As several industry studies reveal that power has shifted from sellers to consumers, customer experience is becoming a priority for UK retailers. How can you ensure that your pricing strategy entices buyers?
An overall effortless and personalised shopping experience is what matters to consumers the most. Customers expect to get what they want at the best price, and at the right time. Using various price aggregators, they can promptly compare pricing from several vendors.
The price of a product is the first thing that catches the attention of a customer. Some compare it to the first impression you make on someone. Price is something which should trigger your interest and make you want to find out more about the product. Delivery, customer support, and other elements of a customer experience come after price.
How can you persuade buyers that your price is the best offer in the market? The answer lies in building the right price perception. A retail team should come up with a balanced, customer-oriented pricing strategy which considers hundreds of variables. These variables should first and foremost include the wants and needs of the shopper, the retailer’s business goals, and the prices of competitors. But what if the managers can no longer process all the necessary data to provide pricing decisions which not only must be made in real-time, but also attract buyers?
Maybe they shouldn’t at all. Advanced retailers are realising that managers need to fully focus on interaction with buyers and craft data-driven customer-oriented marketing, promotional and pricing strategies. Technology needs to take over all the routine tasks.
Artificial intelligence is becoming more sophisticated and affordable to retailers. UK retailers already use AI to enhance different aspects of customer experience, including pricing. Retail businesses utilize anything from chatbots, which interact with buyers directly, to algorithms, which use the data regarding customer behaviour and purchasing history in order to anticipate the needs of customers and/or offer optimal price recommendations.
How can you check if your prices are optimal? Balanced pricing does not irritate customers, but improves marginality. Also, it takes into account how sales of different products depend on price changes.
The UK-based eCommerce retailer Find Me a Gift wanted to revamp its pricing strategy and make it more customer-oriented in the highly intensive market. “We were running around like busy fools selling lots of stuff but we wanted to find a way to make each pound work harder for us,” says Jean Grant, Purchasing and Product Development Senior Manager for the retail company.
The company’s management decided to check if artificial intelligence would help it entice customers with optimal prices to boost sales and profits. The project started with gathering and structuring data spanning two years: sales history, Google Analytics, macroeconomic data and competitive monitoring data on prices, promo, and stock. Find Me a Gift used machine learning algorithms provided by Competera for price optimisation. As prices were optimised, the retailer’s sales grew significantly — by 22% — while profit margins were increased by 14%.
How does AI enhance pricing exactly? Artificial intelligence analyzes any amount of data with any number of pricing and non-pricing parameters, already unmanageable for humans, and comes up with data-driven demand predictions and price suggestions. Then, it provides a “sandbox” to test various pricing scenarios and predicts the outcome of every pricing decision. Finally, algorithms allow for debugging, repeating and scaling any successful pricing decision to meet the customer’s expectations.
As UK consumers expect a more rewarding customer experience, retailers need to ensure that all interactions with buyers, including pricing, are effective and data-driven. Applying AI, which can use the vast amount of any data to recommend prices and predict customer behaviour, will help managers craft enticing offers and pave your way to the hearts of shoppers.