Pricing Strategies to Optimize Customer Loyalty in Uncertain Times

Just when retailers thought the landscape couldn’t get any more challenging and unpredictable, what with Amazon and the rise of always-on shoppers given complete price transparency, the foundations were rocked by COVID-19.

With shoppers steadily migrating online, the pandemic powered adoption curves into hockey stick mode. Sweeping store closures meant aggressively ramping up curbside or home delivery for store-based companies, and disrupted supply chains struggled to address rapid shifts in demand and channel preferences. Unemployment and economic uncertainty have skyrocketed, leaving shoppers more price sensitive than ever.

Past Results No Predictor of Future Anything

Looking to historical patterns to plan the future is suddenly meaningless as retailers, shoppers and suppliers all seek to navigate a landscape that just a few months ago was utterly unimaginable. And no sooner do retailers scramble to adapt to restrictions than the pendulum swings back with phased re-openings.

How can you meet shopper needs and readjust for business success on this alien planet? Fortunately, advances in science, analytics and computing power allow you to separate signals from noise and craft prices, promotions and clearances by channel to keep fickle shoppers engaged.

Science-Based Pricing More Relevant Than Ever

In an increasingly unpredictable world, retailers with science-based pricing are better positioned to gain real-time insights into changes in demand signals. They can then predict future demand and normalize historical data to optimize supply chain management, building shopper loyalty and driving business results.

Quickly identifying new trends: Even in a post-pandemic world, retail will never be the same. The training wheels are off for online shopping, price sensitivities are permanently heightened and new known value items (KVIs) emerge daily: Hand sanitizer, baking and cooking supplies, interactive toys, etc. Today’s data-driven analytics and modeling can move rapidly to make sense of channel, price sensitivity and product mix changes.

Prescriptive recommendations to respond with agility: Automated science-based pricing tools work 24/7 to ingest vast amounts of real-time shopper, market and competitive signals. They generate pricing recommendations that focus on shopper expectations. They in turn feed automated workflows for dynamic price execution online and in stores, if electronic shelf labels are used. Retailers formerly resource constrained in terms of price changes now see recommendations weighted by priority, allowing them to allocate scarce labor on those with the greatest potential impact.

Focus on shopper, business outcomes without the fog of FUD: In these chaotic times, it’s not just external factors that are shifting but internal ones too as price and merchandising teams adapt to work-from-home models. It’s human nature to overreact to sparse data points in times of flux or conversely, to feel overwhelmed and paralyzed amid unprecedented uncertainty. Leveraging the toolkit of AI/machine learning-based pricing tools, you can analyze, learn and recommend without all-too-human factors clouding the process.

Balance shopper needs, business goals to get to win-win: Now more than ever, every pricing and promotion decision across every channel has significant impact on your ability to engage shoppers. At the same time, you must constantly shift in response to changing conditions while still meeting strategic and financial goals. Price optimization gives you the ability to align pricing with financial targets across the entire assortment. It threads the needle to get to the win-win: Fair prices for the shopper, sustainable business results for you.

Price is Still King: Strategically Protect Your Price Image

With shoppers on high alert for perceived exploitation, retailers must make well-informed pricing decisions to align them by item and channel with the desired price image. For all of the reasons discussed here, those with science-based pricing are in a superior position to make informed, surgically focused decisions that accomplish that goal.

Retailers still relying on manual processes, operating under the false belief that long lead times and limited purchase options still exist, are in peril of forever fading into irrelevance. Shoppers have long memories, and will recall when browsing who got it right – and who didn’t.

Cheryl Sullivan is President of DemandTec by Acoustic