Anti-Crisis Price Management in Retail: What You Should Do
Prices are among the most powerful channels of communication with customers. Since consumer behavior is fastidious, retailers seek opportunities to present the best possible offers for their customers, which is challenging. This is relevant for regular times and a calm market.
Prices are still critical during an economic decline, but the market becomes turbulent, chaotic – consumer behavior changes. Businesses are forced to perform in harsh conditions as well as smartly manage prices to survive.
Pricing May Keep Your Business Engine Running
To develop and succeed, retailers focus their efforts on three fundamental drivers:
- Marketing. A company, especially a young one, should recognize the importance of media presence and advertising to improve brand awareness.
- Supply. You have to establish an excellent distribution and variety of channels. Effective supply chain management gives a substantial advantage to any firm.
- Pricing. For both growing and mature businesses, having a suitable pricing strategy is a core principle of growth.
When a crisis hits, the drivers get affected. Most shoppers are prone to spend on essential goods predominantly. Companies decrease marketing financing, and new entry promos are on hold. The supply chain usually suffers because of manufacturing delays and suppliers’ bankruptcy.
Meanwhile, pricing is in the hands of owners. Working with prices smartly gives a substantial revenue boost, as mentioned in the recent Nielsen report. Eventually, only one of three business drivers left alive. That is why pricing is a primary option for staying afloat in a crisis.
Do Not Hesitate to Revise Your Business Goals
While global retail is dependent on consumer demand, markets themselves are major influencers amidst economic recessions. Therefore, businesses of various maturity should revise their primary needs based on the market rules and segments of operations.
For example, companies offering essential goods would refuse to conquer new markets since they face distribution and production issues. It forces owners to set a goal of dealing with severe cost pushes. Non-essential players, like apparel or electronics, should freeze their long-term goals and establish a markdown strategy. Generally, the initial step that enterprises must take is to track the market to adjust as quickly as possible to the conditions.
How Competitors Help to Price Products
When viewing the coronavirus pandemic forced B&M retailers to shut down. Online shopping gains popularity, so the competition intensifies dramatically. Respectively, retailers should manage their prices using competitive data, i.e., implement a market-driven pricing strategy.
To launch market-based pricing, you should review the utilization of pricing software. Unlike traditional price changes in spreadsheets, smart pricing software can process large amounts of data quickly. By that, you save time and can identify actual business competitors among dozens yet hundreds of market players.
Owing to machine learning algorithms, retailers can collect insights into actual sales, price indexes, promos, price changes of real competitors. With competitive data, you can monitor the results of your rivals and adjust prices accordingly.
What to Do with Best-Selling Items
To segment your stock is a solid move during a crisis. There is no need to try selling many low-demand products for affordable prices. Instead, it would be best to categorize the assortment, track dependencies between groups of goods, and determine key-value items.
Based on this data, you can understand what products are poor-selling and get margin thresholds for best-selling goods to increase profits. The categorization allows you to set pricing limits and find useful price points when a price has risen, but demand has maintained the same.
Alternatively, to advanced pricing solutions, a retailer can analyze historical data on important SKUs. Using standardized pricing rules, you can change your prices manually. Undoubtedly, this approach needs time, which is a vital resource for retailers struggling to stay competitive. An additional time-consuming method is a trade-off analysis based on customer surveys, which may work without historical data. However, its accuracy is low.
Crisis times affect retail adversely. Businesses must reshape their strategy and overcome dozens of challenges, including price positioning. Since pricing needs to be done rapidly and firmly during downfalls, retailers may use pricing software to ensure that.
In any case, retailers should have competitive prices, and their approach should be market-based. Reshape your pricing needs, monitor your real competitors, and focus on best-selling goods mostly. These are three pillars of an effective anti-crisis pricing strategy.
I am a Pricing Solution Architect at Competera with more than ten years of marketing research and analytics experience. I am proud to be a part of our team passionate about helping retailers develop and succeed. We are always happy to share some expertise and insights.