Online retailing has grown significantly whilst traditional brick-and-mortar business has seen a stark decline in growth. This shift in the retail scene has put further pressure on retailers’ to get their pricing strategies right.
Creating a pricing strategy for your business is essential, but it is certainly not easy to implement. Retailers are required to decide should you want a higher pricing for your products with a lower volume of sale or lower pricing with a higher volume of sale by comparing metrics with your competitors. This highly depend on how your business model work with profitability the key end goal to achieve. Having this in mind, below are some recommended steps you can take to develop a pricing strategy that can be best suited for your business.
An internal review of existing pricing strategies is crucial to understand your price positioning compared to competitors. This can be done by:-
- Identify your USP (Unique Selling Point)
- Identify your ASP (Average Selling Price)
- Review your markdown % (MD)
Brand USP provides a clear direction in your brand positioning in the market and the type of value you wish to bring to your target market. The understanding of ASP and MD% performance for your brand provides insights on your target market demand and purchase preference towards your brand. A clear understanding of the relationship between your brand USP, ASP, and MD% helps to ensure the alignment of your pricing strategy to work effectively. This can be done on a total brand level and then taking a deeper dive into the specific category level.
Then, we could proceed with an external review of market pricing strategies by using the dashboard:-
- Identify market and competitor ASP (by total brand and category)
- Review competitors’ pricing strategy across brands and categories
The review of competitors’ pricing strategy on a category level provides a deeper insight into their adoption of ‘Good-Better-Best’ pricing architecture. This has yet to be widely adopted by small-medium retailers, hence it would be constructive to explore this framework in-depth to maximise sales growth and profitability.
Having the visibility on key market players pricing strategies improves your competitiveness in the market, and allows you to achieve the following:-
- Cost-saving & positive KPI result
- Time-saving in performing competitor price analysis physically and via respective website
- Higher visibility on pricing distribution across multiple channels
- Increase profitability with optimum pricing planned across categories
- Improve product sell-thru and ROS (Rate of Sales) with more competitive pricing
- Reduce markdowns
Pricing could make or break a business long term sustainability. Hence it is extremely important to establish the right pricing strategy for your business. This will also depend on how you want your brand strategy to work on your target customers, and this all starts with understanding your own and competitors’ price positioning well. Use this insight to curate a relevant strategy that can best portray the brand value to your target market.
We hope you found this article helpful! If you have any questions or would like to explore the Omnilytics dashboard further, feel free to reach out to your respective Client Success Manager.