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Dynamic and intelligent omni channel pricing

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Omni-Channel Pricing enables retailers to maximize sales, profit and shopper loyalty through more dynamic and timely pricing across channels. Using data and insights from one channel to inform decisions in another, retailers can price more intelligently and competitively.

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Dynamic and intelligent omni channel pricing

  1. 1. © 2013 IBM Corporation Dynamic and Intelligent Omni-Channel Pricing January, 2015
  2. 2. 2 Agenda  Price consistency: What matters to consumers  Omni-channel pricing: Current state for most retailers  Solutions and best practices
  3. 3. Consumers rate price consistency as #1 Omni-channel expectation (out of 39) 3 Price consistency across channels In-store, locate out-of-stock item and get it shipped home Track order status Consistent assortment across channels Return in store of online purchase 1 2 3 4 5 Source: Greater Expectations – Consumers are asking for tomorrow, today IBM Institute of Business Value, 2014
  4. 4. But what does price consistency really mean to customers? 4 Conclusion: “Consistency” pertains to strategy, not matched prices across channels Source: Greater Expectations – Consumers are asking for tomorrow, today IBM Institute of Business Value, 2014
  5. 5. Reality of retail organizations often sees separate approaches and even organizations for pricing… 5
  6. 6. …while prices and channels have converged for consumers 6
  7. 7. A variety of pricing solutions are available to retailers 7 Solution Sample Providers Functionality Competitor price feeds Nielsen Provide periodic summaries of market or chain prices Pricing intelligence 360pi, Profitero, Ugame Curate online competitor data and provide visualization and reporting Rules-based pricing, price optimization Revionics, KSS Provide traditional tools for pricing; can be used separately in each channel Dynamic pricing Boomerang Commerce, Wiser, Upstream Provide dynamic pricing for online only Omni-channel pricing IBM Omni-Channel Merchandising (DemandTec) Provide dynamic pricing for online plus ability to coordinate across channels while maintaining key product relationships
  8. 8.  Fast but typically very simple rules-based  Doesn’t maintain key product relationships  Brand and private label  Size relationships  Line relationships  Channel relationships Dynamic Pricing solutions used in isolation can lead to a downward spiral / race to the bottom 8 Lower the price of branded product to match competitor Lower the price of private label products to maintain price differential Further reduce price of branded product to match competitor Further reduce price of private label products to maintain price differential ..and so on Impact to Private Label example $$$$  $ 
  9. 9. Competitors reduce prices by 1% Impact on my sales by channel Category A Category B  How are my sales affected by various competitors changing their prices?  Which changes should I react to?  Who are my key competitors by category? Pure Online Competitor Competitor C Competitor B …but less of an impact on my sales in Category BCompetitor A price reductions have the most impact on my online sales in Category A… A coordinated approach allows data and insights to be used across channels for better pricing decisions
  10. 10. Reducing channel price by 1% Sales impact by channel Category A Category B Reducing the online price has minimal effect on store sales of either category  Will sales in one channel be cannibalized by price changes I make in another channel?  How does it vary by category? Reducing the store price cannibalizes online sales in category A, but has a lesser effect in Category B A coordinated approach allows data and insights to be used across channels for better pricing decisions
  11. 11. Best practice approach to Omni-Channel Pricing 11
  12. 12. Final thoughts  Pricing science has advanced dramatically in the past 10 years – increase your awareness of the new capabilities  While simply having online Dynamic Pricing is tempting, think through the implications prior to implementation  Ensure corporate pricing practices are consistent with goals  Develop a step-wise approach (foundation, strategy, rules, optimization)  Become more surgical in pricing practices, especially with respect to understanding competitors

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