Omnichannel changes how retailers make price and promo decisions

Discussion
Photo: Starbucks
Nov 08, 2016
Graeme McVie

With the rise of click-and-collect and home delivery, ecommerce is growing rapidly. The U.S. market for online goods is expected to surpass $350 billion this year (Amazon accounts for about 30 percent of that amount) and exceed $525 billion by 2020, according to Forrester Research.

With this growth, retailers are seeing consumers splitting their spending across different channels for different purchases. They’re using smartphone apps, showrooming, price comparing and, in general, not acting within the traditional paradigm of seeing or hearing about a sale and then engaging with a retailer to satisfy the desire or need. And then there are the Millennials, the largest demographic cohort in history, who are increasingly looking for personalized and digital interactions and more engagement at every level and in every channel.

Some retailers have embarked on personalization programs, as with Whole Foods Rewards and Starbucks Rewards, while others are deploying a low-priced, deep discount strategy. Still others are trying to figure out the last mile and make delivery a customer and commercial success. All of these retailers need to be smarter about how they compete and make consistent pricing and promotion decisions across the store, online, via the app and in direct communications with customers.

Recent research from Precima and RSR Research shows retailers are most successful when they use an integrated approach of setting omnichannel prices and designing customer-centric promotions. Further, it indicates that the demand for meaningful personalization is growing at a rapid pace — demand for personalized offers grew 11 percent from 2015 to 2016, a trend we expect to continue. Supported by internal and external data, omnichannel marketing analysis helps companies determine the most effective channels for each customer segment, product category and channel.

Retailers have always needed to put the customer at the center of their thinking and operational model. Now, with real-time, data-based insights available to most marketers, front line execution on those insights is what will separate the winners from the crowd.

DISCUSSION QUESTIONS: How must retailers adapt in order to make intelligent price and promotion decisions in an omnichannel world? Should decisions be separate or integrated by channel? How important is personalization to the omnichannel challenge?

Braintrust
"Consumers don’t think channels, only retailers do, so the expectation is that the consumer will see the same price however they choose to shop."
"Price variations can be be seen as a penalty by customers for their spending insufficient time to do price comparisons."
"We have seen real retailers improve conversion rates more than 100 percent with intelligent real-time personalization."

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19 Comments on "Omnichannel changes how retailers make price and promo decisions"

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Max Goldberg
BrainTrust

The article says it all. Successful retailers need omnichannel pricing and personalized offers if they want to attract and hold customers. My wife gets very frustrated with retailers like Gap that have single-channel pricing, and she’s become quite adept at playing the system to get what she wants at the lowest price. Why frustrate customers in an era of one-click competition? It’s incumbent on retailers to mold their strategies to fit consumer desires, not the other way around.

Charles Dimov
BrainTrust

In full agreement. On pricing, customers simply don’t care about a retailer’s specific channels. Consumers want a consistent, seamless, singular brand experience. Having different prices across different channels will just irritate customers. That’s just a formula for losing business!

On personalization … that means retailers need to invest in some technology like the order management systems that can track a customer’s order history, timing, and likelihood to return items. Not only does this mean a greater level of personalization for the consumer, it also means retailers have the option of cherry picking the ideal customers to whom they would like to extend certain offers. Brave new world.

Mark Ryski
BrainTrust

The days of price discrimination by channel are virtually over. Increasingly, consumers do not differentiate by channel and expect to see pricing that is consistent regardless of the channel from which they purchase. Retailers need to take a holistic, integrated approach to pricing. Personalization is critical and is fast becoming a competitive advantage. Retailers who are able to effectively personalize offers will have an advantage over those retailers who do not or cannot.

Susan O'Neal
BrainTrust
11 months 11 days ago

We have to break down the word “personalization.” When consumers ask for “personalization” they are really asking for an improved work-to-value ratio. If you have a lot of SKUs (i.e. Amazon), personalizing merchandise display decreases work and the convenience adds value — no discounts involved.

Chris Petersen, PhD.
BrainTrust

“Should decisions [pricing] be separate or integrated by channel?”

Great question! How would a consumer answer that? Seamless and the same.

Most customers are already voting with their phones and bringing specific products and pricing to the stores when they come to shop. Retailers must have a response when customers in-store for price matching online. If it is only about buying a commodity, lowest price wins most of the time.

One size does not fit all retailers. Large national chains have different capabilities and cost structures than small local shops. A critical question is, does the local store have anything that adds value beyond just price? If not, then there will be increasing pressure by customers for price matching if there is nothing that personalizes the experience or value.

Lyle Bunn (Ph.D. Hon)
BrainTrust

Price variations can be be seen as a penalty by customers for their spending insufficient time to do price comparisons. Is this a behavior that retailers should motivate? Of course not. Nor is the creation of negative emotions that naturally result on the part of the customer from paying more for the same value.

Discounts primarily serve the retailer’s interest in transaction achievement and stock turns and should not be confused with serving customer interest.

Jasmine Glasheen
Guest
Jasmine Glasheen
11 months 11 days ago

The key here is “intelligent price and promotion.” I recently wrote on what discount apparel addiction is doing to retail. I’d hate to see our discount addiction extend to grocery.

I shudder to think of the produce equivalent to fast fashion, although it probably looks like the day-old cabbage filled veggie wrap I got from Trader Joe’s last week. There’s something to be said for quality and customer trust.

Channel integration is imperative for companies that want to integrate an omnichannel marketing strategy without offending customers. Although it is rarely successfully integrated, it’s already expected.

Customers have already experienced a fully integrated and personalized omnichannel experience from forward companies like Sephora, so they’re going to expect it from you.

