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Price Optimization
The Opportunity and How to Benefit
1
Price Optimization: The Opportunity and How to Benefit
Executive Summary
Over the past few years there has been renewed focus on the use of price as a merchandising lever. This is due to a number of factors including volatility in commodity prices and the strained consumer purse as a result of wider economic issues. In both Europe and North America, a number of grocers have focused their marketing on price and value, repositioning themselves in an attempt to gain or retain market share. This focus on price has required significant investment in terms of process and people and in some cases technology. There are a number of software providers that offer solutions to aid in the process of making price decisions. These range from simple rules-based price planning offerings to highly sophisticated price optimization solutions which determine the best price position in order to achieve specific goals such as maximizing overall margin. Considering the need to balance the consumer’s desire for low price with the retailer’s need to maximize value for its shareholders, the adoption of sophisticated solutions has not been as high as some analysts had anticipated. In this white paper, we will discuss: • Why pricing is more important than ever for grocery and hardline retailers • Benefits that can be achieved when using technology to help make price optimization decisions • Fears or barriers to sophistication—why retailers have been wary of price planning and price optimization solutions • What to consider when selecting a price planning and price optimization solution
2
Apart from the wider focus around consumer consciousness of price and increase in commodity costs there are a number of factors that contribute to making price planning and optimization technology an essential piece of retail artillery.
The Opportunity
To every action, there is an equal and opposite reaction:
RETAIL
Price Optimization
The Opportunity and How to Benefit
1
Price Optimization: The Opportunity and How to Benefit
Executive Summary
Over the past few years there has been renewed focus on the use of price as a merchandising lever. This is due to a number of factors including volatility in commodity prices and the strained consumer purse as a result of wider economic issues. In both Europe and North America, a number of grocers have focused their marketing on price and value, repositioning themselves in an attempt to gain or retain market share. This focus on price has required significant investment in terms of process and people and in some cases technology. There are a number of software providers that offer solutions to aid in the process of making price decisions. These range from simple rules-based price planning offerings to highly sophisticated price optimization solutions which determine the best price position in order to achieve specific goals such as maximizing overall margin. Considering the need to balance the consumer’s desire for low price with the retailer’s need to maximize value for its shareholders, the adoption of sophisticated solutions has not been as high as some analysts had anticipated. In this white paper, we will discuss: • Why pricing is more important than ever for grocery and hardline retailers • Benefits that can be achieved when using technology to help make price optimization decisions • Fears or barriers to sophistication—why retailers have been wary of price planning and price optimization solutions • What to consider when selecting a price planning and price optimization solution
2
Apart from the wider focus around consumer consciousness of price and increase in commodity costs there are a number of factors that contribute to making price planning and optimization technology an essential piece of retail artillery.
The Opportunity
To every action, there is an equal and opposite reaction: