This week, ShopGrok catches up with its founder & CEO Aaron Cowper to learn about what he believes should be top of mind for any retailer looking to build a winning pricing strategy in 2023. Here are Aaron’s 5 steps for success:
- Benchmark range & pricing – Get clear on where your pricing currently sits in the market (either using ShopGrok or do it manually). What differentiates your range from competitors? What exclusive products do you have? Identify who your main competitors are in terms of retailers, marketplaces and direct to consumer. Are you competitive with them? Who would be the price leader? Build a price index to learn where you’re strong, weak or average. How consistent is your pricing across categories? 📊
- Understand your overall value proposition 💎– Why should customers come to you? You might be locally convenient, a nimble online retailer with sharp pricing, have a lot of exclusive products/brands and so on. What do you want to be known for? Different parts of your range will have different objectives. Some are traffic drivers (e.g you make a low margin on Apple products but they drive people in), some are Margin Earners (exclusive or private label brands, impulse buys, etc)
- Set strategy – Determine which pricing strategy to use for each group. Examples of pricing strategies include: EDLP (Everyday low pricing – one price that rarely moves), extreme high low (40-50% big discounts are common), RRP/markdown strategy (seasonal lines), rewards/member pricing, online vs offline pricing, regional pricing and so on. 🎯
- Execute cross functionally – It’s not enough to just change pricing, we need to ensure you tell customers what you’re doing and articulate the value you’re providing. Pricing needs to talk to the market team, the in-store team, promotion planning team and have marketing execute well in-store and online. 🤝
- Monitor/correlate with other business KPIs – Set up KPI’s so you can measure if your strategy is working. You can have a price index vs. each competitor, each market etc. Correlate this with sales and margin. If done right it will show increased sales and increased (or at a minimum maintained) margin. Other good qualitative metrics to include are price perception – so do customers actually think you’re price competitive vs the market. If you’re doing this right your price perception will increase over time. 📈
Best of luck and happy trading!
P.S – ShopGrok helps you do all the above, much faster than doing it manually – if you’d like a demo for your company, get in touch with us today.