Ten pricing best practices in generating solid returns
Frank Badillo a Senior Economist for Retail Forward in his November 6, 2009 Washington Post article stated:
“Don’t expect shoppers to abandon their hard-earned lessons in frugality even if the economy starts picking up. Households remain focused on shopping for needs, and this kind of cautious shopping behavior will restrain sales improvements.”
So as 2010 begins what are the pricing best practices that remain constant in their ability to generate solid returns?
- Track trends in customer and competitive behavior and react to trends not single events.
- Engaging in forward planning that utilizes forecasting tools for accurate assessment of demand shifts over time.
- Set goals at the highest and lowest levels. (Every member of the organization should know and understand their part.)
- Evaluate opportunities with store clustering, customer segmenting, and predictable competitive behaviors.
- Assign a role and goal for base, promotional, TPR, and even markdown prices and margins. A plan for total margin mix, sales, and units needs to be known not an accident.
- Constantly measure the strategies for execution excellence and constantly measure goals against well executed strategies.
- Learn to understand the principles of elasticity, cannibalization, affinities, and optimization.
- Utilize private label as a way to maintain margin speed and provide value. Set proper gaps based on price points that are palatable to your customer.
- Choose the right competitors to measure against. Who do your customers shop? Choose the right items and frequency for competitor price shops.
- Manage fewer Key Value Items-assess which are the most likely will cause defection if not priced right.
These are just a few that our retail partners are using. If any of you have best practices you want to share please do so.