BROAD-VIEW OF PRICING STRATEGIES
Before defining new strategies, retailers have to analyze their price policies and do the correlation between
market demand, price level and overall margin in order to achieve sales and profit objectives. Prices are not only defined by the competitive shopping management, retailers need to use the historical sales, customers' needs and habits, price elasticity and do a predictive analysis to optimize item value
margin and define an optimal price.
To answer this need, Soft Solutions provides to retailers an efficient way to organize, collect and integrate competitors Retail Prices through an advanced and complete system.
Price strategy is a core point of the retail business where several actors are involved. In one hand, globalization, competitors and new technologies impact customer behaviors and way of consuming. In another hand, financial and marketing directors, Category managers, Store directors fit the evolving market trends and update their strategies.
STANDARD AND OPTIMIZATION RULES MANAGEMENT:
“OPTIMIZATION IS THE REVERSE ENGINEERING OF THE STANDARD PRICING”
Retailers need to define some input parameters in order to reach the objective. The precise defined rules are not to take advantage of available sales information to adjust prices for maximum profitability.
In defining the Standard Strategy, the retailer has to select the items based on different attributes, then set an alignment rule (whether on Competition, Performance ) and then set a control rule if any (respecting a price interval, psycho rounding ).
Retailers define an objective as input in order to estimate the best parameters to reach it. Our solution allows retailers using historical prices, movement data (turnover, sales, stocks, costs) to generate prices that best achieve the retailer's goals, on sales (monetary unit), sales units (Quantity sold) or gross margin (in monetary unit) ibs Pricing allows retailers to:
- Define objectives for a selected Category, Sub-Category or Segment, Pricing Groups, Linked Groups or any other lower level of the merchandise hierarchy
- Select, work and define objectives for one or multiple Business Group
- Define objectives weight (percentage or coefficient), used when dealing with multiple objectives for the same Merchandise Hierarchy Elements to measure the importance of each objective
Once the objectives are defined, the optimization process can manage the constraints (competitor price, maximum/minimum price change, range, linked items, rounding) and the controls (pre-priced item, promo planned item, retail price change within the last x
days) in order to find the optimal prices.
Standard and Optimization are complementary. It depends of the retailer strategy on the products category. For instance, the retailer Management team wanted having an index 100 for all the highly sensitive products uses our standard rule (defining as an input all these items, with an alignment of 100 compared to the competitors), in order to reach the objective of having the same price than the others retailers. However, for the other categories, the objective is to maximize margin, while maintaining the price image and others constraints like range alignment, specific item level margin etc In this case, the optimization rule is used in order to find the best and optimal prices reaching the objective.
The pricing organization model differs according to the Retailer, its history, the affiliation mode of the stores, the size of the country where it is implemented
In order to fulfill the complete pricing process, our solution enables retailers to optimize sales prices and / or dealer prices.
“OUR SOLUTION ibs Pricing FITS ANY PRICING STRATEGIES, STANDARD OR OPTIMISED, DEPENDING ON YOUR NEEDS AND GOALS.”
"Top-down" means that the top management establishes all the objectives. Strategy details are clearly communicated to each pricing actor involved in the process. ibs Pricing defines and optimizes prices for multi-banners, multi-channel, multi-formats and manages inheritance and coherence controls through all the levels.
- Bottom-up Approach:
"In few cases, the managing executives realize that they need to give more freedom to the teams and adapt their management style. The bottom-up approach implies proactive team, invited to participate in every step of the Pricing process. Thanks to ibs Pricing, retailers can define strategies and objectives by different levels:
- Market: The retailer defines its Market areas and its competitors
- Group of stores: The retailer will group its stores depending on various criteria (competition, geography, consumer trends, stores size/type ) where the stores under one group will have the same strategy
- Category of items: the retailer for all the categories defines Margin and Sales objectives. The retailer will take into account the historical performances of those items in terms of sales and margins
Traditional Pricing solutions are mostly designed to fit the use of the top-down approach and are not meant for the bottom-up management style. With the help of our Pricing Solution, managers can merge the advantages of the two management approaches, helping them to combine control and collaboration, clarity and respect of objectives, and visibility of internal organizational processes.
STRATEGY TYPES MANAGEMENT
Defining the price policy respects the overall retailer strategy. ibs Pricing provides the functionality to the user to automatically or manually create, add, modify, delete, duplicate and assign a strategy or any steps of a strategy belonging to different global strategies. Price is managed in mass or item-by-item depending on the Pricing policy and organizational model of the Retailer. Soft Solutions enables retailers to have a flexible and easy management of its strategies:
- Gaining times when creating or maintaining strategies and rules
- Managing strategy in a mass manner
- Sharing strategies among multiple users
- Having clear visibility of the strategy simulation
- Keeping coherency of the company strategies and objectives
Soft Solutions allows the retailer to run What-if scenarios for different policies in order to
validate the best one by analyzing and studying the impact of each policy.These scenarios, thanks to exchange data with the Forecast Engine, give the
consolidated impacts at the banner, country, or microclimate view of the Pricing strategy performance. In order to organize in an efficient way,
pricing activities can be organized on different time frames: annual, every month, week, day (web canal)
Some triggers can be linked (new competitive data captured, category review, realignment) to strategy in order to run automatic ones.