example of Impact - REVENUE/GROWTH
Crafting a retail pricing strategydetails
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
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%
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:
No clear strategic plan in place
Pursued revenues but with negative impact to margins by making ad-hoc pricing adjustments to match or beat competitors wherever possible
No clear strategic plan in place
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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