What’s the Missing Link in Price Optimization Strategy for Retailers?

For many retailers, price optimization is not being implemented appropriately because of the lack of communication between the supply and demand cycles. As a result, retailers are

  • unable to meet the demand generated by price optimization;

  • incapable of having a pricing and demand structure that can meet local customer needs;

  • unable to create a central demand forecast for the entire enterprise (including every store);

  • unable to use sophisticated techniques to set or change pricing as demand fluctuates by region, uniqueness of customer demand, localization, seasonality, demographics, etc.;

  • not properly using a pricing strategy to reset the base price, promotion price, markdown price, and key category price (focuses on customer centric pricing strategy);

  • failing to understand the significance of price optimization techniques used for allocating and replenishing products;

  • unable to use demand and pricing strategies for vendor negotiation; and

  • unable to use price optimization functionality for the entire product life cycle.

Pricing optimization is one piece of the riddle but being the key piece of the riddle the mystery cannot be solved without it.  The use of price optimization techniques in conjunction with demand forecasting, regular price resets, store planning, product lifecycle management (PLM), and supply management can help a retailer achieve its revenue, profit, and margin objectives.  This is important in order to gain competitive edge and provide the best customer experience. Having all the solutions in place does not guarantee that a retailer will achieve all of its objectives. Retailers need to pick the appropriate vendors with the mix of end-to-end solution capabilities that meet their core business requirements.

Stay tuned for the next blog post where a matrix of retail solutions will be provided for the end- to-end solutions with price optimization.
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