In today’s increasingly digital world, consumers have mobile, on-line, and social channels at their fingertips, in addition to in-store channels, to research product offers and compare competitor deals before making a purchasing decision.
With the pressure omni-channel consumers are putting on companies to provide the most relevant and compelling deals 24/7, how can companies transform to deliver on this consumer need and maintain a competitive advantage? The answer is two-fold: adopt a customer-centric pricing model and use advanced analytics technologies to understand buyer behaviour and develop relevant pricing and promotional offers.
Choosing the right customer-centric pricing model
Broadly speaking, there are three pricing models available to companies: Channel-specific models where pricing is different across different channels; omni-channel models when pricing is the same across channels; or hybrid models when prices are the same across channels but with certain promotional exceptions. When determining which pricing and promotional strategy to adopt, companies should apply advanced analytics tools and technologies to gain consumer insights into pricing sensitivities and buying behaviours. This can help to anticipate consumer response to the possible new strategies before they are put into action.
According to a recent report, in addition to consumer response, analytics can uncover insights on the following critical factors of an effective pricing and promotional strategy: channel profitability, location and channel preferences for deals, competitor pricing, and delivery options. When making data-driven decisions based on the analytics insights, companies can develop relevant pricing and promotions, boost customer engagement and establish or maintain customer loyalty.
Implementing a new pricing strategy with analytics
Restructuring the existing pricing strategy could impact many aspects of an enterprise, from marketing to inventory management, and increase complexity throughout the business. When adopting a new pricing and promotions strategy, companies should explore the following factors to help lower the risk and better manage the transformation journey:
- Data management – A technology foundation comprised of a big data infrastructure and an advanced analytics platform can help execute specific pricing and promotions strategies.
- Advanced analytical methods – A quantitative and qualitative analysis of customers is crucial for companies to understand the effectiveness of a particular pricing model. A comparative analysis across all channels can also provide companies with insight into how they are faring against their competitors.
- Technology – Look to implement new strategies across multiple systems, including legacy, with advanced optimization software.
- Strategic insight – Attract, develop and retain people with advanced analytics skills to analyze and convert data into crisp and actionable insight, and motivate decision makers to make insight-driven decisions.
- Continuous test and learn – As customers move from one channel to another, companies can test new prices, measure customer responses in real-time and optimise their pricing and promotions accordingly.
When pricing insights are incorporated into daily business processes, strategic decisions can be made with greater confidence. To gain the most value from analytical insight, it is recommended that businesses develop robust governance and execution plans.
Taking an analytics-driven approach to pricing and promotions can offer a variety of advantages. For example, a leading European food retailer adopted multi-channel pricing with a key lines strategy for online and offline products. Using an analytics-based pricing strategy, the retailer was able to increase the frequency of price updates in real-time and gain a better understanding of the competition. The impact was an increase in sales and profit, and improved price perception among customers.
With today’s omni-channel consumer constantly seeking the best deal, an analytics approach to developing a pricing and promotions strategy can no longer be looked at as an option. As such, pricing analytics is quickly becoming an essential business driver due to the insights and competitive advantage it can offer.
The company that reaches the consumer with the relevant deals and engagements first can forge ahead of the competitive pack -- is your business optimized through analytics to be in the best position possible for delivering on consumer expectations?
Posted by Conor McGovern, Managing Director, Marketing Analytics, Accenture Analytics