PRICING INTELLIGENCE 2 0 a brief guide to price intelligence and dynamic pricing by mihir kittur

PricingIntelligence2.0
ABriefGuidetoPriceIntelligenceandDynamic
Pricing
ByMihirKittur



TableofContents
Preface
Chapter1:WelcometotheNewWorldofPricing
Chapter2:ThePriceMatchTrap
Chapter3:AnIntroductiontoPricingIntelligence
Chapter4:IntroductiontoDynamicPricing
Chapter5:TheHumanFactor
Chapter6:TheFutureofPricingIntelligenc
Chapter7:HowtoGetStarted



TheAuthor
MihirKitturisaCo-founderandChiefInnovationOfficeratUgam.He
overseessales,marketingandinnovationandworkswithleading
retailersandbrandswithinsightsandanalyticssolutionsaroundtheir
categorydecisionstoimproveoverallbusinessperformance.


ThePreface
Withtoday’schaoticbuyingclimate,we’reallveryawareofhowmuchretailers
arevyingforconsumers’limitedattentionspanandtheoverabundanceofchoices

availabletothem.Themobile,technologyandsocialrevolutionhaveledtothe
riseofthesupershopperwhoisarmed,informedandvocal.Mostconsumers
todaybegintheirshoppingjourneysonlineandarelookingforthebestprices.
They’realsoacclimatizedtodynamicallychangingprices.Pricewarsoccurinreal
timenow,butsomeretailersandbrandsaren’treadyforthisnewreality.
PriceIntelligenceandDynamicPricingareemergingasmust-havecapabilities
thatretailersneedinordertostayrelevanttotheirconsumersandremain
competitiveandhaveanedge.
Knowingthisclimate,we’rethankfulthatyoupickedthisbookandarrivedatthis
page.ThiseBookwasdevelopedforAmazonandisanabbreviatedversionofa
muchmorein-depthbookonthistopiccalledPRICINGINTELLIGENCE2.0:The
EssentialGuidetoPriceIntelligenceandDynamicPricingthatweencourageyou
todownloadhere.
Wehopeyoufindthisbookausefulread,andwelcomeyourcommentsand
feedbackator(415)320-8426.
Thankyou,
MihirKittur



Chapter1:WelcometotheNewWorldofPricing
Overview
Yourcustomersaremoreempowerednowthaneverbefore.Armedwith
smartphonesandcomparison-shoppingengines,eventhemostloyaloneswillgo
elsewhereifyou’renotofferingthe“rightprice.”
Ifyouarejustgettingstartedtryingtowrapyourheadaroundthenewworldof
pricing,thegoodnewsismostoftheretailworldisstillplayingcatch-upwiththe
nextgenerationofPricingIntelligence.

AreYouintheMiddleofaPriceWar?

Retailers,aswellastheanalystsandjournalistswhocoverthem,areextremely
fondofcombatmetaphors.

Describinganearly2014discountingfrenzyonhigh-endshampoobrands,The
WallStreetJournaldeclaredtherewasa“BigHairWar”betweenProcter&
GambleandUnileveroverfolliclesintheUnitedStatesandWesternEurope.1The
JournalalsoreportedthatP&GisnowinTarget’s“crosshairs”formakingit
cheaperformega-rivalAmazon.comtoshipPampersdiapersandBountypaper
towels.Insiderssaythatthegiantretailerhasretaliatedbydevotinglessendcap
spacetoP&Gbrands.2
Isallthisbattlegroundtalkabitmelodramatic?Perhaps.Butthefightformarket
shareisendlessandrelentless–anditpaystofullyunderstandwhomyouare
fightingforandagainstinordertobuildandprotectyourcompetitiveedge.
Theworldofretailisnotforthemeek.IntheAgeofMoreChoice,youcan’tafford
tositonthesidelineswhileyourcompetitorsplaytheprice-changinggame.The
Americanobsessionwithshoppingfordealscaneasilytemptretailerstochase


