EMEA Shoppers Are More Open to Data-Based Pricing Than You Think

EMEA Shoppers Are More Open to Data-Based Pricing Than You Think
October 30, 2019 Alison Raffalovich - Senior Corporate Communications Director

Amid fiercer competition than ever, many retailers try to keep price fluctuations to a minimum, for fear of scaring customers away. But consumers may not be as skittish as retailers think when it comes to changing prices.

In fact, as long as consumers perceive price changes as fair, they embrace them. And while acceptance varies by geography, they’re more accepting overall than retailers tend to believe, with 62% saying they are okay with frequent price changes as long as they’re non-arbitrary.i

Those are some of the findings of recent studies conducted by Forrester Consulting for Revionics. And they give reasons to hope for retailers seeking technology to dial in just the right prices—not too high and not too low—for key items in their inventories.

At the same time, they provide a warning for retailers who are slow to adopt data-driven pricing, as more nimble retailers get to sustain or even increase margins thanks to pricing technology.

The Fairness Factor

Key to consumer acceptance of price changes, according to the research, is the perception of fairness. That’s why data-science-based pricing may be the best option for retailers wanting to adjust pricing to market conditions and the movements of competitors.

Data-science-based pricing takes into account the general availability of various products and their prices at competing retailers to arrive at pricing that protects margins while still providing value.

Forrester Consulting surveyed 1,250 consumers in the United States, Brazil, Germany, France and the United Kingdom in a related study for Revionics. Only six percent of consumers reported feeling that data science-based pricing causing fluctuations is “not at all fair.” About three-quarters felt that such pricing was “moderately” to “very fair.” Eight percent said they felt data-science-based pricing was “very fair”— two percent more than those who found such pricing completely unfair.ii

At the same time, there were some geographical differences in the data, and we want to dig in here to the findings among the European shoppers.

Some More Accepting than Others

While consumers in the U.K. were slightly less comfortable with data science-based pricing than their counterparts in France and Germany, 71 percent of UK respondents were accepting of data science-based pricing. That contrasts with 76 percent of French respondents and 85 percent of Germans.

Anastasia Laska, Vice President of Business Development and Partner Alliances for EMEA at Revionics, chalks up the differences to cultural and educational variations between the countries. “It is of course a hypothesis, but we can explain the higher acceptance of data science in Germany through the fact-based, rational mindset of the German people. This mindset is supported by strong technical education and the overall context of Germany as a European leader in machine building and robotics.” Anastasia points out, though, that the most important point here is not the difference between 85 and 76 percent. Rather, it is the fact that Europe has the overall highest acceptance level of AI and data science-supported pricing.

Despite some differences, however, consumers around the world are, for the most part, receptive to pricing determined by data science. “These numbers should be incredibly encouraging to retailers,” Anastasia says. She sees the trend only going up from there, with consumers increasingly accepting data-driven pricing in the foreseeable future.

The Retail Gap

EMEA retailers, on the other hand, are often more resistant to dynamic, data-science-based pricing than their customers, Anastasia notes. “As retailers, we are afraid to change prices too frequently, because we believe it will push away customers and will be bad for customer loyalty.”

Data from another Forrester Consulting survey for Revionics backs her up. Among 224 retailers in the United States, Brazil, the U.K. Germany, and France, 71 percent “agree” or “strongly agree” that their customers would be frustrated by frequent pricing changes.iii

Seventy-six percent of retailers also felt that most of their customers were looking for the lowest possible prices. That contrasts with only 17 percent of shoppers from the previous survey who said they felt that way.

“This is still a barrier, which we believe it makes sense to address,” Anastasia says, regarding the disconnect between retailer perceptions of their customers and what customers actually said.

Lessons for Retailers

Clearly, broad consumer acceptance of fair, data-based pricing represents a still-untapped opportunity for many retailers. Nevertheless, Anastasia says retailers should not abuse the trust of their customers. “The changes should not be too drastic,” she says of dynamic pricing. Also, “You should never make changes based on anything other than objective criteria.”

The rewards are clear, however, for retailers who do make pricing changes based on relevant factors. If there is a signal that demand is changing, that is the time to shift prices to be more favorable to consumers or the retailer, depending on which way demand is heading.

Further, shoppers have been primed for data-based, dynamic pricing by other sectors, including hospitality, air travel, and taxi services. “Other industries have been preparing and grooming our customers to increase acceptance of the idea of dynamic pricing,” Anastasia says.

In other words, shoppers are wide open to data science-based pricing. Retailers who remain slow to adopt it risk falling behind those who welcome it.


iIndiscriminate Promotions Cost Retailers, a Forrester Consulting study commissioned by Revionics, May 2018
iiUnderstanding Retail Customers’ Pricing Expectations and Tolerances, a Forrester Consulting study commissioned by Revionics, June 2017
iiiRetail Success Requires Personalized, AI-Driven Pricing Strategies, a Revionics-commissioned study conducted by Forrester Consulting, October 2018