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Retail Pricing Strategies Still Not Optimized

by Robert Hetu  |  April 26, 2017  |  Submit a Comment

Product pricing is a critical component of the customer cross-channel experience, but the promise of unified price, promotion and markdown optimization (UPPMO) is elusive. Gartner’s long-held position is that retailers must support consistent cross-channel pricing with situational differentiation. Foundational elements of an effective cross-channel pricing strategy for unified retail commerce include:

  • Consistent base price for products across all physical and digital channels
  • Consistent promotional price for products across all physical and digital channels, allowing for situational differentiation of product pricing by channel for specific and clearly articulated events and time frames
  • Markdown and clearance pricing allowing for situational differentiation by product, channel and location to maximize sell-off

Dynamic pricing across channels represents the culmination of the promise of UPPMO as the foundation of situational differentiation at a customer level. When appropriate, using advanced analytics and machine learning applied to big data — optimally pricing product for individual customers at the time of purchase — represents the future of unified retail commerce. Retailers must focus on the totality of pricing and its relationship to the consumer’s path to purchase.  

My latest research Market Guide for Unified Price, Promotion and Markdown Optimization Applications takes a deep dive into the current state of retail pricing and the future of UPPMO in a world of increasingly dynamic pricing.  Key findings include:

  • Unified price, promotion and markdown optimization (UPPMO) is tracking along a two- to five-year maturity horizon on the Hype Cycle for retail technologies after little movement up the Plateau of Productivity over the last five years.
  • Discussions with large retailers continue to support the premise that pricing strategies are fluid and/or not sufficiently defined to enable an algorithmic approach.
  • Most Tier 1 multichannel retailers are struggling to reach the fourth out of the five stages of the UPPMO maturity curve.
  • Dynamic pricing across channels represents the culmination of the promise of UPPMO.

Gartner has found that most large retailers are struggling to reach the fourth stage of maturity for UPPMO, and as this figure shows, the result is failure to achieve the significant business benefits derived from more complete adoption.

Figure 2 Maturity Curve

Gartner 2017

Gartner clients can read the full and comprehensive research.

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Category: pricing-policy  retail-analytics  retail-trends  

Tags: analytics  customer-centricity  merchandising  multichannel  omni-channel  price-transparency  pricing  retail  

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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