2011 to Q4 2012.

5. There Are Key Dates When You Can Boost Your Revenue:

...Namely holidays and special days. The top shopping being on Thanksgiving, followed by Cyber Monday, Free Shipping Day, Day After Christmas, Black Friday, and Green Monday.

Businesses like ClickTale are looking to help retailers recognize online retail competition, and accelerate online revenue growth. So are we. 

Infographic: Grow by 15% – Or Lose Market Share!

Infographic by ClickTale.com

While cost-cutting can be the mother of invention inspiring creative problem-solving and efficiency, says Fishburne, it can also tax product quality over time. Fishburne talks about a yogurt brand increasing its margin by putting less yogurt in every container while keeping the same retail price. They also kept the same (size) packaging, which meant that every container suddenly had several inches of air at the top of the yogurt. Then, to justify the obvious drop in value, Fishburne notes that they added a package-burst saying, “Now Room For Your Favorite Mix-ins!” That turned out to be a failed attempt to turn short-selling the product into a consumer benefit. 

In the push to increase margins on products, it’s important to remember that there's a cost to cost-cutting. Just as there is a difference between pricing too low and "pricing right," with "pricing right" being aided through the use of competitive pricing solutions. I wrote about this recently in 8 Secrets To Setting Your Competitive Retail Prices Wisely.  

Bottom Line For Your Bottom Line:

In the case of trying to be the lowest price from a competitive pricing point of view, i.e. to rank on Comparison Search Engines, or to try and finagle a sale from a finicky, price-conscious consumer, retailers have to keep in mind that no matter how competitive they'd like to be, there could be a point that is too low for them to bear. Making a practice of pricing too low can put a retailer out of business. Pricing right keeps retailers competitive and viable in the marketplace -- at any price.  

The premise is that as retailers look to increase profit, seemingly insignificant manufacturing and purchasing decisions are often overlooked; using product-level data lets retailers prevent lost sales and excess inventory by making data-driven decisions. 

The same principles apply to the use of pricing and assortment intelligence solutions. It is essential for retailers to have this information to know where you stand with regard to inventory, assortment, competition, and the market -- information that is accurate, timely, effective, and the most important tool in your Retail Intelligence toolbox.  

In the Infographic, Stitch is talking literally about sizes of apparel and accessories, as well as the size and management of the inventory itself.

The Infographic notes that inventory is costly, as 45-90% of all business expenses are a result of inventory costs. Stitch says, minimize costs, maximize revenue and increase turn by making informed decisions about how many of each size to produce or carry.

Based on analysis of more than 340K online transactions totaling more than $20 million in sales, the Infographic examines the average unit revenue for items sold online, using clothing sizing as an example.

What Sizes To Carry Is Important Reflection On Inventory: 

The Infographic says the size x-small is a moneymaker, for while it may not be your BEST-SELLING size, people actually pay more money for smaller sizes, so x-s and xxl -- representing more than 5% of sizes sold, should not be overlooked.

The Infographic talks about avoiding the 1 - 2 - 2 - 1 rule -- a common practice of determining a product mix's supply level for sizes -- stocking 1 size small, 2 size medium, 2 size large, and 1 xl). According to Stitch, for every 100 units set up this way, 6 mediums won't sell, 3 larges won't sell, and 2 smalls won't sell, which equals 11 lost sales. So why stock these sizes if you are not meeting the demand trend? You have both lost sales and excess inventory due to mismatched supply and demand. In order to optimize supply levels, Stitch found the following combination to be more effective and profitable: For every 100 units, stock 2 extra smalls, 22 smalls, 27 mediums, 30 larges, 15 extra larges, and 4 xxl's.

Size... And Labeling Matter

In addition to the size matters question, another interesting finding is that labeling matters, with abbreviated letters (like xs, s, m, l, xl) generating 38% more revenue than sales where the sizes are written out (e.g. large, x-large, etc.)

Bottom Line For Your Bottom Line:  

"You have to know your product and your data to maximize your profit," is the Infographic's basic premise. Carrying excess inventory results in an additional expense for your business, which reduces your bottom line. Not carrying enough of the right products causes lost sales and gives customers the impression that your business is poorly managed. Managing your inventory is the secret to maximizing revenue, avoiding lost sales, and reducing excess inventory and costs. (INFOGRAPHIC FOLLOWS):

Size Matters - When It Comes To Inventory, Assortment, And Competitive Intelligence Actions (Infographic) 

About the Upstream Commerce Blog: In this blog, we discuss ideas, techniques and strategies to compete more effectively in the extremely competitive world of online retail. We explore issues such as competitive price monitoring, competitive pricing, and competition in general, as well as how to drive sales and best practices for online retailers. (Mention of companies or individuals or illustrations used in our blog posts are purely informational and do not constitute an endorsement of any entity). Gilon