STORES Magazine -August 2017 - 40

n

PRICING

PERSONALIZED PRICING
Know your customer ... and how much they'll pay

by SANDY SMITH

T

oday's retailer may feel trapped in an epic movie, searching for the Holy Grail - an idea that rewards
its finder with a combination of great-and-growing profits and rabidly loyal customers. If so, consider
personalized pricing a major clue.
Like any action-adventure movie, there are a few
boulders to outrun and death-defying leaps to try.
But first, the wise sage: Personalized pricing is "Prices
that are set based off individual customer behavior or
characteristics," says Nikki Baird, managing partner
of RSR Research and co-author of "Retail Pricing
2017: The Dawn of Personalized Prices."
"There is the price and there is your price,"
Baird says.
The strategy impacts both pureplay online sellers
and bricks-and-mortar stores, as well as those who
play in both spaces. Peril approaches in the form of
shoppers unwilling to purchase without a deal.
"There are several potential pitfalls - customer
frustration from not receiving a 'fair' price on a
product that someone else received, and possibly
negative sentiment if it is perceived that a customer
group is overlooked or targeted," says Dan Mitchell,
director of retail and consumer packaged goods
global practice for SAS.
"Another challenge is the operational difficulty ... .
With more price variability, it can be difficult for the
retailer to accurately estimate demand, resulting in
out-of-stocks."

Pricing
Business
Challenges
Source: RSR Research

22%

27%

31%

31%

KNOWING THE CONSUMER
"There is one group of people for whom the
promotion does exactly what it's designed to do,"
Baird says. "You make the offer and incent them to
buy. But what comes along is a group of people who
have bought no matter the price. So you gave
away margin."
Also in the mix: Those who are annoyed by
the offer.
"What we're starting to see with the erosion of
loyalty and price sensitivity is the impact of the group
of people who are actively annoyed," Baird says.
The second category is dangerous since retailers
leave profits on the table, a risky proposition. "Retail
Pricing 2017" found that 48 percent of retailers say
their top pricing strategy is to maximize profits -
up slightly from 2016. Pricing strategies that drive
demand (42 percent) and create brand excitement (38
percent) are also growing.
"With personalized pricing, there are theoretically
huge opportunities to strengthen relationships with
shoppers and become more relevant," says Suzanne
Valentine, chief data scientist for IBM Watson
Customer Engagement. What she hasn't yet seen is "an

36%

43%

49%

51%

5%

Shareholder
demands for
price as a way
to achieve a
better return on
inventory
40

Consumer
demand for
personalized or
localized prices

STORES August 2017

Competition
coming from
unexpected
places

Consumer
perception that
we are not price
competitive

Increased
promotional
intensity of
competitors

Consumer
demand
for price
consistency
across channels

Increased
pricing
aggressiveness
from
competitors

Increased
priced
sensitivity of
consumers

Increased
priced
transparency the impact of
comparative
price shopping
STORES.ORG


http://www.STORES.ORG

Table of Contents for the Digital Edition of STORES Magazine -August 2017

Editor’s Page
President’s Page
Retail Politics
NRF News
Trends
Retail People
Hot 100 Retailers
Forward Thinkers
Personalized Pricing
C2W
Q&A
Store Operations
Omnichannel
Marketing
Online
Finance
Business Operations
Startup Spotlight
Security
Fraud
STORES at 100
NRF Communities Update
End Cap
STORES Magazine -August 2017 - intro
STORES Magazine -August 2017 - cover1
STORES Magazine -August 2017 - cover2
STORES Magazine -August 2017 - 3
STORES Magazine -August 2017 - 4
STORES Magazine -August 2017 - 5
STORES Magazine -August 2017 - Editor’s Page
STORES Magazine -August 2017 - 7
STORES Magazine -August 2017 - President’s Page
STORES Magazine -August 2017 - 9
STORES Magazine -August 2017 - Retail Politics
STORES Magazine -August 2017 - NRF News
STORES Magazine -August 2017 - Trends
STORES Magazine -August 2017 - 13
STORES Magazine -August 2017 - 14
STORES Magazine -August 2017 - 15
STORES Magazine -August 2017 - Retail People
STORES Magazine -August 2017 - 17
STORES Magazine -August 2017 - 18
STORES Magazine -August 2017 - Hot 100 Retailers
STORES Magazine -August 2017 - 20
STORES Magazine -August 2017 - 21
STORES Magazine -August 2017 - 22
STORES Magazine -August 2017 - 23
STORES Magazine -August 2017 - 24
STORES Magazine -August 2017 - 25
STORES Magazine -August 2017 - 26
STORES Magazine -August 2017 - 27
STORES Magazine -August 2017 - 28
STORES Magazine -August 2017 - 29
STORES Magazine -August 2017 - 30
STORES Magazine -August 2017 - 31
STORES Magazine -August 2017 - 32
STORES Magazine -August 2017 - 33
STORES Magazine -August 2017 - 34
STORES Magazine -August 2017 - 35
STORES Magazine -August 2017 - Forward Thinkers
STORES Magazine -August 2017 - 37
STORES Magazine -August 2017 - 38
STORES Magazine -August 2017 - 39
STORES Magazine -August 2017 - Personalized Pricing
STORES Magazine -August 2017 - 41
STORES Magazine -August 2017 - 42
STORES Magazine -August 2017 - C2W
STORES Magazine -August 2017 - Q&A
STORES Magazine -August 2017 - 45
STORES Magazine -August 2017 - Store Operations
STORES Magazine -August 2017 - 47
STORES Magazine -August 2017 - Omnichannel
STORES Magazine -August 2017 - 49
STORES Magazine -August 2017 - Marketing
STORES Magazine -August 2017 - 51
STORES Magazine -August 2017 - Online
STORES Magazine -August 2017 - 53
STORES Magazine -August 2017 - Finance
STORES Magazine -August 2017 - 55
STORES Magazine -August 2017 - Business Operations
STORES Magazine -August 2017 - Startup Spotlight
STORES Magazine -August 2017 - 58
STORES Magazine -August 2017 - Security
STORES Magazine -August 2017 - 60
STORES Magazine -August 2017 - Fraud
STORES Magazine -August 2017 - 62
STORES Magazine -August 2017 - 63
STORES Magazine -August 2017 - STORES at 100
STORES Magazine -August 2017 - NRF Communities Update
STORES Magazine -August 2017 - End Cap
STORES Magazine -August 2017 - cover3
STORES Magazine -August 2017 - cover4
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