Price Optimisation

What is Price Optimisation

Many people in the software industry are trying to blind retailers with Science.  They are trying to pretend that clever algorithms and mathematical calculations on comparisons with publicly available market data can predict the right price for a product.

We do not believe that. 

For us Price Optimisation is about helping Retailers implement and manage a ‘Price Strategy’, and be able to evaluate it, optimise it and react to competitors when they try and disrupt it. 

We do not try and tell Retailers how to price their products.  Only they can put a value on it.

Pricing says more about a retail brand than any other attribute, so it is not something that you can trivialise.  It also has a dramatic impact on a retailer’s profitability.

What we try and do is make sure Retailers do not lose margin in the process of trading competitively, during a season or over a given time period.

Retail pricing varies dramatically whether you are dealing with ‘continuity’ or ‘seasonal’ products.  So it’s completely different for a fashion retailer compared with a grocery retailer.

It is also completely different for fast sellers, and Key Value Items (KVIs) compared to slow sellers.

The problem is not that retailers do not know how to price their products, they do, the problem comes when you are trying to price manage thousands (‘000s) of products across hundreds (000’s) of stores on a daily basis.  Particularly when you are also running promotions on them most of the time.

Complexity also comes in if you are managing prices across multiple jurisdictions and if in your country or area you practice ‘differential pricing’, which they do in southern Europe or Brazil extensively.  Differential pricing is becoming the norm.

Pricing is also used to drive sales uplifts in retailers, particularly when they have too much stock, or they are missing their sales targets.  Promotions are often supplier funded.  This makes the whole pricing exercise problematic.

We optimise Pricing by doing the following

  • Helping ensure that initial prices are in-keeping with Price Strategies
  • That in making price changes we do not violate Price Architectures and competitive strategies
  • That we have a considered approach to multi-jurisdictional and differential pricing
  • That we optimise promotions and markdowns (not over discounting)
  • That we react to competitor price adjustments judiciously

By helping retailers with these pricing basics, we dramatically improve margins.  We are helping retailers uplift margins by 1-4%.

Yes we use science, for example in trying to keep track of Elasticity, Halo and Cannibalisation effects, but they are an aide to Price Optimisation, not the drivers of it.