example of Impact - REVENUE/GROWTH

Crafting a retail pricing strategy

details

Client background and situation:

Retail client

Retail client

Deteriorating return on sales and clear lack of pricing discipline and standardization

Deteriorating return on sales and clear lack of pricing discipline and standardization

U

Pricing well can be critical for bottom line impact - even a 1% improvement in price of goods and services can increase operating profit by 7-9%

U

Pricing well can be critical for bottom line impact - even a 1% improvement in price of goods and services can increase operating profit by 7-9%

THe past

Prior approach & challenges:

u

No clear strategic plan in place

K

Pursued revenues but with negative impact to margins by making ad-hoc pricing adjustments to match or beat competitors wherever possible

u

No clear strategic plan in place

K

Pursued revenues but with negative impact to margins by making ad-hoc pricing adjustments to match or beat competitors wherever possible

solutions

Coppertree Partners approach:

DEVELOPED STRATEGIC PLAN

Aligned that winning market share was primary objective

ANALYZED PRODUCT & COMPETITIVE LANDSCAPE

Analyzed customer purchase patterns, product alternatives/substitutes, and pricing behavior of competitors. Developed view of product cross-selling/up-selling potential, differentiation, historical pricing, and ability to change pricing by customer segments

ROLLED OUT PILOT

New approach for dynamic pricing of some product lines with calculation of product elasticity taking into account seasonality and cannibalization, effect of product price on customer price perception (to identify “key value items”), competitor pricing (including web-scraping prices), inventory levels, etc

STANDARDIZED PROCESSES AND OWNERSHIP

Established internal guidance and process for pricing strategy when competitors changed prices or when inventory levels increased

TRACKED PROCESS

Put together dashboards of key information including some metrics that were not being generated before like pricing exceptions

Impact:

  • Improved return on sales 5%
  • Strengthened end-to-end process for pricing¬†¬†

Additional insights and takeaways

Pricing is truly art & science combined and most effective when it blends human and digital capabilities for decision-making where managers and commercial teams have rich & accurate data and can assess recommendations from algorithms. Strategy is important – knowing the categories and products that drive customer price perception and that influence traffic and additional purchases. For instance calculating price awareness scores correctly for products allows you to adjust pricing accordingly and be very competitive on those with high awareness and secure higher margins on the lower end. This requires more than brand perception and purchase frequently and should be data driven – pulling transaction and research data from various systems into a data warehouse or lake for analytics.

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NEW YORK, NY

917-727-6345

neil@coppertreepartners.com