Susan O'Neal
BrainTrust
11 months 11 days ago

Retailers should engineer a shopping experience. Some elements of that experience will be integral to their brand (inspirational visuals or low prices for example) — these absolutely must be consistent across channels. Other elements are supporting to the experience and should be optimized by channel (how the customer finds what they are looking for, how merchandise is presented).

Lyle Bunn (Ph.D. Hon)
BrainTrust

Successful retailers do engineer the in-store shopping experience by store layout, product display, associate support, modulating pace, etc. to generate visits, dwell time and conversion. Too often the communications of product features and the use of in-store special pricing, which are easily accommodated by dynamic signage, are neglected in operational focus.

Susan O'Neal
BrainTrust
11 months 11 days ago

Lyle — I agree, what I should have written was, “when retailers engineer their shopping experience, they should determine what elements must be consistent across channels — and what needs to be optimized for the channel.” Then my guidelines make more sense. And to your point, there are things the in-store experience can learn and adopt from digital channels for sure.

Lee Kent
BrainTrust

I am all about transparency and do not like the price game that some retailers play. Unless, of course, the consumer knows they are entering a pricing game. Consumers don’t think channels, only retailers do, so the expectation is that the consumer will see the same price however they choose to shop.

For my 2 cents!

Liz Crawford
BrainTrust

I agree with Max — one price per customer. In the age of instantaneous price comparison, retailers can’t afford to have single-channel pricing… unless the retailer is trying to incent shoppers to purchase through a particular channel.

Also – about dynamic (personalized) pricing – be careful.

Shep Hyken
BrainTrust

Consistency (in pricing) creates confidence. Personalized promotion and messaging creates relationships. Combine them and you have a winning solution.

Looking at it from the other side, price inconsistency creates frustration. Lack of personalized promotion and messaging is a missed opportunity, given the amount of data many large retailers have on their customers.

Stu Conroy
Guest
11 months 11 days ago

It’s amazing how many brands would not be able to implement consistent pricing due to their distribution management. An earlier article on this site pointed to Louis Vuitton not wanting to sell on marketplaces and somebody pointing out that nearly 3000 of their products were listed on the most famous one.

The omnichannel path is filled with new challenges that new brands appear to handle in many ways better than more established brands who were geared up for a previous era. So a brand now must control its global distribution down to the store level. In many ways it is easier to offer deals in-store below an online price as it is not in the public eye for all to see, only the localized micro level.

A brand must have full awareness of who is selling its products, where and how at the same time as promoting so that it can adhere to an “integrated approach of setting omnichannel prices and designing customer-centric promotions.” After that it is unfettered to manage its promotions across the key channels to the end-consumer.

Ralph Jacobson
BrainTrust

This is all about personalization, or actually real-time individualization. Personalization capabilities help you tailor messages to match customers across devices and channels seamlessly so you can improve engagement along with revenue. This also leads to discussion around conversion. We have seen real retailers improve conversion rates more than 100 percent with intelligent real-time personalization. This is critical to reduce cart abandonment, drive loyalty via true differentiation and increase profitable growth.

Kim Garretson
BrainTrust
11 months 11 days ago

One area of “real time, data-based” insights that 40 retailers are rolling out is individualization, where non-buying shoppers at the product page level are asked to opt in to alerts on price drops, back-in-stock, etc.

Merchants are using this new dataset to make more informed decisions on price, promotions and inventory. In fact, with overstocks and out-of-stocks representing a $1 billion problem each year in the retail industry, merchants can now see “pre-revenue” intent for helping them buy smarter. When they have overstocks, instead of just slashing the price at the website, they can do private Groupon-like email alert offers to test various discounts to move those goods at a higher overall margin.

Christopher P. Ramey
BrainTrust

Prices should be the same across all channels. Playing GOTCHA is a poor strategy to build revenue or loyalty.

Joleen Wroten
Guest
11 months 11 days ago

Retailers need to shift their metrics to drive internal behaviors that support an omnichannel strategy and are inclusive of multi-channel success. KPIs that reflect the whole business health start with robust data sources that can help paint a fuller picture.

While research seems to vary slightly, several experts have stated that $1 online impacts up to $11 offline and over one-third of all offline sales are influenced digitally. In terms of pricing and promotion decisions, retailers need to look beyond their own walls and data to get competitive insights as to how competitive pricing and promotions are potentially impacting their own sales. Shoppers are now armed with comparison shopping tools, coupon sources and promotional flyers on their cell phones. Very few retailers are actually leveraging that degree of insight to understand and convert shoppers in-store and online.

Manmit Shrimali
BrainTrust

Customers don’t care about omnichannel pricing but experience and understanding of what to show and when. I have seen many articles on personalization, this one being one of them. We recently concluded a study where we used AI to reason how much sales is generated when retailer invests on personalization index (composite score of investment across channels and products based on consumer buying). Personalization did not drive significant value — far lesser than the hype around it.

I was delighted to see AMA also concluding outcomes where efforts spent on personalization are yet to be proven. Retailers are known to go behind the buzz — be it big data or personalization without really assessing how much value it is driving. Brand experience, right value at the right time (even if it is higher price) is the key. We live in the world where we don’t question the pricing of iPhone, but the cost of jeans and $5 coupon….

wpDiscuz
Braintrust
"Consumers don’t think channels, only retailers do, so the expectation is that the consumer will see the same price however they choose to shop."
"Price variations can be be seen as a penalty by customers for their spending insufficient time to do price comparisons."
"We have seen real retailers improve conversion rates more than 100 percent with intelligent real-time personalization."

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