Responsive Merchandising: Back to Basics, Part II

Responsive Merchandising: Back to Basics, Part II
July 14, 2016 Sue Dale - VP and Managing Partner, Global Strategic Consulting, Revionics

As I mentioned in Part 1 of this blog post, experience working with dozens of retailers as they progress along their price optimization journey has helped my colleagues and me create a Responsive Merchandising Maturity Model that falls into three phases that we call Crawl, Walk, Run. The last post discussed foundational elements and considerations, including data integrity, price strategy and competitive insights. Here we’ll explore the “Walk” phase, which is rules-based price management.

By now it’s a given that the old days of “set it and forget it” pricing are long gone. Customers continually shop prices, both online and in-store. They can even set alerts to know when a price is updated on an item they want to purchase. The need for price automation that monitors competitive updates and consumer behavior at the shelf is a given. But what are the best practices for selecting and implementing a solution that will help you effectively meet your business and financial goals while competing successfully for shopper loyalty?


At this stage, retailers will want to develop clear pricing strategies and rules that align with their merchandising strategy, brand image objective and operational policies. They should invest in developing processes that enable the consistent delivery of prices seamlessly across their stores and channels. This is a period of cultural and operational maturation from a “price execution” philosophy to a true and strategic “price management” environment.

1. Evolving prices and strategies.

As you begin to implement a price management technology, you are overtly shifting from history-based, or even gut-feel pricing to rules-based pricing. Defining and setting those rules and related parameters is informed by data analysis on competitive price history, price change history, and of course weekly sales data. As you gain experience and additional data, you can evolve strategies to more sharply differentiate between, say, national brand and private-label, and bring good-better-best pricing execution to life at the shelf.

2. Implement more sophisticated KVI and zoning practices.

With market, competitive and consumer trends evolving rapidly, retailers need to continuously monitor – and update – their key value items (KVIs). Retailers are increasingly moving away from annual or semi-annual cadences to monthly or even weekly refresh cycles. A flexible, SaaS-based price management solution can support whatever frequency makes sense for a retailer’s specific business needs. In tandem, retailers should accommodate localization with zone-based pricing informed by competitive and regional factors. With the data integrity work that went into the “Crawl” foundational phase, deep analytics across multiple data sources over time can lead to an intelligent, informed and targeted zoning strategy.

3. Streamline and automate workflows and competitive monitoring.

With the implementation of processes and rules, having automated workflows helps to speed and optimize responsiveness while ensuring adherence to policies. Role-based security is important. Retailers should look for a configurable approach that lets them implement price consistency while allowing overrides as appropriate – within defined parameters. The automation also supports scalability to support growing volumes without having to hire price strategists at a linear pace. This phase is also a good time to implement automated competitive shop so you have real-time market-based competitive price intelligence.

4. Forecasting and trending.

With the pricing team freed up from repetitive, spreadsheet-oriented tasks, they can turn their attention to more strategic activities. Modern price management solutions support sophisticated forecasting, enabling strategists to do “what-if” scenario planning/on-demand simulations and anticipate the impact of a price update on demand, revenue, margins and profit, making informed trade-offs before committing to an update. Once prices are implemented, the team can see immediate analytics on the impact of that update – feeding a virtuous cycle of making assumptions, rules and flows continuously more aligned with the realities of shopper and competitive behaviors in the real world. As data and results accumulate over time, the team can develop and observe trends such as a competitive pricing Index trend.

The “Walk” phase is deeply rewarding in the Responsive Merchandising Journey as retailers see – and measure – true business impact and ROI as they grow more sophisticated and targeted in their price management practices.

In the “Run” phase of the maturity model, we’ll look at adding science-based pricing – and even dynamic pricing. Meanwhile I invite you learn more about price management in our new video.

Check out Part I and III in our Responsive Merchandising blog series:
Responsive Merchandising: Back to Basics, Part I
Responsive Merchandising: Back to Basics, Part III