Report: Precision Pricing Is Becoming a “Must-Have” for Retailers and Consumers
Survey finds wide gap between retail “Winners” and “Laggards” in “pricing readiness,” satisfaction with pricing strategies amid persistent market disruptions
Retailers see AI-powered pricing and promotions as path to earning greater “share of wallet”
DemandTec by Acoustic, a pioneering leader in retail pricing, promotions, and markdown technology, published a report that finds a wide gap in the adoption of advanced pricing technology by retailers. The commissioned study, “Retail Pricing 2022: Bringing Agility and Precision to the Art of Pricing,” was conducted by Retail Systems Research (RSR), and surveyed retail executives across five categories. The researchers found that while 60% of average and under-performing retailers rate competitive pricing their number-one issue, the greatest concern for top performers is that consumers are becoming increasingly troubled by rising prices and continue to increase their focus on pricing.
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“It is clear that in order to win, precision pricing is a must-have, not a nice-to-have.”
“With the lingering effects of a global pandemic, supply chain concerns, and economic uncertainty over war in Europe, retail pricing technology has rapidly become a priority need,” said RSR partner, Brian Kilcourse, co-author of the report. “If your company is not fully confident in its ability to make rapid pricing decisions and changes – right now – it’s time to begin serious internal conversations about how to shore those systems up.”
As part of this study, RSR conducted an online survey of retail executives from December 2021 to January 2022 across five retail categories: fast moving consumer goods; apparel, footwear, and accessories; hard goods; general merchandise; and other retail. Of the retailers surveyed, 10% had worse than average sales (retail laggards), 35% had average sales, and 55% had better than average sales (retail winners). RSR set average sales growth at 4.5%.
“Retailers and consumers alike are experiencing a storm of challenges, including record inflation and energy prices, making price more important than perhaps any other value attribute,” said Anis Hadj-Taieb, General Manager of DemandTec. “Retailers – in a constant battle to fend off price leaders like Amazon and Walmart – know that even though offering a low price may not win new customers, having high prices will certainly cost them existing ones. As a result, to win customer share of wallet, precision pricing is a requirement for retailers to thrive in the market.”
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Key findings include:
- Gap in retailer attitudes. There are stark differences in retailers’ attitudes about what – and who – is driving pricing issues in the first place. While average and under-performers lament the aggressiveness of the competition (60% call it their number-one issue), the top concern for the majority of retail “winners” is that consumers continue to ratchet up their focus on price.
- Gap in retailer capabilities. Retail leaders are far more satisfied in their current capabilities than average and under-performers are. According to the survey results, 64% say they are pleased with their ability to establish a price strategy for regular and promotional products. That number is much lower for average and underperformers: 36%.
- Fear of customer reaction. Retail customers have been through a lot in the past few years. Lockdowns, social isolation, difficulty finding products due to supply chain woes: all have a cumulative effect. Rising prices have consumers on edge, and retailers are incredibly sensitive to this fact. As a result, 29% of retailers are fearful that any change in prices could bring about a negative reaction from customers.
- Gap in retailer perception about AI. As it relates to technology enablers, AI has been the talk of the industry for years. But where are retailers’ perceptions amidst all the hype? More than half of average and lagging retailers deem it vital, while the remainder call it a nice-to-have feature. More important, nearly all the best performing retailers in the study say that advanced retail pricing technology is essential to drive business improvements going forward (82%).
Based on the data, the report offers several in-depth yet pragmatic suggestions on how retailers should proceed.
“In the end, retailers should know that closing the pricing readiness gap is now a critical component of overall retail strategy,” said Kilcourse. “It is clear that in order to win, precision pricing is a must-have, not a nice-to-have.”
