Pricing isn’t easy to get right, even for the most experienced retailers. It’s arguably both an art and a science.
The market is dynamic, and what was once a viable strategy may no longer be producing the results you want. You might see this manifest itself in depleting margins, poor return on ad spend (RoAS), frequent out-of-stocks, and more. It’s critical to be proactive about identifying when and what changes you need to make to stay ahead of the game.
Here are some of the most common reasons why your pricing strategy may need an update:
1. Working with inaccurate competitive pricing data
How often are you monitoring and benchmarking against the competition? Retailers are repricing frequently, and if you’re not near or at that pace, you are likely missing out on opportunities to capitalize on these changes.
For instance, human error can come into play if you’re relying on manually collecting data. It’s also much more time-consuming than automating the process, which means by the time the data is aggregated, you’re already late to the party. Automated data collection can help tackle both these issues.
2. Changing prices uniformly across your product catalog
Different products or categories have different price elasticities and require different pricing strategies. Demand for some products will change when a competitor changes their price, but not always. Pricing is more complex than that; while competitive pricing is an important component, it’s not the only one.
Sometimes it doesn’t make sense to match a competitor’s low price and you may even find opportunities to raise prices instead! For example, Amazon does not have the lowest price on everything—they have some loss leader products or categories but make up the margin in other areas.
3. Using an overly simplified pricing model
Gone are the days of simple cost-plus pricing. There are so many variables that can impact pricing, such as seasonal fluctuations, competitor pricing, and more. And they…