customersatanycost,launchingpricewarsthatultimatelymightnotbeintheir
bestlong-terminterest.AstheMITSloanManagementReviewhasnoted,there
areusuallynowinnersinapricewar:“Thelosersareoftenforcedoutofbusiness,
andthesurvivorshavebeenknowntosufferalong-termsqueezeinprofitability.
Pricewarsbeginwhencompetitorsaggressivelyandrepeatedlysetpricesbelow
establishedlevels.”3
Insomecases,companiesthatinitiatepricewarsengageinself-destructive
behavior,whichleadstodownwardpricingspiralsthatalterindustrystructures,”
wrotePatrickReinmoeller.“Instudyingpricewarsthattookplacebetween1980
and2013inindustriesincludingairlines,telecomsandfinancialservices,Isaw
thatpricewarswereinvariablylinkedwithseriousdropsinfinancialperformance.
Indeed,whenpricewarserupted,mostcompaniesfoundthemselvesin

commoditytraps:Profitsnarrowedconsiderably,andweakcompetitorshad
difficultystayinginbusiness.”Inawarofattrition,bothsidescomeoutbadly
beatenandworseoffthanwhentheystarted.
There’sanotherwayforpricestogo,ofcourse.Andthat’sup.
Selectivelyraisingprices,ifhandledtherightway,willnotleadtocustomer
insurrection.Wepromise.Thinkaboutyourownconsumerexperience.Whenyou
arecruisingdownthesupermarketaisles,you’lllikelyfindeitherCokeorPepsi
productsonsalefor99centsfora2-literbottle.Stopataconveniencestoreat
midnightandyou’llhavenoissuesforkingover$1.50fora16-ouncebottle.Want
thatsamebottleataballgameorconcert?It’snow$4.Atthemovies,your32ouncefountaindrinkis$6inasouvenirplasticcup.Ifyou’readevotedsoda
drinker,youknowthepriceofthirstvariesbasedonwhereyouare,theavailability
(orlack)ofcompetition,andwhetheryouarewillingtowaitforeitherofthose
factorstochange.Youwon’tstopdrinkingsodabecausethosearetheaccepted
anduniversalrulesofthegame.Evenifyou’renotinthebeveragebusiness,
thesesamepricingprinciplesapplytoyourcustomers.



Chapter2:ThePriceMatchTrap
Overview
Amazonismakingmillionsofpricechangeseachday.Tryingtomatchtheirevery
moveisafruitless(andimpossible)exercise.Youneedtoplayyourowngame.If
youtaketheprice-matchingtrendtoitslogicalconclusion–everyretailer’sprices
eventuallybeingthesame–youneedtogiveyourcustomersamorecompelling
reasontokeepbuyingfromyouandonlyyou.

AvoidingthePriceMatchTrap:Q&AWithKevin
Sterneckert
Inthecurrenthyperactivepricingenvironment,manytopretailers,likeBestBuy,
haveadoptedprice-matchingguaranteesastheirfirstlineofdefense.

Customersinbrick-and-mortarstoreswhofindcheaperonlinepricescanoftenget
thosepriceshonoredbyastoremanager.Someretailersevenofferapricematch
afterthefact–ifacustomershowsupwithinaweekwithproofofabetterdeal.
Wantingtoavoidbeingundercutbyevenafewpennies,manymajorretailers
continuetoexpandtheirpricematchingpoliciesandproudlyannounceeachnew
revisionintheiradvertising.
Pricematchinginanyformisuniversallyviewedasavictoryforconsumers,but
forretailers,it’saracetothebottom.Toexplorewhy,wetalkedwithretailanalyst
KevinSterneckert,aformervicepresidentofresearchforGartnerandan
industryexpertonPricingIntelligence.
AccordingtoSterneckert,retailerswhotrytocompetewithAmazon
onprice“areshowinguptoagunfightwithapixiestick.”
Q:HowfaraheadisAmazonintheareaofPricingIntelligence?
KS:Let’sputtechnologyasideforaminute.Iwouldsaythatthey
aresixtoninemonthsaheadinstrategicthinking.It’sgoingtotakeeducationand
painforanothersixtoninemonthsbeforeleadingretailersbegintosay,“We’ve
gottodosomethingdifferent.”Thenit’sgoingtotakeanothersixto12monthsto
installthetechnologythat’sgoingtoleadtoamorecompetitivesetofcapabilities.
I’mnottalkingaboutmatchingAmazon.I’mtalkingaboutgoingtoagunfightwith
agun–andtoday,peopleareshowinguptoagunfightwithapixiestick.
Q:Whichretailersareaggressivelytryingtocatchup?
KS:Thelargestcompanieswiththemostdirectcompetitiveimpactarecertainly
workingaggressively.Walmart,Staples,Target,Macy’sandTescoareamong
thoseworkingaggressively.Theyrecognizethethreat,buttodaytheyaretaking
moreofareactionarypositionthantheyaretakingastrategicproactiveposition.


