By now you’ve heard from numerous sources that data is king, but how does it impact the retail industry? Data in retail provides an uncapped opportunity to optimize many different aspects of the business from conversion rates to average order value. In this post I’ll focus on pricing to get retailers up to speed on data’s role in it.
What Kinds of Data Should Retailers Focus on?
There are two different types of data that retailers need to take into account. The first is structured data. This data is easily quantifiable, such as website traffic levels, price’s impact on sales volume, and changes in demand over time. The second type of data is a bit harder to collect and analyze, but it is still important. It’s called unstructured data and it can come in the form of likes and comments on social media accounts. Knowing what customers like and what their opinions are can help retailers target them more effectively.
The answer to the question posed in this section is very broad because there is so much data out there, but the key is focusing on what is important for each individual retailer. Just like a science project, it’s important to ask a question and state a hypothesis. Only look into the data that has to do with that specific question to avoid focusing on extraneous data. All data can be analyzed and used to a retailer’s advantage, but asking questions based on company goals is necessary to get the most out of it.
Many large retailers have assembled data super teams made up of data scientists and analysts. However, those that don’t have the budget for that yet can still benefit greatly from analyzing their own data.
What Can Data Tell Retailers About Their Pricing?
Data holds the answers to a number of questions about pricing and the insights gleaned from it can improve pricing going forward. Retailers can learn how effective their pricing has been in the past. For example: how effective are certain percentage discounts at boosting sales, compared to others? If there isn’t much difference in the number of sales that occur at 40% off, compared to 50%, then it’s much more profitable to limit discounts to 40% off.
Beyond optimizing discounts, data can also teach retailers when they can increase prices. That’s right, a big part of improving profits has to do with boosting prices when it makes sense. There are two specific times when retailers can benefit from higher prices. First, when a competitor runs out of stock, increasing prices automatically is the best way to capitalize on the extra demand. Second, being the price leader can be a good strategy to win more customers, but how low a retailer goes determines how much margin they can get. If a retailer is priced way lower than competitors, boosting prices up to be closer to them makes sense to capture more margin.
About the Author
Angelica Valentine is the Content Marketing Manager at Wiser, the leading pricing intelligence suite. Wiser’s flagship product, WisePricer is a full-featured pricing and merchandising engine that monitors, analyzes and re-prices retail products in real-time. WisePricer enables retailers to grow profit margins, price with confidence and improve merchandising through powering the development of a sound pricing strategy.