Set the direction to increase gross margins
Retail Pricing Priority and Complexity
* McKinsey (2019) Automation in Retail

The process of the “best price” calculation forces specialists to solve complex problems on a daily basis and take into account many factors of influence at the same time: promotion, competitive environment, and demand elasticity

McKinsey in his 2019 research identified the TOP 3 priority projects, the automation of which has a greater impact on the retail company’s business model transformation.

One of such projects is Pricing Automation based on a data-driven approach

Retail Pricing Challenges
1 Setting regular retail prices without regard to elasticity, sales optimization strategies, and gross margins
2 SKUs cannibalization and price gaps
3 KVIs are selected and analyzed by experts not with data-driven
4 Difficulty in calculating price elasticity due to the impact of external and internal factors: traffic, OOS, competitors' promotion
5 Inability to localize pricing at the store cluster level and respond flexibly to demand
6 Pricing when promoting does not take into account the elasticity to the price gap in terms of the discount depth and duration
Significant operating leverage in retail
Price drop
by 1%leads to profit decrease by 10-11%
Solution Operation Algorithm
Statistical processing and clearing of receipt and sales data
ML: price sensitivity assessment
Regular prices improvement for various strategies
Consideration of behavioral factors and price segments
Promotions and seasonal sales
Setting prices and Analyzing results
Check the course,
referring to the information board

Individual parameters for the goods and stores category

  • Use flexible settings for each product, format, region and store cluster category
  • Select price increase restrictions for each product category/SKU
  • Calculate your current profitability and set a new profitability for the whole group/SKUs

Be “inside the market” using KVIs and competitive pricing

  • Set a pricing strategy for KVI
  • The solution will calculate the price considering the elasticity and the price segment and will compare it to the competitive environment
  • If a difference from the competitor’s price is allowed within the chosen strategy, the new price will take this factor into account
  • If there are set value limits, the new price will be set in accordance with the competitor’s price

Achieve increased gross margin

  • Apply a price improvement strategy and set target values you plan to achieve
  • Improve new prices and compare changes by key indicators
  • Predict target values

A detailed result for each SKU

  • Manage the price in detail at each stage in terms of each SKU
  • Determine elasticity, cross elasticity, price segments, and current sales figures
  • Maximize your gross margin and be ahead of competitors
Result the best pricing matrix with estimated key indicators
SmartPricing System Features
Considering multivariate price elasticity
Price sensitivity is calculated for each SKU, taking into account cross-elasticity factors and retaining the price within the price segment and the influence of promotions, while minimizing the effects of cannibalization
Price segments
Correct price segmentation allows taking into account behavioral factors and sensitivity, and the optimal distribution of SKUs within the price segment allows getting the best result
Store clustering
The best price matrix can be calculated separately for the format, region – price zones, and even customer segments
Psychological pricing
Psychological pricing based on behavioral factors helps to smooth out the perceptual effect of shelf price change
Product line prices
Prices for the same brand goods with the same characteristics but different aromas/tastes are calculated taking into account elasticity and target strategy
New products and private label pricing
The pricing of new products and own brands takes into account the peculiar characteristics of different strategies: “skimming” or “penetration”, considering the price gap between the private label and the brand
Best price strategies
The best price search uses various strategies: maximizing gross margin/revenue, or a balanced strategy, which can be set both for the category as a whole and individual SKUs
Competitive pricing
The pricing of KVI goods always depends on the competitors' prices The solution takes this feature into account and allows choosing different strategies for KVI prices, recommending the best set, and calculating the Price Index
Package pricing
Package pricing is used to automate mass calculations for several categories/whole product groups
Automatic parameter search
Gross margin increase: the solution will automatically select the best parameters to achieve the target growth value
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