Mostofthesecompaniesarestillinveryearlystages.Theyarethinkingrulesbased,theyarethinkinglookingatthecompetitor,lookingattheirvolume,
understandingelasticityandthenmatchingpricesontheelasticitems.Insteadof
beingapriceleader–andthatreallyiswhatAmazonhasdone.

Q:Whichretailersarefarbehind?
KS:Thebulkofotherretailersarefarbehind.Andit’snotatechnologyrace.It’sa
strategic-thinkingrace.Manyretailersgetandunderstandoptimizingpricesfor
brickandmortar,yettheyhaveforsomereasondecidedthattherightstrategyis
tomatchtheironlinepricewiththeirin-storeprice.Ifthat’syourstrategy,itisa
veryflawedstrategy.

TheSolution:HowRetailersCanSurviveandThrive
Thetrick,accordingtoSterneckert,isunderstandingandinfluencingthecustomer
throughhisorhershoppingbehavior.
“Thecustomercaresaboutcertainitems[intermsofpricesensitivity]andthey
don’tcareaboutothers.Youtrulycantapintowhatthecustomerexpectsandyou
cansteerthecustomerinverypredictablewaystobuycertainitems–andtonot
buyotheritems,”hesays.
“Let’ssayyouhavetwodifferentsizesoflaundrydetergent,the128-ounceand
the96-ounce.Ifyouhavemoreprofitonthe128-ounce,youcaninfluencethe
customertobuythatitemjustbymakingtheper-unitpricingmorefavorable.You
canalsoreversethatandmakethecustomerwanttobuythe96-ounceitemif
that’swhereallyourprofitis.Thiselasticitymethodologytrulyisthewaythat
retailerscanwin.”
SterneckertusedtobeinchargeofpriceoptimizationforH-E-BGroceryStores,a
regionalsupermarketchaininTexasandNorthernMexicothathasachieved
greatersalespersquarefootthanWalmart.
“It’sbecauseH-E-Bhassaidwe’regoingtotakepriceoffthetable,”theanalyst
reveals.
“We’regoingtounderstandourcustomers.We’regoingtostudythem.We’re
goingtomakesuretheydon’tgotoourcompetitionbecauseofprice.We’renot
goingtosaythatwe’regoingtomatch,butwearegoingtoberightontheitems
thatthecustomercaresabout.Andwe’regoingtoofferthecustomerthingsthey
can’tgetanywhereelse.”

“Inmymind,thebestquoteofthecenturyaboutbeingcompetitivecomesfrom
SamWaltonhimself.Andhesaid,‘Ifyouwanttocompetewithme,dowhatIdon’t
do.’”


