In eCommerce, price plays a decisive role and is the number one decision-making criterion for consumers. Because of simple searching for comparable offers and bargains, it is often mere pennies that determine where consumers will ultimately strike and where they will not. A situation that significantly increases the pressure on retail. Retailers and manufacturers, after all, want to set prices that increase the profits of the company and also raise margins. A sophisticated price setting in eCommerce is therefore not to be underestimated and online retailers need to consider many factors in its development.
What role does big data play in price setting and how can you increase your profit margins with it?
Before the introduction of innovative pricing systems, price comparisons for companies were a very difficult and lengthy process. Many retailers today are still wasting valuable time manually setting their prices. In the meantime, however, algorithms based on big data now automatically calculate the optimal price for a commodity article.
The complexity of price management can best be grasped through an example. The department store chain Macy’s operates about 800 shops in the USA. It has to consider 73 million article numbers for its pricing decisions. The analysis of 270 million possible combinations of pricing decisions, including price reductions, over a data volume of about three terabytes, in the past required more than one day of computation time. Using big data, this analysis has now been accelerated by more than 20 times. This will now allow the retailer to optimise their margins across the whole portfolio much more frequently and to implement the new prices operationally.
Manual pricing processes are not only time consuming compared to big data analysis, but also extremely cumbersome and often ineffective. From the enormous volumes of data involved in a big data analysis, much essential information can be derived for your own business success. So use big data yourself to get your customers excited and also find the best prices for your products.
3 steps to turn big data into profits
Especially for medium-sized and large companies with an extensive range of products, it is advisable to familiarise yourselves with the advantages of big data analysis. This should be used effectively to avoid throwing away any valuable profit potential. The following three steps will give you a brief overview of how to effectively integrate big data into your day-to-day business, thereby securing your retailing success.
# 1 Use the data to react individually to your customers
Big data can be used, for example, to analyse consumer purchasing behavior and the price sensitivity of individual customers. In this way, as an online retailer, you can use artificial intelligence to determine the specific needs of a consumer, and what value they place on certain products, as well as what price they would pay for a product or service. In addition, you can also predict the future purchasing decisions of your customers.
Furthermore, big data gives you the opportunity to delight your customers with a personalised approach. This individualised consumer address is certainly not a novelty in eCommerce, but it is an effective customer retention method. Using the collected information about the preferences of your customers, you can offer these fittingly interesting products as well as personalised gift cards, or even make them individual offers. Not only do you score with consumers here, but you also help your business to succeed.
# 2 Big data saves you time-consuming manual comparisons and price adjustments
It is essential for company success to look further afield and to find out about the markets and the competitors in your sector. Gathering and analysing a wealth of information – whether it’s about an item, a competitor, or a customer – is of enormous importance in eCommerce price setting. However, comparing competitor prices and product ranges is time-consuming and cost-intensive – and almost pointless due to the dynamic market and daily price adjustments. To counteract this cost and time expense, you should use a pricing tool like blackbee, which examines the pricing and assortment design of your competitors, and also helps you identify opportunities and risks in your market. Thanks to the intelligent price monitoring of blackbee, you, the online retailer, can see day-to-day….
…which prices your competitors ask at which time for those products that you also have in your product line.
…where pricing campaigns are taking place and how they influence prices and product ranges.
…which retailers offer how many of the products you also have in your product line.
…how differently customers evaluate these products at various retailers.
…if available, an indication of the delivery time and the cost of shipping.
On the basis of highly valid and reliable statements, you can perform a price adaptation to your competitors. You will then always be one step ahead of your competition.
# 3 Communication is everything: Make price adjustments internally
In all operational processes, it is important to ensure consistent internal communication. Your employees should be informed, for example, about product introductions or eliminations, otherwise selling will become an extremely difficult task. This means that sales staff need to be alerted to new products in the range, as well as the elimination of any other products. Working closely with your sales people is an important key to success. You should explain to them the reasons for new price recommendations and also agree the price adjustments together with them. Only in this way can it be ensured that the sales staff can identify with their prices and products, which forms the basis for good sales. In addition, the sales force should be empowered to adjust prices themselves, instead of relying on a centralised team. This requires a certain degree of creativity in developing a custom pricing strategy, as well as some entrepreneurial thinking.
Ultimately, big data concepts not only play a significant role in business success when it comes to pricing. Also, in terms of planning and the control of marketing and sales activities, these enormous amounts of data are important in order to address millions of customers across multiple communication channels.
Big data: Price adaptation in real-time
Because of the better possibilities for evaluating increasing amounts of data, retailers will from now on be able to adjust their prices to the actual demand and market situation. Based on historical, statistical purchasing data and real-time customer data analytics, as well as up-to-date competitor data, the planning of special sales promotions and the pricing and price variation of product offerings can take place dynamically. Even with extensive product portfolios, companies with big data concepts are positioned to calculate the optimal price setting at great speed and to high precision. In addition, companies can now capture in detail enormous amounts of data about their customers’ personal information and their purchasing behaviour.
With real-time, big data analytics, you can always keep an eye on your competitors’ pricing and assortment, and also adjust your own prices accordingly. This will ensure you long-term competitive advantages. Many retailers and manufacturers already rely on our intelligent, self-learning blackbee technology, which is able to most accurately compare the products of all suppliers. Based on this comprehensive data, you will receive recommendations for your price setting that are relevant to success – so that your pricing policy now remains adapted to the competition.
Would you like to optimise your price management and perfect your pricing strategy in online retail? Then request now your free trial access and convince yourself of blackbee today!