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Pricing 2015: Learning To Live In A Dynamic, Promotional World According to this year's benchmark, retailers

May 21, 2020

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  • Pricing 2015: Learning To Live In A Dynamic, Promotional World

    Benchmark Report 2015 Nikki Baird and Paula Rosenblum, Managing Partners

    June 2015

    Sponsored by:

    Supported by:

  • Executive Summary

    According to this year's benchmark, retailers have figured out how to use pricing and promotions to drive sales, but are not so good at using them to make profits. The best-performing retailers believe they have solid promotion planning processes, and they see their promotions' effectiveness in line with those beliefs. Retailers whose sales are lagging are even more likely to believe their promotions are effective, even though they don't regularly identify bad promotions, and they don't regularly measure the full impact of a promotion. Pile on the need to understand and respond to competitors' dynamic pricing strategies – multiple, intra-day price changes – and retailers face as much disruption when it comes to pricing as they did when price optimization was first introduced.

    How does this translate into the future of pricing? It is a muddled future, indeed.

    Key Findings • Retail respondents report that consumer price sensitivity remains top of mind, but with

    increased focus on pricing aggressiveness and price transparency. We examine how retailers are reacting to these issues in the Business Challenges section of this report, beginning on page 6.

    • Retailers need to improve margins and they see profitable promotions playing a significant role there. Alongside promotions, retailers increasingly see an opportunity for dynamic pricing. However, while they resolve to match competitors' prices as a result of price transparency and competitive price intelligence, when actually confronted with shoppers and mobile phones in stores, retailers' responses fall short. Learn more in Opportunities (page 10).

    • The evolution of retail pricing has been technology-driven for the last fifteen years, but that time may be coming to a close. It's not that the technology has stopped evolving. It's that retailers have finally developed enough maturity with how the technology is used to be able to start building an effective process and organization around it. See how that has shifted retailers' perceptions of how to prepare internally in the Organizational Inhibitors section, page 14.

    • Just as dynamic pricing has played a strong role in shaping retailers' perceived opportunities, it has also played a role in driving technology investments. While retail respondents say they see the most opportunity in evolving their base price capabilities, their planned technology investments tell a different tale. Learn more in the Technology Enablers section, beginning on page 19.

    Even though price tools and processes have been around long enough to be considered "mature," retailers still face a tremendous amount of disruption and uncertainty. Our suggestions for how retailers can navigate this uncertainty can be found in the Bootstrap Recommendations portion of the report.

    We certainly hope you enjoy it,

    Nikki Baird and Paula Rosenblum RSR Research

  • ii

    Table of Contents Executive Summary ......................................................................................................................... i Research Overview ......................................................................................................................... 1

    Mixed Emotions And Mixed Messages ........................................................................................ 1 A Good Holiday Season! ............................................................................................................. 1 Results In Line With Pricing Objectives ....................................................................................... 2 The Volume Of Price Changes Continues To Soar ..................................................................... 2 Retail Winners Flying With Clarity, Laggards Flying Blind ........................................................... 3 Methodology ................................................................................................................................ 4 Survey Respondent Characteristics ............................................................................................ 4

    Business Challenges ....................................................................................................................... 6 What Have We Wrought? ............................................................................................................ 6 Europe And The UK Follow In Dangerous Footsteps .................................................................. 7 A Fair-To-Middling Self Evaluation .............................................................................................. 7 Price Transparency And Channel Proliferation Create Disruption ............................................... 9

    Opportunities ................................................................................................................................. 10 Localization Takes A Back Seat To Promotions And Value Proposition ................................... 10 Retail Winners See Different Opportunities ............................................................................... 11 A Disconnect Between Strategies And Tactics On Price Comparisons .................................... 11 Competitive Price Intelligence: Are Opportunities Missed? ....................................................... 12

    Organizational Inhibitors ................................................................................................................ 14 What Is The Impact? .................................................................................................................. 14 The Consumer Looms Larger And Larger ................................................................................. 15 Overcoming Inhibitors ................................................................................................................ 16 Learning From Differences ........................................................................................................ 17

    Technology Enablers ..................................................................................................................... 19 Back To Basics .......................................................................................................................... 19 Moving To The Digital Front ...................................................................................................... 21

    BOOTstrap Recommendations ..................................................................................................... 23 The Jury Is Still Out ................................................................................................................... 23 Focus On The Process, But Keep The Customer In Mind ......................................................... 23 Accelerate Efforts To Measure Promotion Effectiveness .......................................................... 23 Make Sure Your Competitive Price Policies Are Consistent ...................................................... 24 Monitor Dynamic Pricing Behavior – Don't Be Afraid To Experiment ........................................ 24

    Appendix A: RSR’s Research Methodology .................................................................................... 1 Appendix B: About Our Sponsors ................................................................................................... 2 Appendix C: About RSR Research ................................................................................................. 3

  • iii

    Figures Figure 1: Good Improvement In Holiday Season Gross Margin ...................................................... 1

    Figure 2: Objectives: Improve Margin And Convey A Value Proposition ........................................ 2

    Figure 3: The Number Of Price Changes Skyrocket Again ............................................................. 3

    Figure 4: Winners Get The Processes, Laggards Shooting Blind ................................................... 4

    Figure 5: Consumers And Competitors Drive The Agenda ............................................................. 6

    Figure 6: US More Focused On Consumers, EU On Competitors .................................................. 7

    Figure 7: Self Evaluations: Overall Mixed Signals ........................................................................... 8

    Figure 8: Dramatic Differences Depending On Products Sold ........................................................ 8

    Figure 9: Mixed Responses To Channel Proliferation ..................................................................... 9

    Figure 10: Focused On Pulling The Price Lever For Everyone ..................................................... 10

    Figure 11: Winners Laser Focused On Margin, Moving Towards Localization ............................. 11

    Figure 12: In General, Get As Close As You Can ......................................................................... 12

    Figure 13: A Split Between Slow And Rapid Response To Price Intelligence .............................. 13

    Figure 14: Potential Price Decisions Grow More Challenging ....................................................... 14

    Figure 15: Growing Dangers ....................................................................................................