The importance of researching pricing trendsBY Australian Retailers Association
Modern retailers consider pricing a strategic decision. With the increase in domestic online retail, and the improved access of Australian customers to international avenues to shop, local bricks and mortar stores need to be aware of current pricing trends to remain viable.They need to do so not only with regard to pricing policy but also with how prices are communicated to customers in-store.
To learn more about pricing and products, the ARA Retail Institute runs multiple workshops on planning and development. Join the ARA Retail Institute in their latest workshop which looks into planning product development and the ability to generate product ideas suitable for a defined marketing place and finally preparing a design brief for production.
Manage information on pricing trends
The opening up of retail to online and international players creates opportunity for bricks and mortar retailers to get creative with their pricing, creative with a commercial focus. To do this well, retailers need to fully understand the pricing trends impacting their sector of the industry by observing competitor strategies and customer behaviours and preferences.
- Manage information on pricing trends
- Action pricing changes
- Communicate changes to relevant staff
Some savvy retailers employ strategic pricing where the relationship of price to costs of goods sold is less important than business smarts.
Some examples of strategic pricing are below:
- Leader pricing – selling products at less than their normal profit margins to introduce a new brand or stimulate customer interest
- Loss leaders – selling products at a loss to introduce a new brand or stimulate customer interest
- Price lining - products within a category are set at different price points, the higher the price, the higher the perceived quality
- Luxury pricing – pricing based upon perceived value, increasingly this is emotional value i.e. pricing based upon the status, confidence, pleasure, enjoyment someone will get from a product rather than its inherent cost
Action pricing changes
Implementing pricing changes can be a big task for retailers. The main challenges are around how to do so efficiently and effectively and this can become a significant logistical effort particularly for large retailers.
There are several factors that can streamline the process:
1. Maintain clear lines of communication with stores
2. Provide the right information on how and when the pricing changes are to be made
3. Provide the required resources at the right time
4. Ensure all pricing is changed in line with physical store pricing, i.e. online prices, marketing materials, catalogues,
5. If the price change is likely to prompt customer feedback, provide information or a script to help sales staff to explain why.
With the right planning enacting pricing changes should not be a complicated or difficult task. It can easily become one however when attention to detail and timing is not a priority. Incorrect pricing means customers may be entitled to a cheaper price if it is the one displayed. Again, supermarkets often face this issue, many choosing to allow the customer the benefit of the doubt, honouring the incorrect ticketing as a loyalty building exercise.
Communicate changes to relevant staff
The key to effective planning for pricing changes lies in communication. At store level the most important communications need to be to the visual merchandising and sales teams as they are the staff that need to action and explain the changes.
Timing is essential. Visual merchandising teams need adequate time to plan the changeover particularly if extensive ticketing and signage changes are required. They may also need to order or wait for resources, redesign displays and consider the best ways to promote price reductions.
If pricing has been reduced promote it, take for example the Coles marketing around their 2012 price reductions. The ‘price are down’ campaign with the big red hand and the catchy song has seen a boost in brand awareness. Sales teams need also to be informed of their role in the price changes.
In some stores, they will be the ones to execute the physical ticketing changes, signage and promotional communications, in others they will only need to be aware of the changes and the reasoning behind them in case of customer inquiry. It is helpful in these cases to have a consistent script for staff to fall back on if pricing has increased to a level where customers are likely to notice and query the justification.
About ARA Retail Institute
ARA Retail Institute is Australia’s leading retail training provider for both accredited and non-accredited learning programs. For more information, please visit: www.retailinstitute.org.au
ABOUT THE AUTHOR
Australian Retailers Association
Founded in 1903, the Australian Retailers Association (ARA) is Australia’s largest retail association representing Australia’s $310 billion sector, which employs more than 1.2 million people. As the retail industry’s peak representative body, the ARA works to ensure retail success by informing, protecting, advocating, educating and saving money for its 7,500 independent and national retail members throughout Australia. For more information, visit www.retail.org.au or call 1300 368 041.