Toys“R”UsandTargetbothofferstore-exclusiveLegosets.Kmartletsyoudress
likeformerCharlie’sAngelactressJaclynSmith.Macy’sandNordstromhave
dealswithMadonnaon“TrustorDare”shoes.Whenyourstoreistheonlyplace
tobuyanitem,youarenolongercompetingjustonprice.
Differentiationdoesnothavetobebasedonproductchoiceorassortment.Itcan
alsoinvolveauniqueapproachtocustomerservice.ZapposCEOTonyHsiehhas
adoptedtheunorthodoxpolicyofhavinghiscallcenterrepresentativesdirect
disappointedcustomerstothreedifferentcompetitorwebsitesifZapposisoutof
stockonacertainsizeorstyleofshoe.
“Yes,welosethattransaction,”heexplainedtoanaudienceataSouthby
SouthwestInteractiveconference.“Butwe’renottryingtomaximizeeverysingle
transaction.We’retryingtobuildalifelongrelationshipwitheachofourcustomers
–onecallatatime.”4
Whenyouareofferingitemsthatcanbeboughtfromseveralothercompetitors,
usingDynamicPricing,whichistheactofpricingitemsbasedonvariablemarket
conditions,youcanensurethatcustomersperceiveyourbrandasbeingfair.With
therightPricingIntelligencesolution,you’llknowwhichhighlyprice-sensitive
itemsneedtobediscounted,whichonescanremainunchangedandwhichones
areripeforincreasingprofits.
Yes,Amazonisfaraheadoftheretailpack.Butthere’sgoodnews:Accordingtoa
January2014studybyRISNews,mostofthatpackissittingonthecouch.5
ConsiderthesefindingsaboutthecurrentuseofRetailPriceIntelligence:
Only23%ofsurveyedretailersareusingPriceIntelligencesoftwareright
now.
Anadditional29%ofretailersplantodeployPriceIntelligencetoolsin2014.

Astunning42%havenoplanstousePriceIntelligencesoftwareatallthis
year.
Asmentionedearlier,eventhemostsophisticatedtechnologyisuselesswithout
therightstrategicthinking.Butifyouwanttostopbeingreactiveandstartbeing
proactivewithyourpricing,there’sstilltimetogetonboard.
ActingontherightPricingIntelligencewillhelpyouavoidthePriceMatchTrap.



Chapter3:AnIntroductiontoPricingIntelligence
TheMyth:Store-BasedRetailersOnlyNeedStoredBasedIntelligence
Asstrangeasitmightseeminthecomputerage,thepencil-and-paperapproach
tointelligencegatheringishardlyextinct.
CompetitorPriceMonitoringhasbeenaroundinvariousformsalmostaslongas
retailitself.Thisisprimarilybecausewhetheryouarerunningaconsumer
electronicsstoreoraneighborhoodlemonadestand,yourcustomerswilllikely
flockelsewhereiftheycanconvenientlygetthesameproductsatalowerprice.
Traditionally,brick-and-mortarretailershavesentemployeesintocompeting
storeswithachecklistofkeyproductsforpricecomparisonandthendecidedif
theirpricingneededtobeadjustedaccordingly.Retailerscannowoutsourcethis
cumbersometasktomysteryshoppersorretaildatacollectioncompanies;
however,theystillcan’tavoidputtingpeople“ontheground”sincenotallstores
putalltheirpricesonline.
Conventionalwisdomamongstore-basedretailershasbeenthatonlyphysical
visitstocompetingstoreswillproducethemostmeaningfulcompetitivedata.
Indeed,thatmethodisstillimportant,butbrick-and-mortarretailersalsoneedto
includeonlinepricemonitoringontheirradar.Withveryfewexceptions,online
retailpricesnowreflectin-storeprices.
Onlycaringaboutpricingdatafromphysicalstoresislikepretendingyour
customersdon’tknowabouttheInternet.Youneedtobethinkingaboutpricing

thewayyourcustomersandcompetitorsthinkaboutpricing.Youneedtobe
lookingatthesamenumberstheyare.
Amazonismakingpricechangesmorethanamilliontimesaday.Walmartand
TargetevaluatethepricingontheirKeyValueItems(KVIs)everytwohours.
Bygatheringonlineprices,retailerscanregularlyandaccuratelymonitorall
targetedcompetitiveproductsinsteadoffocusingonaselectfew.Withoutthe
limitationsofphysicalstoreprice-checks,thereisvirtuallynolimittothenumberof
SKUsthatcanbemonitoredonlineacrossanynumberofrelevantcompetitors.
Onlinepricemonitoringgivesretailersaholisticviewofthemarketplace–
includingcomparisonsoftheoriginalproductprice,theMSRP,thepromotional
priceandthepricewithandwithoutshipping.
AccordingtoarecentonlineshoppingstudybyWorldPay,aglobalpayment
companythatprocessestransactionsin120differentcurrencies,56%of


