By now you’ve heard about dynamic pricing and you’ve probably even tried it yourself. There’s an underlying principle about this pricing strategy that can be applied to other parts of your company to keep you up-to-date consistently and across the board.
KPMG recently studied the most important attributes contributing to where shoppers choose to shop and found that best pricing ranked highest. Price beat best delivery options, preferred website, and stock availability, but these factors, and a few more, remain paramount to inching shoppers further along the path to purchase. So, what are the top ways retailers can apply dynamic practices to see significant ROI?
Why dynamic strategies work
Before we dive into dynamic assortment and promotion strategies for retailers, it’s important to understand why dynamic strategies are crucial. Retail is an industry that changes as often as the wind blows. There are market leaders who drive the industry and gobble up competitors to expand their offerings and enter hot categories. All other retailers are left scrambling, unless they’ve put dynamic plans into place. Because it’s not a matter of if the market will change or if competitors will try to egg you into a price war, but when. Preparation is key.
The impact of a dynamic assortment
Merchandising is an ongoing process. Even when you think you’ve made the best forecast of your career, trends and preferences can switch with no notice. But there is a dynamic principle that could help mitigate the chances of that happening. There’s no such thing as a perfect assortment or forecast, but machine learning can improve the odds of getting breadth and depth as close to perfect as possible.
Assortment trends are always fluctuating. A certain brand may heat up and start moving faster than you expected, or a new category may turn out to be a dud. But if you have a system in place that takes into account sales history, volatility, and future projections, then your assortment has a much better chance of meeting your customers’ needs and your revenue goals.
Just like a dynamic pricing strategy, an optimized assortment also has competitive insights built in. You need to know (in real-time) where there are assortment gaps when compared to competitors. Retailers who can identify their assortment weaknesses often can act on them and jump on trends or make corrections to avoid issues down the line.
Personalization in retail
Another crucial aspect in e-commerce is personalization. To say the least, personalization is profitable. Brick and mortar is the perfect example of this, because helpful associates ask questions, get to know customers, and provide them with recommendations that fit their current and future needs. Online retail typically misses out on this personal relationship building, but machine learning can make up for the majority of that deficit.
One side of personalization is promotions. When you go into your favorite mom-and-pop shop, you’re greeted by name and you might even get a small discount or free item for being a valued customer. Online retailers can provide this as well in terms of email marketing promotions. What has your customer bought recently and what items can you suggest to them that would go along perfectly with what they just bought? Targeted promotions mimic the in-store sales associate who remembers you bought a pair of slacks last time and tells you blouses are 20% off this week.
When you have a full understanding of customer behavior, competitor promotions across channels, and trends in your vertical, you can present your customers with an assortment and promotions that will boost sales, profits, and even customer happiness. The only way to accomplish this is with a flexible strategy. Pricing, assortment, and promotions are cornerstones of an effective dynamic strategy, but the sky’s the limit in terms of what aspects of your business you can optimize for continued success.
For more sales strategies, see Primed: Prompting Customers to Buy.