The work of managers in retail teams is full of daily challenges. Labor and delivery costs are rising, vendors are trying to impose favorable conditions, and competition is getting tougher. In this environment, online, omnichannel, and offline retailers are no longer competing in sales but creating a unique customer experience at the intersection of pricing, assortment management, and marketing. And like many other types of enterprise software, pricing software is sometimes seen as a cure-all solution.
Why is pricing software essential, and how does it affect the shopping experience?
While personalization is an important trend in many industries, its impact is most visible in retail. According to Epsilon research, 80% of shoppers want a personalized shopping experience, while only 12% of marketers are satisfied with their companies’ personalization level. Clearly, the lack of innovative solutions remains a barrier to building a unique shopping experience.
According to Gartner’s research, retailers will invest over $225 billion in technology solutions to improve personalization in 2022. And it starts with pricing because the price is the first thing a customer pays attention to. At the same time, retail still needs talented managers and comprehensive technology that can generate important insights about sales, market trends, seasonality, and other factors that affect pricing.
Today, third-wave technology solutions allow retailers of all types and sizes to achieve optimized pricing through automation and a targeted approach. And that’s good news: retail giants are no longer monopolists in creating unique customer experiences.
Advantages of pricing software
Today pricing software is as vital for online stores as enterprise accounting processes for big businesses. Pricing software has more advantages than disadvantages. Let`s first discuss the advantages of pricing software and then the disadvantages.
Pricing software allows for optimal pricing through insights into pricing, assortment management, and marketing
A unique and personalized shopping experience is built at the intersection of pricing, assortment management, and marketing. Underestimating the factors affecting any of these aspects can jeopardize the overall competitiveness of a business.
Pricing software helps sales teams lead a proactive policy using flexible pricing and promotions at the store, regional, or country level. Most pricing software works with different types of data (ERP, GA, CRM, e-commerce platforms, or specialized data providers), generating and collecting all the most critical insights and recommendations about pricing.
Pricing software provides time to react to any situation before the business starts to lose money
What kind of situations are we talking about? For example, violations of RCP (recommended retail price) by competitors, product releases with better credit terms, low stock levels of popular goods at the warehouse, the status of a unique seller of a particular product, etc. Pricing software will generate an alert as soon as any of these things happen in the market.
Your team can secure optimal prices and prevent unique items from competitors using these insights. Instant Insights from pricing software are designed to monitor your pricing strategy’s execution and improve each manager’s performance. The platform supports the team and personal goals by tracking current status and finding new growth points.
Pricing software helps reach goals with the right operational decisions
Retail exists not so much for people as because of people. With some pricing software, managers get full control over the entire cycle of their operations, from strategic category management, merchandising planning, negotiations with vendors, and assortment management to promotion campaigns and direct pricing decisions.
You’ve probably heard the stories about how technology is making life harder for workers by changing how they’re used to it. That’s why some pricing software provides a high level of customization. Focusing on actions instead of processes allows managers to handle different types of tasks efficiently and improve their hard skills.
Pricing software helps retailers of all sizes achieve optimal pricing
Retailers go through four main stages on their way to customer-facing pricing. First, the pricing policy is built from the purchase price of the merchandise. In the next phase, the competitors’ policies are considered, leading to automated pricing and its adjustment to specific rules. Only then can the retailer achieve optimized pricing based on a targeted approach.
Most pricing solutions are created for a specific group of retailers – depending on their size and short-term objectives. However, some pricing software easily adapts to the needs of a wide variety of retailers, regardless of country, industry specifics, or assortment type.
Pricing software evaluates the impact of each decision: find out which decisions improved sales or worsened price perception
Most pricing software gives you a complete picture of your team’s performance across four key metrics – revenue, unit sales, gross margin, and profit margins. Pricing software models the expected results for each metric in terms of current and optimized prices when re-evaluating
By comparing recommended and current prices, your sales team can make the necessary decisions to grow each of the abovementioned metrics. Also, managers can avoid price wars, cannibalization of sales between individual products, or impairment of the customer’s price perception.
Pricing software offers scalable success through price recommendations with up to 98% prediction accuracy
Technologies have changed commerce, and now it radically differs from what it was 20 years ago. Once the retailer reaches a certain level of maturity, rule-based pricing becomes insufficient. Effective price optimization requires predictions about the impact of new prices on market demand.
Most pricing software uses a two-tiered approach to achieve forecast accuracy between 90-98% (the exact figure depends on the market, product, or industry). First, the software calculates how price changes will affect sales performance. The algorithm then generates price recommendations for the entire assortment.
Pricing software helps you experiment and create effective tactics and strategies
Pricing software allows you to test hypotheses and different pricing scenarios. You can use ready-made strategies or customize them to your liking by manually setting targets and limits. Predicting the results and consequences of any scenario is a matter of a couple of hours. For example, the team can accurately identify the most in-demand products and put a competitive price on them. At the same time, prices for other products can be raised without losing margins.
Disadvantages of pricing software<
Pricing software has fewer disadvantages than advantages. They are less worth paying attention to. Moreover, pricing software constantly improves, so maybe in some years, these disadvantages will be eliminated. So, pricing software disadvantages are:
- Limited ability to reflect customers’ readiness to spend money at price points. The chronological perspective creates restrictions when pricing for new consumers.
- Lack of ability to automatically execute your pricing strategy
- There’s a risk of low acceptance from the sales team with off-the-shelf solutions
5 years ago, pricing software had much more disadvantages than now. With the further development of pricing software, it will become more intelligent, has more functions, and has fewer disadvantages. If you aren’t using pricing software, right now is the best time to change this and improve your sales alongside revenue.
Conclusion
There is no unified formula for success and creating a truly unique customer experience depends on the specifics of each customer. Retail in the digital age is one of the most dynamic industries. Managers have to make dozens of informed and timely decisions every day. And pricing software is the best way out for a company of any size.
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