customerswillabandontheirshoppingcartswhenpresentedwith“unexpected
costs”likeshippingortaxesatcheckout.6
Itiscriticaltomakesureyoualwaysmonitorcompetitorpriceswithshipping
included.Thereisawidevarietyofshippingpoliciesonline:
WhatDoes“FREE”ShippingMean?
MinimumPurchasesRequiredByRetailers


*BothBelkandTargetofferfreeshippingforstore-brandedcreditcardholders
**Ordermustbeunder20lbs.
Source:Retailerswebsites

Therearemanyothershippingfactorstoconsiderwhentryingtounderstandthe
psychologyofyourcustomers.Mostfreeshippingpoliciesdonotincludelargeor
bulkyitems,suchasfurnitureorlumber.Manyretailerswillalsoofferfreedelivery

toanyoftheirstoresforcustomerpickup.Lastly,AmazonPrimeoffers“free”twodayshippingfor$99peryear.
Forsmallerpurchases,adiscountofafewdollarswillbeneutralizedifthe
shopperneedsto“givethemoneyback”atcheckoutinshippingcosts.Most
peopleareevenwillingtoabsorbaminimalconveniencefee–payingasmall
amountmore–ifitmeansgettingtheirpurchasesnow.
Customerswhocomparepricesinphysicalstores(alsoknownasshowrooming)
paycloseattentiontohowshippingaffectstheirbottomlinesforonlinepurchases.
Makesureyou’repayingcloseattention,too.

TheFourStagesofPricingIntelligence:Turning
NumbersintoAction
Thismaysoundobvious,butwhenyou’remakingasalad,it’soptimaltousethe
freshestlettuce,tomatoesandcucumbersavailable.Nomatterhowgoodofa
chefyoumaybe,usingwiltedvegetableswillresultinarottensalad.
ThesameprincipleappliestoPricingIntelligencedata.Youneedtorefineyourraw
datasoit’sreadyforyouranalyststoturnitintorealintelligence–inaccuratedata


willleadtofaultypricingrecommendations.
Herearethestepsthatareneededtoturnyournumbersintoaction:
1. GatheringPrices–Webcrawlerscontinuouslyscrapecompetitorsitesfor
products,modelnumbers,pricesandothercharacteristics.
2. EnrichingtheData–Usingautomatedtoolsandretailcategorymanager
expertise,yourproductsarematchedor“mapped”tothesameorsimilar
productssoldbycompetitors.Pricecomparisonsareonlyvalidifyouare
makingapples-to-applescomparisons.
3. Analysis&Recommendations–Usinghistoricalsalesdata,retailanalysts
buildpricingmodelsthatexplainpastperformanceandpredictfuturetrends.
Thepricingformulasdeterminetheoptimalpricewheresalesandprofitswill
behighest.

4. TakingAction-Analystsrecommendthatpricesberaised,loweredorkept
thesamebasedoncompetitorpricechangesandyourownconsumer
demandandexpectations.
Unfortunately,mostpricingdataisnotreadytousewhenit’sfirstdeliveredbyweb
crawlers.Forexample,computerscaninstantlycomparethepricesofeveryiPod
intheuniverseaslongastheUPCcodesarelisted.ButgiventhatAppleseldom
discountstheirproducts,themoresignificantquestionis:WhichcompetingMP3
playersaremostcomparable–whichoneswillbemostlikelyattachedtoyour
customers’earbudsiftheygowithPlanB?
Makingmattersevenmorecomplicatedisthatshoppingforconsumerelectronics
(andmanyothercategories)ofteninvolvesthreesetsofprices:Manufacturer’s
SuggestedRetailPrice(MSRP),salepriceandthesecret“clickhere”price.
Manyproductpagesone-commercesitesshowyoutheirlistpriceandtheninvite
youtomoveyourmouseovertheitemorclickonashoppingcartto“SeePriceat
Checkout.”ThereasonretailersdothisistoavoidMinimumAdvertisedPrice
(MAP)violations.Someofthemorepremiumbrandsforbidstoresfrom
advertisingtheirproductsbelowacertainpricethreshold–toavoidcheapening
theirbrandequity.
Manyretailershavebeenhappilyusingautomatedwebcrawlerstogather
competitorprices,butmostofthesetoolsarerapidlybecomingantiques.Your
technologynowneedsto“see”thesehiddenprices.Itneedstocapturethisdeep
databyreplicatingthebehavioroftheonlineshopper.


