We are all encountering the inflation pinch – everything from the groceries we buy to the gasoline we put in our vehicles is being affected. In April, the Consumer Price Index reached a 40-year high hitting a whopping 8.3%. Executives are stymied on how to make critical decisions and maximize profits with prices continuing to skyrocket.
Businesses of all shapes and sizes are feeling the pressure. Target, for example, reported profits that were roughly half of what they generated at the same time last year, resulting in Target’s shares dropping over 25%. With inflation slashing consumer spending by upwards of 94%, it is more important than ever to explore new predictive technology to navigate uncertainty.
Companies need to understand and adapt to the new norm of rising prices, supply chain disruptions, and changing consumer behavior. How can decision-makers effectively optimize assortments, demand, markdown strategy, and sell-through? Fortunately, there's a straightforward solution that feels almost too good to be true.
What is price optimization software?
Price optimization software is a solution that helps retailers and brands effectively determine price points for products. Businesses can gain a deeper understanding of their customer values, needs, and behaviors, to make more informed decisions before investing. Some solutions can deliver results in as little as 48 hours that are actionable and forward-looking.
Traditionally, businesses determine pricing for new items based on in-store testing, historical sales data for related products, and standard competitive analysis. These techniques disregard the most important factor in price optimization: the voice of their customer. Price optimization software helps companies by leveraging predictive analytics to determine appropriate price points and markdown techniques before their products enter the market.
Benefits of price optimization solutions
- More effective, faster, and less expensive than traditional techniques for deciding pricing strategies
- Help businesses tackle future unforeseen risks in the industry such as inflation and supply chain
- Identify new opportunities such as capitalizing on sustainability initiatives and products
- Allow businesses to capture the most demand at the highest price point, which increases sell-through and reduces markdowns
- Gives companies a competitive advantage by increasing speed to market and improving product success rate
- Reduces waste to help our planet and create a greener tomorrow
To inform pricing strategies, these tools use a combination of predictive analytics tools, the voice of the customer, machine learning, artificial intelligence, human computational modeling, and Bayesian mathematical models - all of which make up our pricing optimization software. This may appear hard and time-consuming to handle, but, in fact, most of these procedures are automated and can provide predictive data and actionable results within 24 - 48 hours, allowing businesses to adapt quickly and mitigate risk.
Let’s face it, traditional product development processes are inefficient, costly, and contribute to the billions of pounds of waste every year. With inflation creating uncertainty for all industries, price optimization tools will help you to reduce costs, forecast demand, create leaner inventory, and cut testing time to maximize return.
By implementing price optimization software, businesses can leverage voice of customer data to accurately implement successful pricing strategies before they invest. By testing what pricing strategies are most effective, businesses can make critical decisions with confidence, even during inflationary times.
Interested in the latest research on inflation’s impact on consumers?
Our latest report, The State of Consumer Spending: Inflation Impacting Consumer Confidence highlights areas in which consumers are cutting back and prioritizing spending. Download our free report to learn how hundreds of executives are using this data to inform their business decisions.