This Holiday Season, Retailers Need To Optimize Their Pricing Strategies

The digital transformation that has guided the ecommerce boom in the last two years has helped brands and retailers hone optimizing those core with the eventual phaseout of third-party cookies, there has been a divestment in those legacy identifiers, which has given smart brands and retailers more actionable, intelligent data.

In short, better data has largely solved the first three of the four Ps; brands and retailers can now deliver the right product to the right person through the right channel with increased efficacy.

As retailers begin mapping their holiday sales strategies, focusing on pricing can help on multiple fronts, including managing supply and demand as well as offering personalization in an increasingly price sensitive consumer climate.

Focusing on Price Can Help Manage Supply Chains

The intersection of first-party data initiatives and pricing strategies is crucial for brands and retailers to manage their supply and demand going into the holiday shopping season. The ecommerce boom during the pandemic, and the corresponding labor shortage, has stretched supply chains thin. And At this point, however, the unpredictability of shipments may be too much to account for. At this point, however, the unpredictability of shipments may be too much to account for.

“It’s going to be a very interesting year around promotion and discount,” says Sara Spivey, chief marketing officer at Braze. “The only thing known is the unknown.”

For many brands and retailers, pricing and promotion is a key way of controlling demand. When a brand lowers prices, it creates a demand for a product as a means of managing inventory and setting priority on which products to move. This strategy is especially effective. During the holidays, when shopping reaches peaks on key days like Black Friday and Cyber ​​Monday, already struggling supply chains can be overburdened, which can lead to delays and unfulfilled orders.

As supply chains make stock unreliable, it may not be in a retailer’s best interest to discount at all for fear that an increase in sales can prevent customers from getting their orders on time.

“We have had a tradition of doing one sitewide sale a year,” says Suzanne Ellis Wernevi, owner of luxury jewelry retailer Luna & Stella. “People have come to expect it so I feel obligated to do it. But I truthfully am wondering whether that’s the right choice this year—with a limited inventory it might not be necessary. ”

By closely managing price, brands are better able to manage their supply chains. With blanket discounting strategies that don’t discern between products in the supply chain, brands can suffer with a lack of inventory when they need it most. This holiday shopping season, smart brands will avoid blanket discounting, especially early on, or they risk burning through stock with precarious reinforcements coming.

“One of the patterns that we will continue to see will be promotions and discounts will be offered to customers where they think they have a high probability of purchase,” Spivey says. guessing we may not see as much of that this year. ”

Further, with increased first-party data, brands and retailers are given a larger customer database to tap, which can, in effect, unmoor them from traditional holiday sales cycles. This can also help manage supply chains. Instead of relying on the traditional sales. holidays in the fall, brands can create their own isolated sales events which can circumvent what competitors are offering, and sidestep the holiday season logjams that will hamper supply chains.

Beyond stresses to supply chains, managing price is also imperative for brands as they build long-term relationships with increasingly price-sensitive consumers.

Brands Need to Adopt a More Customer-Centric Pricing Strategy

These days, consumers expect a more personalized experience from brands, and a major part of that calculus is how pricing is treated on the consumer level. As brands have built up first-party data stores, they’re offering consumers a value exchange for their information. And consumers expect that value to be reflected in the discounts and promotions they receive.

According to a recent Braze survey, consumers say they are willing to share details including email addresses (72%), personal interests (37%), home address or zip code (35%), phone numbers (35%) and date of birth (33%) if it means a more personalized experience; particularly if it means exclusive offers.

The problem with blanket discounting strategies that have guided pricing strategies for decades is they’re inherently a brand-centric decision. It’s a one-size-fits-all approach that is decided on by teams who analyze the numbers and determine that a 20% site-wide discount is enough to motivate consumers to buy without encroaching on margins when executed at scale.

With brands building better stores of first-party consumer data, and understanding their customers better, they’re missing a key opportunity to optimize their pricing at a time when consumers are increasingly price sensitive. What’s the point in knowing your customers, knowing what their motivations and wants are, but continuing to build discounting strategies that don’t speak on an individual level?

Price sensitivity is a term we use to describe a level at which a customer will or won’t make a purchase. What doesn’t get discussed often is how this motivation cuts both ways. Sure, a customer who needs a 25% discount to buy won’t buy when only given 10% off. But the inverse is also true: a customer who would buy at 10% will still buy at 25% off. This disparity needs to be taken into account when determining pricing strategies.

And, moreover, it’s the right At a time when so many consumers are watching their bottom lines, especially during the holidays, pricing models need to take on a modicum of empathy. Each customer is unique, and margins can be optimized even if promotions strategies are looked at on an individual consumer level.

This level of price optimization is key for brands going into the holiday season; it can give customers the incentive they need without taking a one-size-fits-all approach that fails to understand the individual motivations on a customer level. And, as brands march into the unknown of supply chain disruptions, smartly managing price can be an essential component to setting demand and managing stock during a chaotic shopping season.

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