Onceyou’verefinedyourdatawiththerightautomatedtoolsandanalyst
expertise,youcanthenactonyourintelligence.
PricingIntelligencetoolsidentifythebestopportunitiesforincreasingmargins,
givingyouasnapshotofwhichproductsarethemostpricesensitiveatanygiven
moment.

TakingAction:WhatCanBeLearnedFromPricing
Intelligence?
Duringthe2013holidayshoppingseason,wetookanextensivelookatpricing
datafrom15majorU.S.retailersacross13categories,includingclothing,toys,
consumerelectronics,fragrances,cameras,kitchenappliancesandvacuum
cleaners.(Youcanreadthefullreport,“Revealed:RetailStrategiesofthe2013
HolidaySeason,”here.)
NovemberandDecemberof2014wasabannertimetobepurchasingclothesfor
girls.
Ugam’sseven-weekpricinganalysisrevealedthatgirls’clothingwasthemost
frequentlyandheavilydiscountedholidayproductcategory,withBelkdepartment
storesloweringpricesonawhopping98percentoftheiritems.Target,onthe
otherhand,ransalesononly40percentofitsgirls’clothing–stillasizable
selectionforbargainhunters.
Fromabrick-and-mortarperspective,theaggressiveBelkstrategymightseem
mostrelevanttonationalretailerswithlocationsthroughouttheSouthernstates,
wheretheregionalchainisbased.However,Belk.comwouldhavepoppedupfor
shopperssearchingforclothesontheWeb–andtheirfreeshippingforordersof
$99ormoreshouldbefactoredinbyretailersplanningtheirownapparel
strategies.
PercentageofGirl’sClothingonSale–2013HolidaySeason


Onthestingiersideofthespectrum,theproductcategorywiththeleastamountof
pricevolatilitywasvideogames.2013wasanexceptionallybriskyearforvideo
gamesaleswiththereleaseofthenextgenerationXboxandPlayStation
consoles.
VideoGameAssortment&Prices–2013HolidaySeason

Theyellowbarsinthegraphaboveshowgreatfluctuationinvideogame

assortmentandpricesforretailersfromAmazontoToys“R”Us.Amazon,not
hinderedbyshelfspace,boastednearly70%morechoicesthanWalmart.Butthe
bluedotssayitall.
Thebluedotsmarktheaveragevideogametitlepriceoverthebusiestseven
shoppingweeksoftheyear.Notethealmostnegligible$5differentiationinprice
betweentheseretailers,whoareusuallynotbashfulaboutsluggingitoutoverlow
prices.
Videogameenthusiastsarenotknownfortheirpatience.Theyputtheirnameson
waitinglistsandstandinlinesatmidnightfortheprivilegeofbeingthefirsttoplay


thenewestconsolesandgames.Ingeneral,videogamersarelikeiPhonefansin
thattheyarewillingtopaythe“goingprice”forwhattheywant–whateverthat
pricemaybe.
Strategiccompetitiveintelligencecanalsohelpyoudeterminewhensignificantly
loweringpriceswillincreaseprofits.



