Typically, whenever a shopper is getting ready to make a purchase, one of the main aspects that they look at is the price. Indeed, 60% of shoppers end up committing to a product from a particular retailer based on their price. Consumers make their final choice by comparing KVIs, or key value items, from each retailer. These are the items that they value the greatest; therefore, they anticipate the lowest prices from them. As a result, the changes made to KVIs at one retailer’s store will end up impacting the sales of those identical items at another retailer’s store. For instance, if your competitor lowers the prices of their KVIs, you can expect your sales to fall. If this is the case, there are a couple of things that you will need to do if you want to be happy with the end result.
The first thing that you will need to do is pinpoint the KVIs that your shoppers are interested in buying. Afterward, you will need to figure out whether you are able to offer the lowest prices for those products or whether shoppers will end up coming to you regardless of the price that you offer. The latter only really works, though, if you are a retailer that is considered a trusted product specialist in a certain field. Take, for instance, items for pets. Pet stores typically have higher prices for products that you can find in a general store since customers may come to you for help or advice. This is because they feel that you are more equipped to assist them in comparison to those who work at supermarkets as their collection of products isn’t as precise.
Now, if you relate more to the former option, then the first thing that you will have to do is identify your KVIs. To do so, you can first begin by using the intuition of pricing managers since they know from practice, which items are sold more and which sales are affected the most by changes in rivals’ prices. You can also examine sales checks; use them to try to find various patterns from the items typically found in these kinds of checks and that usually have products from different categories that go hand-in-hand with them. In both of these cases, however, you would not be able to figure out if shoppers will buy from you because of your low prices or just because they trust your brand. If you want to be able to figure out the connection between your prices, your rivals’ prices, and your sales, pricing managers will need to combine their knowledge with data. Indeed, if you want to calculate prices, you will need a consistent input of pricing data along with powerful computational tools; that way, you can analyze all of that information. Indeed, by putting together copious amounts of data with a robust analytics system, and actionable information, your firm will be able to figure out what its KVIs are, who your actual rivals are, and which prices are the most optimal. This way, you are making the most that you possibly can. After all, not every single retailer that sells the same KVIs as you will be your rival, pinpointing them is vital if you want to establish optimal prices that compare to your real competitors.
With the help of machine learning, you can equip your teams with the speed and accuracy that they need to produce the outcomes that you are yearning. Indeed, with the help of an algorithm-powered price management solution, your firm can see up to 16 percent in growth of revenue.
To conclude, as you have learned, there are three steps that you need to take to respond to changes in prices from your rivals; these include collecting competitive pricing data in real-time, analyzing the data, and then making decisions based on those given insights. Only small retailers can attempt to do so manually, granted they are only managing a small number of items. As a result, those who have thousands of SKUs, around 1,500 of which are KVIs, could not even dream of doing it on their own. Indeed, if you want to figure out the prices for that many items, you need to have a lot of computational power. Machine learning comes in handy in this case as it can help you grab the attention of customers while, at the same time, make the most revenue that you can.