The new year provides us all with an opportunity for a fresh start. Most people's personal new year resolutions tend to revolve around getting healthier or to get better organised. In retail it's also a good idea to think about starting afresh after the Christmas rush and making some positive new year resolutions around your pricing strategy. To make it more fit for purpose, because a reinvigorated pricing structure will drive revenue and profit growth for the whole year.
It's true that things can often slow down after the frenzy of the Christmas season but this doesn't necessarily mean that your existing or potential customers will put the brakes on their shopping: plenty of people will have received cash for Christmas and a spot of retail therapy can often help ease those winter blues. So, why would you want to miss out on encouraging customers to spend money on your products during the dark winter months - and beyond?
The downside to new year resolutions is that, despite laudable intentions, most people quickly trail off on their enthusiasm to make changes. Don’t allow this to happen with regard to your pricing strategy. Your job as a retailer is to position your company's products and services so that your customers' lives become easier, more enjoyable, or otherwise better throughout the year, not just for January.
Some New Year pricing resolutions to implement all year round
1. Keep a Close Eye on Your Competitors
New Year is the perfect time to review your prices and compare them to your competitors. Are you over or under-pricing your products? You will require a robust data collection mechanism to keep track of your competitors’ prices and this is where BlackCurve can help with its competitor price tracking software. BlackCurve allows you to identify the best prices within your market and so improve your profit margins. Our technology now makes it possible to be more competitive in real-time.
Why You Should Use BlackCurve's Competitor Price Tracking Software
The current retail environment is much more multi-dimensional than previously, new competitors are joining all the time – and the consumer is firmly in the driving seat. Once you start competitor price tracking you will have clear visibility on how prices change over time and how competitors react to your prices and price changes.
Competitor price tracking also allows you to determine what trends are developing. With this knowledge, you can apply your strategies and tactics accordingly to set the best prices; once you understand your competitors' strategies you can also price optimally and compete much more effectively. BlackCurve's Competitor Price Tracking software will alert you immediately on those products you've labelled to be checked in comparison to your competitors and requires no extra effort on your part to keep on top of your competitors' prices.
2. Always offer value
Tom Reilly, an author and value-based shopping expert puts it succinctly: "Value is always long term. Price is short term."
Before you arrive at a price, make sure you have established your value - and that your buyers understand your differentiation value. This starts with your website and social media presence and is followed up through delivery and use.
Value selling is the foundation of increasing your retail sales. It’s easy to mark down items or steer customers toward the cheapest option but markdowns are harmful to profit and rarely the best option for your customer. Once customers understand that there are genuine differences in quality, they’ll be more understanding of a price disparity.
Your pricing strategy might lend itself to an everyday-low-price or high/low approach, or a combination of the two; what it must always answer is the following questions: what is the target price position versus competitors by category, channel, and geography? What is the optimal mix of price and promotion by category and channel? Which customers and their shopping missions matter most? How do your most valuable customers shop? What drives value perception?
As a retailer, how do you determine which categories and items become part of your Key-Value Categories and Key-Value Items?
i) By analysing transaction and basket data, i.e. sales by £s or volume, number and size of basket. Divide your products into marketable sub-niches and try identifying with a specific customer profile.
ii) Through primary research to identify the categories and items that most drive value perception.
iii) Analysing competitor data - review and add strategic items that are being offered by competitors.
iv) Using judgment that comes from experience.
Although the new year is an excellent time to re-examine value offered, refresh your list of KVIs throughout the year.
3. Make Discounting Strategic
"Discounting is a strategic issue for any eCommerce business and needs to be approached with the right methodical mindset." Aran Reeks
Discounts are a fact of life for most retailers and, in certain cases, discounting to better align value and price is a reasonable strategy, viewed as investments in either a customer or a sector. As a retailer, you make an investment with the expectation of getting a return so any ‘discount as investment’ should be accompanied with a plan for how it will generate that return - and with a risk analysis.
Review your discounts and ask why the discount was given. Was it ...
i) To align price and value? If so, how was value determined?
ii) As an investment in a customer or a sector? If so, when will there be a return and what are the risks?
iii) In response to a competitor? If so, what is your differentiated value relative to the competitor?It’s vital not to diminish your brand by discounting. Always make the discount terms crystal clear and test/measure which discounts are effective and which are incompatible with your profit margins. You should also evaluate the impact of discounting on your overall pricing strategy and for your entire market – never get embroiled in a price war through heavy discounting.
Through pricing automation software, BlackCurve allows retailers to make profitable pricing decisions. We look forward to helping your company in 2020.
Why not get the FREE Ultimate Guide to Discounting.
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References
https://www.psprint.com/resources/what-customers-buy-on-the-new-years-holiday/
https://openviewpartners.com/blog/5-pricing-resolutions-for-2019/#.XcLNJ9WnwdU
https://www.innovationexcellence.com/blog/2017/11/21/want-to-nail-pricing-understand-market-dynamics-first/ Steven Forth
http://blog.varstreetinc.com/competitive-pricing/
https://www.allbusiness.com/sell-value-over-price-secret-to-value-based-selling-113904-1.html
https://www.retaildoc.com/blog/how-to-increase-retail-sales-three-tips
https://www.shopkick.com/partners/blog/creating-customer-value-in-retail-5-ways-to-incentivize-your-customers/
https://www.mckinsey.com/industries/retail/our-insights/pricing-in-retail-setting-strategy