An agile pricing approach and Dynamic pricing optimization is required to survive in today’s market conditions. Maintaining profitability while driving customer loyalty and ensuring short term and long term sales requires constant analysis of real time data and the ability to react with the right pricing strategy at the right time.
The structure of the product data (attributes and classifications) is critical for dynamic price optimization. The cleaner and more detailed the data, the more effectively the pricing software can operate, and the more diverse the possible business cases become.
We live in a fast-paced market where changes are constant, frequent and can have devastating implications on consumer price and or brand perception.
The need to identify the right triggers for price change, react, analyze and evaluate results requires analyzing large amounts of data and can only be achieved through automation.
In a highly competitive vertical such as consumer electronics (customers are constantly comparing prices), it is required to deploy an automated pricing solution. This solution helps retailers move from gutt feeling to a more scientific approach when reacting to market changes. It can also support in predicting the impact of a price change.
Long tail Items
Companies tend to actively manage the pricing of only key products (“short tai”) based on value delivered to customers and competitors’ prices, applying cost-plus approaches for the rest – the “long tail”.
A long tail strategy refers to “niche” items that don’t sell very often. Yet when they do sell, especially in large businesses that also sell a wide variety of popular products, they generate substantial profit.
When it comes to dynamically pricing long tail or slow-moving items, the process becomes simpler as the number of product attributes stored in master data grows. The attributes of all articles are analyzed for this purpose, and corresponding price groups are formed. The longtail products are then assigned to these price groups based on their characteristics. Once the initial price level has been established for these articles, further price optimization can follow.
For retailers operating in more than one channel (Online/Offline, Different countries, Different currencies etc.) Achieving effective pricing will require optimized strategies that consider the specifics of the pricing channel as well as the interrelationships between all channels across multiple business constraints.
It is especially important for the consumer electronics industry to be able to calculate price elasticities at the product and category level. The elasticity of demand for a product has a significant impact on any business plans. Because margins in the consumer electronics industry are frequently very low, many product prices do not have much room to fluctuate – especially when measured against competitors. Price elasticity enables retailers to seize opportunities that occur in the marketplace.
Inter Product Relationships
When it comes to dynamic price optimization, it is essential to be able to consider complementary goods and substitutes strategically, as well as price them separately. Complementary goods purchased together, such as an iPhone and iPhone cover, can be determined using cross-price elasticities and sold directly as a bundle. The primary benefit of this strategy is that bundles can increase both profit and frequency. To avoid cannibalization, pricing software should account for substitutes, so that the sale of one item does not automatically lead to a decrease in demand for its substitutes.
Consumer electronics is a highly paced industry. New technologies constantly disrupt the assortment, and it is often required to clear a discontinued or less popular item. Utilizing advanced machine learning models, coupled with real time, reactive price changes, helps retailers maximize the yield from this remaining inventory. These models also take into account the cross-elasticity, thus reducing the cannibalization effect on the rest of the assortment
A dynamic price optimization solution assists you in this and relieves you of manual price maintenance. Customers can change their prices on a daily and even inter-daily basis. All the while making sure that the pricing strategies deployed are aligned with business KPIs specific to the market and business.
Consumer electronics retailers can only compete in the long run if they use dynamic pricing. Contact Quicklizard today to learn more about our Dynamic pricing platform and how we can help your business achieve pricing excellence.