‘Your price should not be low, should not be minimal, but optimal’
, according to Deloitte report
There is a need for a new approach to price formation as old mechanisms for setting the price have become irrelevant. Therefore, ‘price reduction’, or ‘price lower than that of the competitor’ strategies are no longer bring the needed result.
In other words, the price for the customer should always be justified and based on substantial analytic grounds. If that is not the case, then it can destroy the margin because the supplier or competitor may change the price in any moment.
The third point that “destroys” the price shelf is the relationship with suppliers, due to the fact that viewpoints may drastically differ. The supplier is interested in having only his product on your shelf, and you are interested in providing the selection of the product to the buyer.
If we look at customer’s behaviour on the website, then we can understand whether he/she is going to buy anything or not with the likelihood of almost 100%. In any case, the seller will do everything for the customer to make a purchase. Subsequently, using this data in personalized-contextual pricing, one can form a price for a price cluster. In Ukraine, this is already being put in practice, in particular with one gas station network.
Nowadays, technologies can help us to weigh so many pricing factors. Some of them are following:
• Brand perception
• Cash expense
• Consumer behaviour
• Shelf position
• Communication channels
There are also goods that are ‘interrelated’. In short, one product changes the price indices of another. There is a need to change the price – today this product may cost x, but in a week, it may be a 2x or even 3x. By changing the price of one product, you affect the shelf and the relationship between products.
It is also important to consider the contribution of the product to the overall success. There are products that have a relationship with each other – for example, milk and eggs, as well as toilet paper and toothpaste. This system demonstrates that a single optimization group is strongly required in modern trade system.
A prominent case is displayed below:
Samokat.ru – one of the largest delivery services in Russia with more than 400 dark store and $123 million annual income.
• The pricing policy did not match the needs of the business during the cumulative growth in 2020.
• Due to a large number of managers, they lost control over key indicators – revenue and margin.
• Overestimation up to 4 hours daily
• Lack of unification and standardization of pricing
• Lack of analysis and flexible price management system
• Time spent on pricing has been reduced from 4 hours for 200 stores to 30 minutes for 500 stores per day
• Managers got a unified pricing workspace without tables and separate tools
• Introduction of ‘what if’ analysis – managers now make decisions based on the predictable effect of change
• Increase of the efficiency of pricing through differentiated prices.
Рус версия статьи https://retailers.ua/news/menedjment/12006-vasha-tsena-doljna-byit-ne-nizkoy-ne-minimalnoy-a-optimalnoy-ceo-competera-aleksandr-galkin-o-tsenoobrazovanii-v-riteyle