It’s Time For Digital Transformation In Retail Pricing
Yes, it’s a digital-first world. Yes, it’s changing at a shocking pace. Yes, it requires reimagining your business — and it’s an extremely painful wakeup call for the traditionally conservative industry of retail. But it also means one great thing: unprecedented opportunities to grow your company by appealing to your customers. You just need to take the right steps.
The first thing is acceptance. There is no way you can survive without digital transformation. I’m not the only one thinking like this. So does PwC: “We believe your business needs to transform as fast as possible — and digital is a vital enabler for doing this. But only if it’s blended with the right insights into business and experience.”
The next thing is that you need to know where to start. What will be the first area where you will let digital in? As customers are getting pickier and operational costs are rising, you need to act fast to stay afloat. If you think too long, there will be no “you” to save tomorrow. But if you are too hasty, you may waste millions of dollars. As I stated in a recent Expert Panel for Forbes Technology Council, “Before investing in any tech solution, you need to know exactly how it will drive your key performance indicators or bring more revenue.”
So you can move forward by trial and error. Or, you can choose the areas that bring the fastest results once optimized and go from there. Most retailers start with optimizing the three P’s of marketing — product, place and promotion — forgetting the fourth element (pricing). But let’s imagine for a second how much time and money it may take to upgrade your assortment, open a new store or launch a truly profitable promotional campaign. These projects would require engaging several teams — and we all know how hard it is to manage cross-team projects. What’s more, they are unscalable.
As for pricing, currently, it is a cumbersome process that relies on Excel or, in the best-case scenario, on an in-house ERP system. It is difficult and time-consuming to manage. But the good news is, the more chaotic your pricing process is today, the more you will get once you optimize it with the help of advanced technology. AI is the brightest “for instance” of such technology.
Unlike upgrading your product, place and promotion mix, price optimization does not require the engagement of other teams. It is especially great for those companies that focus on their core businesses and outsource everything else. What’s more, it takes weeks, not years, to integrate and show the first results, and it’s scalable.
AI-enabled price optimization allows for hitting three major goals:
1. Craft an optimal value offering. The optimal value offering means setting such prices that allow for maintaining customer loyalty while reaching business goals such as profit or revenue increase.
2. Boost key business indicators. Technology sees the potential of every product and recommends the best pricing strategies on the fly. It allows you to maximize the financial performance of every product as well as your overall financial performance.
3. Give pricing managers means to become more effective. Equipped with AI, managers make errorless decisions and stop wasting time on routine.
If your company is researching technology to digitize its pricing process, here are three pieces of advice that can help you make the right choice:
1. Check if the provider is ready to bring the first results in the near future. Some providers are actually a team of experts who manually create econometric formulas to better your pricing. It is slow and unscalable. A tech-powered provider’s time to value is four to six weeks. If the solution takes at least 12 months to integrate, let alone bring the first tangible value, this may mean that in reality there is no technology there.
2. Check if the solution is flexible and scalable enough.
