With a No1 objective of raising profits without selling more items it’s not surprising that most retailers are investing in ways to help them optimise pricing. Software to manage markdowns, adjust prices based on competition, demand and even weather conditions are now being more widely used or evaluated. Claims are being made of improvements to gross margin of 1-5% in certain defined segments.
More than price
While price is important optimisation is not just about price, or even tuning websites. Increasingly retailers are taking a much bigger view and regard optimisation of their processes as a vital step to enabling them to implement a fully joined up omnichannel strategy.
Retailers start point for optimisation is often the customer journey from developing an interest and evaluating options right though to making a purchase and subsequently using the product. Process optimisation makes that customer journey as simple and helpful as possible through all possible touch points with a retailer. It may not be quite as obvious but a number of back office internal processes have to be optimised and work together effectively too!
To illustrate what I mean lets return to pricing. Even when you know the optimal price or promotion you still need to be able to manage that information in your internal systems along with other data that is associated with that product. This could be pictures, product description, legal requirements and other data. All of this data needs to be brought together in the right way to ensure that the right price and promotion information is in front of customers at the shelf edge. It also needs compliance and auditing plus the ability to change things quickly based on information from the pricing tools.
Moving forward with optimisation
Many retailers have not got all of their back office processes optimised to handle promotions and price changes as quickly and easily as they would like so they won’t be able to take full advantage of their pricing and promotion optimisation tools. However, things are changing rapidly. We are talking with several retailers who are adopting an omnichannel strategy and have recognised the increased importance of optimisation in achieving success including those key back office systems.