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Is It Too Radical To Rethink Pricing Optimization Strategy? Hint: If The Answer Wasn’t ‘Yes,’ Would We Have Even Bothered To Ask The Question?

December 5th, 2012

Legalities aside, it’s all but certain that this type of information will become as commonplace—and as accessible to consumers—as shopping price-comparison bots are today. How long will it take before Google, Bing and Yahoo routinely offer such data in their shopping feeds?

In the same way that price-match deals may not make much sense anymore, given the popularity and accessibility of price-comparison sites, will pricing optimization have to undergo a similar radical rethinking?

Sucharita Mulpuru, an E-Commerce analyst at Forrester Research, thinks such a change is inevitable. She sees the most near-term impact being “a huge shift in the manufacturer-retailer relationship.” Her argument is that some manufacturers—such as Nike, Samsung and, especially, Apple—have ultra-strict pricing laws, “where the price is the price is the price.” For those products (think, iPads), pricing optimization simply isn’t an issue.

For manufacturers who either have less clout or are more pricing flexible, Mulpuru suggests, retailers will need to insist on either differentiated products or some other way to avoid the low-price quicksand. With this new view into retailer prices, shoppers will start to resist price reactions and instead wait for even better pricing. The long-expected shopper knee-jerk reactions (drop the price 20 percent and see sales increase 34 percent) may sharply change as consumers become price cynical.

“There’s this huge issue of trust that you start to lose with the customer,” Forrester’s Mulpuru said. “This (transparency) is amplifying that 50 times.”

Dynamite Data’s Schulz sees the future somewhat differently. She expects to see far more pricing manipulations from chains. Although those chains “used to only manage pricing on the top 5 or 10 percent of their products, they now need to manage pricing on their full portfolio.”

Schulz also sees the lightning-fast Web price changes soon appearing in-store, via electronic shelf labels. Inventory is a critical element, too, as prices can go up once it’s confirmed that a rival has sold out of a particular product line.

There is a time-honored tradition within IT to use the technology available. If there’s data that can be analyzed and leveraged, it needs to happen. But, sometimes, the love of the byte obscures what really matters, which is the relationship with the shopper.

Foxes and chickens have also maintained time-honored traditions. But when chickens start tracking RFID-tagged foxes on their iPads, it’s probably time for the fox executives to rethink strategy.


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