Price Intelligence for More Effective Promotions:
A Price Intelligence (PI) solution not only presents pricing data in a concise and clear format, it also reveals key information that helps merchandisers plan and implement more effective promotions. Let’s look at how Price Intelligence helps merchandisers do this…
Reviewing the price volatility in specific categories can give a retailer insight and allow them to evaluate whether it may be a good idea to run a promotion in this category. A historical view of pricing data quickly shows a merchandiser where their price was at a particular point in time, where the competition’s price was and what subsequently happened when one retailer lowered or raised their prices. The review of historical trends and market data may also highlight the fact that a promotion should not be run at all or that the retailer needs to look at promotions that are not founded solely on price (i.e. value driven offers). Historical data might also show you why some of your past promotions were not that effective. A quick look back at the sales during a previous promotion may show that sales were not that strong because the competition was offering something similar or better than what you were offering. Having access to important pricing data helps you make smarter promotion decisions.
Using PI data to create strong promotional opportunities can introduce a very exciting (and profitable) element to your business model. Sure, retailers plan promotions all the time. However, do they have the proper tools in place in order to make informed and strategic promotional decisions?
Consumers are given more choice than ever and they can buy from various channels. It’s important that retailers look at pricing more critically than ever, and this includes catering their promotions and sales messaging to this pricing strategy.
How can merchandisers use a price intelligence tool to create strategic and effective promotions?
Easily identify key products and categories where you are priced lower, the same or higher than your competitors.
Action Plan for your Key Items/Categories
Create an action plan for these key items and categories and figure out how you are going to compete. Is it solely on price? Is it through bundling or value added activities? In previous posts, I touch briefly on bundling, differentiation and value-adds as creative ways to promote and drive messaging (i.e. factors other than price). An example of this can be an extra year warranty on a TV, free servicing for a year on select items, etc. This can also help you put emphasis on your competitive advantages. Having accurate and informed pricing data is essential in to build out your promotions.
At times, it is OK to change the game. Use price intelligence data to create buzz. Select the appropriate channels and target audience. As an example, you can create a “flash” sale on items where you are priced the same as your competitors (i.e. a 48 hour sale advertised through an email campaign to all opt-ins.) This is a chance to create excitement while driving top line sales for your organization. This could be in a category where you are margin-rich but sales are slow. Sure, you may be priced properly versus the competition, but maybe it is time to do more. In the pricing data, there are opportunities jumping out at you. It is just as important to utilize the data to make short-term decisions as well as long term ones (just as long as the short term ones don’t affect the long term ones of course!).
Marry your pricing data with your current enterprise resource system – this can help you reveal even more about how to execute promotions and improve your negotiating power with suppliers. You may be holding too much inventory on an item and see the chance to create a selling opportunity by offering a promotion. This may also prompt you to go back to your supplier to demand a better price to help you clear through some inventory, rather than prematurely running a promotion. Conversely, you may have identified a promotional opportunity but do not have enough inventory to support the endeavor. Integrating a PI solution with your enterprise system allows you to understand the many moving parts and factors involved in order to plan the most effective promotion.
A PI solution ensures that you can maintain the sustainability of the promotions implemented. Often as a consumer electronics buyer, I would implement a promotion and have to constantly manually monitor my competitors’ prices throughout the duration of the offer. With a PI solution, retailers are quickly alerted to issues and can react accordingly to ensure that the promotion they are running is strong from the beginning to end . Your loyal customers will definitely start questioning if you are advertising a promotional price one day, only to have that price beaten the following day by a competitor. A PI solution helps you become a more nimble retailer and ultimately a more credible one.
For more tips and ideas, check out our Five Price Intelligence Secrets for more insights on the relationship between Price Intelligence and promotion.
Price Intelligence for More Effective Promotions is part of a multi-post series.
To start at the beginning, read: A Buyer’s Tale About Price Intelligence