Chapter4:AnIntroductiontoDynamicPricing
Overview
DynamicPricingisNOTthesameaspricematching.Basedonsupplyand
demand,consumersocialsignals(e.g.productreviews,Facebooklikes),the
weather,andeventhetimeofday,therearealsoopportunitiestoraiseyourprices
withoutgettingyourcustomersupset.Manyretailershavealreadybecomeextinct
inthisharshcompetitiveenvironment.DynamicPricinghelpsyoustaynimbleina
constantlychangingdigitalworld.

SliceofReality:WhatAreYourCustomersWillingto
Pay?

Howmanypiecesofpizzadoyouusuallyeatinonesitting?Doespriceimpact
howhungryyouare?
AtStevestonPizzainVancouver,BritishColumbia,theirspecialC6gourmetpie
costsawhopping$450–that’s$56.25perslice–forheapingportionsoflobster,
blackAlaskancodandRussianOsetracaviartoppingthemozzarella.7Canadian
newsmagazineMaclean’scalleditthe“World’sMostExpensivePizza.”8
Incontrast,Domino’sPizzarecentlyadvertisedanonlinespecialforalargethreetoppingpizzafor$10(caviarwasnotatoppingoption).Atthisprice,youcould
buy45Domino’spizzasforthecostofoneStevestonC6.
WhycanSteveston’schargesomuchforlunch?Becausecustomerswhoordera
C6knowtheycan’tgetoneanywhereelse.Perhapstheyhavethedisposable
incometoorder$450pizzaseverydayoritmaybeaone-timeindulgenceto
knockoffabucketlist.Eitherway,thispricepointexistsbecausepeopleare
willingtopayit.
That’sthephilosophybehindDynamicPricing.Retailerswhoknowtheir


customers’preferences,spendinghistory,tastesanddesirescanestablishthe
rightpricefortheminsteadofreflexivelymatchingthepriceoftheircompetitors.
Sterneckertputsitmoresimply:“Ifyouhaveathousandunitsthatmoveamonth
onanitem,andyourcompetitionlowerstheprice,butyouarestillsellinga
thousandunits,whydoyouneedtolowertheprice?Youdon’t.”
DynamicPricingisbasedonsupplyanddemand,customerexpectationsand
eventhetimeofthedayorweatherconditions.Sportsfansnowacceptthatmany
oftheirfavoriteteamsfluctuateticketpricesbasedonthepopularityofopponents,
whetherthehometeamiscompetitiveenoughtomaketheplayoffs,andof
course,whetherornotit’sgoingtobesunnyandwarm.
BasedongatheringaccurateandtimelyPricingIntelligencefromyourownstores
andcompetingretailers,thereareconstantopportunitiestoraise,lowerorkeep
pricesthesame.

“It’sokayifsomebodyisbeatingyouonpriceifyourcustomersdon’tcare,”says
Sterneckert,notingthatthepricesensitivityofitemsvariesbyproductcategory,
timeofyear,customerdemographics,storelocationandnumerousotherfactors.
Consumersarenotstingyaboutsharingwhattheylikeandwhattheydon’tlike–
andwhethertheythinktheirpurchasesareworththeprice.There’sanevergrowingsupplyofconsumerproductreviewsandsocialmediasentimentto
determinebuyingtrendsandwhatproductsmightbecometomorrow’shotsellers.
Herearesomeofthefactorsthatdeterminecustomers’expectationsatcheckout:
ProductAvailability–Doesacompetitorcarrythesameitem,andifso,at
whatprice?Isitoutofstock?
Location–BuyingapackofguminNewYorkCitywillbemoreexpensive
thanthesameguminthesuburbs.
ConsumerSegment–Whatistheirdiscretionaryincomeandspending
history?
InstantGratification–Nobodycaresaboutfreeshippingwhenthey“need”
theitemrightnow.
ProductPopularity–Isthisitemflyingofftheshelves?Oristhesize,style
orcolorinlowdemand?
Forgetaboutpricematching,despiteallthehype.Youjustneedtomeetyour
customers’expectationsforwhattheyperceivetobefair–andwhenpossible,
offerthemsomethingtheycannoteasilygetelsewhere.
That’salessonthatStevestonPizzatooktoheart.Encouragedbythepositive