A customer, while looking at a product in your store, may decide to search for it online – while in your store. Finding a better deal, he leaves your store – to go and get it elsewhere at a better price. Price – it has become a key consideration in the purchase decisions of today’s budget-conscious shoppers, as they grapple with a recessionary economy.
Intense competition for the shoppers’ wallet leaves you with a very narrow margin for errors in your pricing strategy. For every SKU in your store, you have to hit on that ‘magic’ price which best drives its sales and profitability – while fitting in with your overall price image.
Not surprisingly, price optimization is an essential part the retail game today. It helps you have better control over your pricing decisions across every category and product type – from fast sellers to perishables. With price optimization, the process of determining the right price of a product has clearly moved away from rudimentary tools and ‘gut-feelings’ to an actual data-backed science. It involves relying on techniques such as demand modelling and ‘what-if’ scenarios to understand the impact of an item’s price on its sales and margin performance – and fixing a price that works for your retail business goals.