Become a Pricing Expert: Your Business Depends upon It!

Pricing Optimization: The New Reality for Successful Retail Businesses

A pricing challenge

Product pricing for Retail and Retail distribution presents a unique challenge in today’s economy. The usual large numbers of parts to price often coupled with multiple distribution channels makes the task ever more difficult. Margins, trends, and changing economics are a constant concern. Product movement and trends comprise a slice many considerations. Stock levels, lifecycle and supply chain performance all figure into extracting the right price for every product. Tracking and controlling multiple price lists adds to the complexity. Which customer group is buying what, in which location(s) and when? Simplifying and streamlining these processes are important to unlocking the pricing puzzle.

The case for Price Optimization

Controlling variable costs and expanding market share will always remain important considerations in the process of doing business. However, neither of these has nearly as great an impact on profits as a pricing initiative. Price optimization remains the most powerful initiative to boost profits. Slight improvements in price can quickly add up to a double digit permanent increase in profitability. Our previous blog addressed the basics of pricing improvement and pricing optimization.

This phenomena is unmatched in comparison to variable cost improvements and sales increase initiatives. Deloitte®, Simon and many others are among a growing group of respected consultants that offer similar variations on this law of averages when it comes to price improvement.

The science of Price Optimization

There is so much that a price optimization system can and must do for your business. It is likely that the Promoter® system is different in many ways from any solution you have experienced. The focus of the entire program is squarely on Price Automation and Optimization. With each step, Promoter’s powerful analytics confidently guide you to better, faster pricing decisions, optimizing the sell price of every product in every price list. No need to be a pricing scientist, as Promoter® takes the mystery out of Price Elasticity modeling and puts it squarely in your hands.

Segment, assortment and product mix demands

In Retail and Distribution, there is often a necessity to price based upon certain particular product assortments, regions, and market segments. Margins can vary wildly from one group of product types to the next. Businesses must be able to delineate and isolate the differences through price automation. Without the right optimization software, these kinds of analytics are out of reach for most companies to control.

The true goal of pricing

The goal should always be to execute pricing based upon the true market value that your customers are willing to pay. Visualize a bell curve. Your goal is to place a dot for every product at or near the top of that curve!

Strategic advantages

A plurality of companies in Retail and Distribution spend much of their time and energy on the process, as opposed to the strategies and tactics necessary to optimize prices. Alternatively, many work from business rules that do not take into consideration the true value of their offerings. For mature companies, the fount of price intelligence exists in an enterprises internal data. There are both obvious and abstract highly effective ways to listen to how your customers value your products. Pricing software allows you to be in a position to act quickly and decisively upon those valuations.

Your prices of course, must be in the mainstream. You must be competitive where it counts. You also must be able to automate the process of understanding which products in your line are price-sensitive. By reducing the volume of process issues, you can in turn exercise sound pricing decisions through pricing science.

Brand loyalty and image

Brand loyalty and image sensitivity should always be a consideration. Marketing, branding, and consumer perception should influence the degree of aggressiveness you would want to exercise in a price initiative. Promoter® gives you that flexibility.

As always, good luck in your pricing journey!

For more information, contact:

Dave Leonard, Pricing Consultant, Chairman/Ext. 5502

Advanced Pricing Logic® Software Inc.

1770 Saturn Way

Seal Beach, Ca 90740

562 594 0275 B

562 594 7275 F

www.aplpromoter.com

By Dave Leonard

Chairman, Advanced Pricing Logic Software, Inc.

ABOUT THE AUTHOR

Dave Leonard is the CEO of Advanced Pricing Logic. He has over 30 years of executive management experience in multi-channel retail, distribution, manufacturing, and catalog merchandising. Mr. Leonard has extensive experience in the area of technology analytics as it relates to price optimization for the mass marketer, inventory control and optimization, purchasing optimization, and consumer pricing psychology.

ABOUT APL

At Advanced Pricing Logic we are dedicated to designing innovative analytic software that makes our customers more profitable. Our software transforms data into insight and provides the platform to turn insight into action. Designed by business professionals, our software follows three guiding principles: encapsulate world class analytics, enable customers to take sound action through easy to use applications and ensure ROI less than a year after purchase.

Photo courtesy of www.freedigitalphotos.net

© 2012 COPYRIGHT ADVANCED PRICING LOGIC SOFTWARE, INC. No part of this document may be reproduced without permission from APLI. All rights reserved. *Legal Notice: Statements made herein shall not be construed as precise representations or warranties of performance. Performance and other claims made herein will vary depending upon the enterprise business model using Promoter®. Statements concerning the use, benefits and performance of Promoter® price automation and optimization are based upon case studies, both in alpha, beta testing and in actual practice. Factors that could cause actual results to differ materially may include general business and economic conditions, competition, unique business practices and other risk factors.