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Price Optimization Best Practices

by Robert Hetu  |  March 18, 2015  |  1 Comment

Gartner research conducted in Fall 2014 shows that over 50% of large retailers in the US and UK have implemented price optimization for one or more of the 4 main types. In the UK markdown optimization is the most frequently implemented, while in the US promotion optimization scored highest. After a short hiatus price optimization returned to the forefront as customers and competitive pressures threaten to erode margin. Success can be traced to an effective implementation based on best practices. In my recent research Prioritize 10 Best Practices for Successful Price Optimization Implementations Gartner clients can learn each of the best practices that will help secure long term success.

  • Key Challenges
    • If the retailer is expecting a strategy to arise from the implementation of price optimization, then the project is doomed to failure.
    • Failure to operate an effective change management strategy results in lack of success, regardless of the technology vendor selected.
    • For many retailers, systematically generated pricing recommendations are not executed by the headquarters merchandising staff due to lack of trust, poor administration of policies, inaccurate source data, and willful non-use.

Utilization of the price optimization applications suggestions within the retailer’s merchandising and planning organization can vary from reliance to disregard. As a result the promised benefits can be lost. Gartner’s view of implementations throughout the marketplace is that, regardless of the technology provider selected, a successful implementation, (defined as the optimization solution that is an integral and ongoing part of the merchandising pricing process), is directly dependent on the human aspects related to the change. As a result, four human resources best practices must be the focus of preparation and ongoing execution.

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Category: merchandising-process  pricing-policy  retail-analytics  retail-trends  technology-and-emerging-trends  

Tags: analytics  competition  consumers  gross-margin  merchandising  multichannel  omni-channel  planning  price-transparency  pricing  retail  showrooming  

Robert Hetu
VP, Analyst Retail
7 years at Gartner
29 years IT Industry

Bob Hetu is a Research Director with the Gartner Retail Industry Services team. His responsibilities involve tracking the technology markets and trends impacting the broad-based retail merchandising and planning areas. Mr. Hetu is an expert in the areas of brand, vendor and assortment management, merchandise planning, allocation, and replenishment. Read Full Bio

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