In-season pricing changes, fast responses to competitor promotions

by | Oct 10, 2017

Consumers are a savvy bunch. Armed with bots, pricing apps, alerts and social networks, we know how to find what we want with the lowest pricing available on a particular product. According to a survey by Retail Dive, 65 percent of consumers will research prices online before they ever visit a store.

Consumer loyalty is a very slippery proposition these days – customers won’t stick with a store brand and pay higher prices simply because that’s where they’ve always shopped. The retailing promotional game today is very subtle and can often be fickle; what works today might not be sufficient tomorrow. Sometimes small value-adds like shaving a day off shipping or free gift wrapping might be all it takes to get a customer to switch from one store to another. Price matching will sometimes be incentive enough to get people to switch, or keep them from switching. For example, Best Buy promises to match all competitor prices in order to avoid consumer showrooming – the practice of shopping in the store, but buying online from a cheaper competitor.

Racing to rockbottom prices

What’s especially interesting is watching major retailers like Best Buy, Target, Walmart, and Toys “R” Us compete with Amazon as each have promised not to be undersold. And in order to keep up, Amazon can change as many as 80 million prices during the holiday season. How can retailers best prepare for this and avoid a pricing “race to the bottom”, which kills gross margins.

So what happens this holiday season when you find out that your competitors are undercutting your prices, and you’re now one of the highest priced sellers on the market? How do you calculate a response to such competitive price pressure?

This is where it helps to have a pre-established set of procedures and even “just in case” promotions and markdowns so you can respond quickly and with agility. Your promotions can be product sub-category specific, like mobile phone cases or outdoor sporting goods that last while the sale is in effect, while a markdown is usually product (SKU) specific, e.g. Patriot’s NFL ball caps, and stays at that price until sold out. Create some in-season competitive responses to promotions to shore up those fast-acting sales and offer discounts that happen spur of the moment.

How can you respond with your own agile in-season pricing changes and promotions? Would it help to know what the top searched and converting products are on your competitors websites? How can you determine how low you’re willing to set those prices to attract and keep consumers? Perhaps the manufacturer would be willing to co-fund based upon current market conditions. Remember, once you have a customer’s attention with a low price, they’re much more likely to add other items to their shopping cart and follow through with checkout. The time-tested ploy of luring in customers with loss leaders in order to make it up with other higher margin products is very much alive and well.

1screen for competitive responses

One possible tool that could be useful for in-season pricing changes in response to competitors is the 1screen analytics solution from SPS Commerce. 1screen blends all critical data across all of your channels, and offers visibility on performance across department, category, product, geography and vendor. It enables more accurate seasonal, regional and size analysis of your sales and promotions, so you can make better decisions on pricing.

Perhaps it’s not just a matter of pricing that entices consumers to pursue your promotions; displays and marketing play a part. With 1screen, analyze which planograms are performing best, and identify accurate space allocation by category and merchandising segment. Next year, use more comprehensive historical performance information from this year to make better pre-season planning decisions in the future.

There are tools that can automatically notify you when competitors change their prices – that’s easy. It’s deciding how to react that can be difficult. It can be a struggle to get the key information that you need to quickly evaluate your own promotions and markdowns. Leverage all of your available data to swiftly react to pricing changes, in partnership with your vendor.

Want to make better in-season pricing changes in response to competitor promotions or know more about 1screen and other SPS analytics solutions? Visit the SPS Commerce website or contact an SPS representative to discuss how our cloud-based solutions can help you with promotion responses, supply chain visibility and agility to better compete in this wild west retailing environment.

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Rob Wilson

Rob Wilson

Sr. Strategic Alliances Manager at SPS Commerce
For more than 20 years, Rob has been an agent for change with a proven track record of unearthing and implementing new business solutions. As a trusted advisor to executives, he helps drive joint go-to-market initiatives that lead to tangible results. Rob has built an impressive record of fostering win-win opportunities with customers and partners through his product management, marketing and sales roles.

Rob graduated from the University of Minnesota, Carlson School of Management with a Finance MBA, Beta Gamma Sigma Honors, and an undergraduate BS degree in Marketing, Minor in Economics.
Rob Wilson

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