Responsive Merchandising: Back to Basics, Part I

Responsive Merchandising: Back to Basics, Part I
June 29, 2016 Sue Dale - VP and Managing Partner, Global Strategic Consulting, Revionics

Retail is in a period of unprecedented upheaval: super-connected shoppers firmly in control, and they carry the store wherever they go. Further adding to the already heightened pressures, retailers must also contend with an ever-fiercer competitive environment dominated by traditional brick-and-mortar retailers, behemoths like Amazon and a proliferation of new entrants. And for too many retailers, with increasing price sensitivity, transparency, accelerating price changes and intense price competition, a race to the bottom is in full swing.

A meaningful value proposition for your customers is more critical than ever, and responsive merchandising can set you apart in being able to listen, sense, anticipate and respond with greater speed and scale across all channels.


In this three-part blog series, we’ll explore three phases of the journey along the Responsive Merchandising Maturity Model – Crawl, Walk, Run, beginning today with the Crawl stage.

While it’s tempting to jump straight into a discussion of sexy price optimization capabilities – predictive algorithms, prescriptive analytics, and so forth – we all must crawl before we walk, and walk before we run. Every retailer faces unique challenges and must forge their own path. Yet our experience working with scores of retailers as they embark on and progress along their pricing journey has helped us identify best practices to help you progress effectively along your way.

First and foremost, organizations from top to bottom should understand what success looks like and work backwards to drive this journey. If done right, pricing is the one area that has the most impact on margins, profits and customer retention. From there, establish or formalize roles within a pricing team to drive this initiative further.

It all starts with the “Crawl” stage. Here, take some time to ensure you have effectively tackled the foundational elements of your pricing strategy.

Data integrity

As retailers collect more and more data from all relevant sources, today’s advanced science and analytics present the opportunity to unlock clear and actionable insights into the pricing decisions, at the customer segment and even individual level. But the analytics are only meaningful if the data is accurate. It’s a taxing but necessary fundamental step to clean up your dirty data and establish disciplined processes to ensure data quality in later phases of your responsive merchandising journey. Data that organizations often pay particular attention to include product and price master data, competitive price history, store demographic data and market data. It’s also important to capture transactional data to understand whether a product was purchased at standard or promotional pricing and what products were purchased in the basket.

Price Strategy

Now that you have a solid data foundation, moving from “gut-level” decisions to analytics-driven insights enables you to develop not only your price strategy but also evolve your merchandising structures including price zones, product classifications based on substitutable products, and product pricing relationships to more effectively align with localized customer preferences. These foundational elements will flow through every decision you make as you progress on your journey. A few important questions you should when crafting this strategy is are you seeking to maximize profits or grow market share? Do you focus on being an Everyday Low Price provider or do you have a more targeted high-low strategy? What is your price image today – and what do you want it to be longer term? This is the phase during which the team may begin to evolve a key value item (KVI) strategy and a price zone strategy.

Competitive insights

As you begin to mature your operational processes, invest in developing a competitive strategy that aligns with your market share and brand image objectives. This process begins with establishing an integrated and automated shop process – that is targeted, repeatable and scalable – for identifying the items to shop and frequency of the shop. Look for a partner to provide insights into which products are important to your customers – and equally important, which are not; also look for real-time competitive data collection capabilities. Activities during this phase set the stage for you to benefit from analyzing competitive price history to further develop your competitive strategy.

The beauty of a phased journey is measuring financial outcome and ROI – the payoff at each phase. Instead of a monolithic all-or-nothing approach, retailers can invest and proceed at the pace that best suits their business and financial objectives, customers and culture, delivering incremental business impact at every step.

Are you ready to Walk? Explore best practices for the Responsive Merchandising Maturity Model in the “Walk” phase. To learn more about the Crawl phase, take a look at our new Price Management video accompanying this post.

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