The imperative intensifies for retailers to modernize their practices. Omnichannel is why.
Innovative retailers have had true personalization at scale on their radar for a while now. It is evolving rapidly in tandem with shopper loyalty platforms and the digitalization of shopping along with continued advances in AI-enabled technology.
The current omnichannel surge in food, drug and mass has only heightened the urgency. For experienced digital shoppers, personalized prices and promotions are an expected part of the experience, which means the risks of not providing it are high. For retailers who do it very well, it can be THE differentiator that builds strong engagement and enduring loyalty.
Personalized pricing is advancing on three primary fronts – the omnichannel view, the external perspective, and the transformation of process. Where does your organization stand on the following initiatives?
Complete and refine the omnichannel view of shoppers. Retailers confront the need to incorporate shopper behavioral data from all points of shopper interaction. The idea is to compose a more complete picture of customer contact across the whole retail enterprise. From this more comprehensive story, retailers can differentiate down to the individual customer, trip, and basket type to create more meaningful offers.
Context: There is no longer a useful distinction between “store-shoppers” and “online shoppers” (if there ever was). Today we have omnishoppers. Retailers need a clear omnichannel strategy that tracks customer needs by touchpoint to understand how they shop and what matters in each encounter. A well-defined pricing approach that spans store, online and direct-to-customer is crucial.
Fold in perspective from outside the enterprise. Use external market data to understand true customer loyalty, based on share of requirements, and identify the spend earned from customers (and importantly, the spend not earned). This is accomplished by understanding current value, potential value and headroom. Determine optimal customer-centric strategies that drive sales growth via share of customer and where to focus price investments.
A second use of the data is external benchmarking of pricing versus marketing to optimize prices based on price perception, price elasticity, importance, and relative price position. Price is no longer the customer’s sole focus. They are concerned about relative price to competitors. Personalizing pricing enables retailers to set the right prices for the right customers in categories and items that matter most to them.
Context: The external view is growing in importance. A retailer’s price to the customer is only one element of their comprehensive value story in a marketplace with growing price transparency. Price relative to competitors is critical in setting shopper perception, which greatly influences their choice of where to shop. Retailers need to fully leverage market and competitive data to make the most of this.
Pursue fundamental transformation. It has been reported that Amazon updates over 250 million prices per day.* And that number is only going to increase. Other major online retailers have similar dynamic pricing in place. This will only increase in scale and speed. Hence, the need for innovation and change to maintain competitiveness.
Context: Future omnichannel winners will incorporate automation and true optimization at scale. Up to 85% to 100% of online prices may need to be automatically updated on a daily or intra-day basis. Those decisions must be implemented in coordination with pricing actions in stores, online and through direct-to-customer digital channels. To accomplish this at scale, prices must be data-driven, powered by AI and governed by an optimization engine that aligns to strategy and objectives.
Progress Toward Omnichannel Personalization
To succeed, a retail omnichannel pricing strategy must consider the role each touchpoint plays within the total customer journey. Each shopper encounter brings different need states, urgency and expectations. It is truer than ever: Strategy must be customer-centric and data-driven. This requires retailers to leverage customer-data from loyalty, traceable tender and online to truly understand how customers shop each channel overall, by category and by occasion. The goal is to ensure the needs of each customer are met in every encounter while enabling more refined insights and better personalized offers.
Beyond the Five Walls: Fold in Outside Data
With so much data flowing in, omnichannel retailers grapple with how they will put pricing personalization into daily practice. They also recognize the need for reliable tools to predict performance of personalized offers. How to define reliable benchmarks? Market data is essential to understand consumers beyond the “five walls” – that is, what they do in the stores plus on the e-commerce site. It is also very important to gather broader insights on the customer and how they engage with your competitors and in the broader market. Benchmarking (or indexing against market norms) is not possible without this context.
Social media and sentiment data can add richness to the outside perspective. Feedback, posts and ratings can be useful means to keep tabs on price perception. Clues may reside on public sites or in the retailer’s own social pages. Sentiment – from automated language processing – can be a valuable source of very timely feedback on delivering relevance to customers. This can be tracked in near real time and with individual customers and across the market as a whole. The power of social media is that it enables both individual feedback as well as group reactions based on popularity and agreement.
How Market Leaders Create Competitive Advantage
Personalized pricing is growing in importance and is quickly moving from a “nice-to-have” or differentiator to a “must-have.”** This is driven by increasing customer expectations and the need for retailers to win one customer at a time. Retailers are battling on three key fronts:
- Competition. The shift to more digital shopping encounters creates fierce competition with channel fragmentation and blur
- Transparency. Mobile-connected shoppers can easily check competitive prices online or while shopping in the store
- Speed. Omnichannel decision making is changing in an increasing pace, forcing companies to be relevant “in-the-moment” and operate in near-term
Tomorrow’s omnichannel retailers will be required to be real-time and highly personalized. Delivering at scale also means AI automation is essential. Omnichannel shoppers are more sensitive and aware of value and their demand for personalization is increasing. They demand personalization in exchange for their engagement and their loyalty. They will “fire” the companies and brands that do not personalize well or do not differentially drive value through relevance.
The market leaders of today and tomorrow are those that personalize best to serve their customers. For omnichannel retailers, this means understanding what items matter to which customers at each moment and providing prices that communicate value and build loyalty.
* An Introduction to Amazon Pricing in 2021
** When Customers Are — and Aren’t — OK with Personalized Prices