The technologically inclined and well-informed customers of today demand robust solutions and timely service that cater to their needs. The use of digital platforms has significantly influenced customer buying behavior, due to which businesses are now digitizing their business processes including – merchandising, sales, customer interactions, and retail promotions. The digital journey of customers encompasses the entire purchase lifecycle of a prospect right from discovery to loyalty and is increasingly becoming complex with the proliferation of new and advanced technologies that possess the capability to transform business landscapes. To succeed in such a complex scenario, businesses are now looking at leveraging advanced retail pricing strategies to differentiate themselves from their peers.
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Three Proven Retail Pricing Strategies that Help Drive Growth and Profitability
Risk-based pricing is one of the most commonly used retail pricing strategies that often recommend a better way to price products by analyzing consumer credit risks and other factors which could indirectly impact growth. However, it’s crucial to note that the limitations associated with such a pricing strategy include imperfect customer segmentation, negative customer reactions, and declining sales. Theoretically, risk-based pricing strategies are designed to help businesses align price and costs of their offerings by increasing the price for higher-risk customers and decreasing the price for the lower-cost and better-risk customers. Unlike the other retail pricing strategies, risk-based retail pricing strategies solely focus on risk as a key component for setting optimal prices.
Before diving headlong into dynamic pricing, retailers need to have a clear pricing strategy, especially those with physical and digital channels. Being one of the most popular retail pricing strategies, dynamic or spot pricing strategy offers several opportunities for business growth. Dynamic pricing strategies are designed to automatically identify the optimal price for products by analyzing several internal and external factors that impact profitability and market demand for a specific product category. Adopting such an approach enables businesses to incorporate market demand, customer sentiments, competitor pricing strategies, and inventory availability into their pricing algorithm to achieve better business outcomes.
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Competition based retail pricing strategies help businesses to analyze competitors’ prices for a particular product category before setting optimal prices for the launch of new products or services. In this approach, the price of competing products is used as benchmarks to identify the most profitable pricing strategy. However, it is crucial to note that setting a price above the benchmark will help businesses to drive higher profit margins but will result in the sales of fewer units as most customers prefer purchasing producing at lower prices.