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•Guest Column: Optimizing Pricing In A Turbulent Economy

By Wayne Usie, Senior Vice President, Retail, JDA Software

Setting the "right" initial product price is one of the most important steps companies can take to ensure solid profit margins and top line revenue. However, determining the right everyday price for a product is no simple task. In fact, the idea of corporate or chain level pricing has become antiquated as a product's price needs to vary across locations. Furthermore, simply maximizing unit sales, margin or revenue are not the only considerations. Cross-product relationships, competitive factors, brand statements, and multiple selling channels are just some of the factors contributing to an individual product's price.

Consumers vary greatly from market to market, so determining preferences based on local demographics, as well as geographic location and economic conditions is critical when setting initial product pricing. Beyond basic product assortment indicators– such as differentiation in client preference based on geographic store location – it's also critical for retailers to have an understanding of nuanced customer preferences. Advanced technologies can detect these nuances, such as demand for ski attire in Phoenix due to large population of consumers that travel to nearby Colorado for ski season, enabling retailers to accurately tailor assortments and determine the most appropriate initial price.

Market conditions are not the only important factor to consider. Cross-product pricing must be taken into account to ensure that no product is priced in isolation. For example, a grocer selling a cola product in a two-liter bottle, a six pack, a 12-pack and a 24-pack assortment needs to ensure there is some distance in the prices between the items. Without a shared view of products, companies run the risk of underpricing themselves.

Click Here To Download:
•Guest Column: Optimizing Pricing In A Turbulent Economy