Compared to the past few years, the 2017 holiday shopping season was a success for many. According to the latest MasterCard SpendingPulse Report, holiday sales increased a record 4.9 percent. Big winners included Kohl’s, which showed sales up 6.9 percent in November and December, and Target which saw sales rise 3.4 percent in the same period, to name a few.
Interestingly, analysts are warning that despite these strong holiday sales, retailers and brands may not see increased margins. The reason? Increased promotional activity.
A promotional strategy is a crucial component to a retailer’s success as consumers are continually influenced by deep discounts. A recent First Insight study found that 45 percent of women won’t enter a store if there isn’t an advertised discount of 41 percent or more.
However, if you’re offering differentiated product that you know your targeted customer will love, you will see the benefit in increased full-price sales. The challenge: how do you determine what’s going to resonate and how best to price it?
Technology today can help retailers and brands improve their pricing strategies to avoid losing margins to product markdowns. In fact, last month, First Insight released the world’s first and only solution that enables retailers to forecast price elasticity of new products to determine optimal prices and increase margins. It’s called ElastiCast.
By collecting consumer input and processing these data through First Insight’s proprietary algorithms, ElastiCast enables merchants, planners and marketers to analyze various pricing scenarios and predict how consumers will react to different price points throughout the product’s life cycle - from initial pricing to markdowns to clearance. Results allow retailers to see the distribution of demand, before they go to market, so they can set prices more intelligently.
In addition to helping to avoid unnecessary markdowns, the tool is helping retailers determine which products can bear a higher initial price point. Our retailer customers call these products “margin movers”, because getting their prices right drops money right to the bottom line. Many are using the tool to recommend an initial price point, and others are testing various pricing scenarios to see how products will sell with a higher price tag. On the flip side, the tool can also help to ensure that your winning products aren’t flops because you’ve priced them too high.
A strong pricing strategy is more important than ever. Armed with technology, consumers have all the power, and they can and will move on to competitors if you aren’t offering the right products at the right price. Luckily, retailers and brands also have technology to aid them. Gone are the days of relying only on historical data or guesswork to inform your pricing strategies. By leveraging your customer feedback with our proprietary predictive analytics, you can decrease your markdown rate, increase the percentage of full-price sales and eliminate poor performing products before they go to market.