Over the last couple of years, Revionics has commissioned a series of global shopper and retailer studiesi conducted by Forrester Consulting. Taken as a whole, we find very strong, compelling themes and takeaways that retailers must consider when crafting and implementing their pricing and promotions strategies. Here are three compelling narratives that jump out when we look at the studies as a whole, which surveyed shoppers and retailers in the United States, United Kingdom, France, Germany and Brazil.
Price is King
Despite all the change in the retail industry, one imperative remains constant: the power is in the pricing. The studies found that for the majority of shoppers, the absolute most important factor they use to determine where to shop is price. In fact, the study found that 72% of consumers say price is the most important factor when choosing where to shopii; therefore, retailers need to adopt AI and data science-based pricing solutions that provide prices which engage shoppers on the items they care about the most. Also, shoppers want and demand fair pricing — the study found that globally 59 percent of consumers would refuse to purchase an item if they perceived the price to be arbitrary.ii
Bottom line: The towering importance of price means retailers can’t afford to get it wrong – and shoppers demand the right price, at the right time, in the right channel.
Retailers are Missing the Mark on Promotions
The Revionics-commissioned Forrester study results found that on many fronts, retailers are getting promotions all wrong and therefore damaging profits, margins and loyalty. For example, 52% of retailers’ weekly or monthly promotions go to customers who say they would have happily paid full price. Furthermore, 37% of shoppers said that receiving irrelevant offers caused them to feel annoyed, shop at that retailer less often, or provoked no reaction. In addition, 17% of shoppers say they don’t want to receive promotions at all.ii
The amount of margins and profits retailers are losing through misguided promotions is astonishing. And the risk of losing their customers’ loyalty is even more devastating to a retailer.
Bottom line: Retailers need to leverage AI-powered solutions that enable them to reach their shoppers with the promotions they care about most, at the right time and in their preferred channel.
AI-based Pricing is the Way to Go — While Delivering the Fair Prices Shoppers Demand
Meeting customers’ expectations in today’s retail environment is challenging, but AI-based, data science driven optimization technology can help retailers meet shoppers’ needs on their terms while still enhancing retailers’ competitiveness and profits. In an exacting market, pricing has to be right. The Forrester study series showed that almost 60% of respondents said if an item was available but at a higher than expected price that they would wait, not purchase the item at all, or purchase it from a different retailer.
The research also demonstrated that shoppers are comfortable with data science determining prices. An impressive 78% of shoppers stated that they are comfortable with data science determining the price of a product as long as they receive a price that they consider fair and non-arbitrary.iii And even if there are frequent price changes on a product, consumers are tolerant of these changes if they are perceived within a “fair” range and based on data science — again, not perceived as arbitrary.
Bottom line: Shoppers want price transparency and are comfortable with data-science driven price fluctuations as long as they consider the prices “fair” and not arbitrary.