Retail Science & Pricing

A Price is more than a number! It’s a critical factor for all retailers, and crucial to why a customer chooses to shop a retailer, brand or product!

Retailers must consider four crucial dimensions to maximize their Pricing, Promotions and Markdowns

Price is the biggest single lever a retailer has to impact its performance. Traditional Pricing approaches have relied on Financial analysis and often simplistic Competitor benchmarking. At TPC we believe to drive truly successful, sustainable, longer term Pricing and Promotions strategies and operations you must successfully leverage 4 factors

Financial:

Leverage Financial science and analysis to maximize and optimize sales and margin performance

Market:

Use competitor data and Market intelligence to carefully position prices in relation to the market, your strongest competitors and your strategy

Customer Behavior:

Know your customer! Drive your advantage with Customer Data to deliver pricing strategies that understand Customer behavior, customer loyalty and what customers are willing to pay

Customer Psychology:

Employ techniques that utilize a deep understanding of Customer Psychology to maximize impact and position your prices optimally

“TPC have been a driving force in helping us develop a long term pricing vision while at the same time providing real, actionable solutions that delivered significant in year margin benefits. The team brought a wealth of industry knowledge and subject matter expertise but what sets TPC apart is their uniquely collaborative approach to working with all levels of the business making potentially difficult change feel like a team effort. The team understood our business and truly cared about improving it.”  

-Group Merchandising Director at Shop Direct

The TPC approach drives results across key Pricing, Promotions and Markdown questions:

Regular Price Setting and Optimal Price Architecture   

TPC have extensive experience leveraging big data sets and historic performance analysis to drive optimal regular pricing structures, price ladders, and price points. Driving the right price architecture across categories and ranges is a powerful building block in establishing strong price perception with customers. Our approach is nuanced and informed, utilizing pricing theories such as key price point identification, Latitude Of Acceptance (LOA), daily/weekly price trading, and value based pricing, amongst others.

  • Drive Price perception through logical, optimal pricing architecture that builds consumer trust
  • Improve margin performance through key price point identification, better price ladder design and understanding of Latitude of Acceptance
  • Result +05%-3% profit uplift annually   

Pricing in a Multi-Channel, Multi-Brand or Multi-Geography Business 

Pricing across geographies, zones, channels, and brands drives operational complexity but can present opportunities for intelligent pricing techniques to drive out margin opportunities that react to Customer behaviors. Utilizing data modeling techniques, TPC’s derived pricing model helps drive optimal prices that leverage these differences in Customer behavior across brands, zones etc, to recommend optimal prices that drive margin or sales performance.

  • Optimized price differentials by brand, region, channel
  • Smart tooling: with price point attractiveness considerations (utilizing Pricing Psychology frameworks) to drive optimized product pricing
  • Result +2%-7% profit uplift annually

 

Optimal Markdown Pricing 

 using Smart Tooling and proven data science

Optimize Markdown prices for sell-through, margin or a combination of both using proven data science techniques. Whether provided as a service OR our small-footprint “Smart Tooling” approach, our proven Markdown approach employs leading edge science and maximizes Markdown performance.

  • Forecast sell-through and margin performance outcomes with powerful demand models
  • Proven approach that works and drives real business benefit
  • Smart tooling: quick builds, low training overhead, low deployment costs
  • Result +1.9%-6.8% profit uplift annually

 

Using Pricing Psychology Techniques to Maximize Pricing Presentation and Pricing Decisions

Customer Psychology plays a powerful role in how your Customers perceive your price competitiveness and perceive your brand. Utilizing Pricing Psychology techniques grounded in academic understanding can make a real difference to how impactful your prices are, how they are understood, and how they are perceived. These powerful principles and techniques can drive better online presentation, which has an immediate impact on customers and prospects (conversion), but ALSO drives better price setting itself to support revenue and margin performance.

  • Implementation of proven price presentation methods  to increase conversion
  • Incorporate academic understanding of psychological effects of pricing into BAU price decision making
  • Price point attractiveness codified (where appropriate)
  • Result +1.2%-2.5% profit uplift annually

 

A Price is way more than just a number! To win customers’ hearts, minds and wallets involves not just great rational analytics and thinking but a firm understanding and use of psychology in every price and promotions decision. Deploying this explicit understanding is extremely rewarding, while being both liberating and commercially advantageous to clients.

     — Dr. Iain Watson, Principal Consultant TPC

Dynamic Regular Pricing 

using Smart Tooling and proven data science

The TPC Dynamic Pricing approach consumes competitor data, KVI classification data and margin data to allow the end user to model different pricing reactions to Competitor prices in a semi-automated fashion. The KVI segmentation supports a strategic Pricing response that allows end users to understand the ideal competitive response. Our Smart Tooling approach means this can be delivered without long,  expensive software implementations and big license fees.

  • Maintain competitive position and stay on strategy
  • Leverage forecasting science to understand demand and margin impacts ahead of time
  • Proven approach that works and drives real business benefit
  • Smart tooling: quick builds, low training overhead, low deployment costs

Optimize Promotions  

using Smart Tooling and proven data science

Optimize promotional prices for margin, stock clearance, or cash sales using proven data science techniques and small-footprint “Smart Tooling”. Our promotions model allows merchants to optimize line level promotional prices, quickly, easily, and objectively.

  • Utilize optimization science for price generation
  • Forecast outcomes with powerful demand models
  • Smart tooling: quick builds, low training overhead, low deployment costs
  • Result +3.9%-12.1% profit uplift annually

 

Competitor Strategy & Customer KVIs

Determine where to compete with and how closely, by category, utilizing Customer driven Key Value Items (KVIs) and price response metrics. Our Customer driven KVI approach means retailers can intelligently and objectively understand which products really matter to their KEY customer groups when competing, and which product areas/products will drive strong price perception. Don’t follow competitors out of fear or routine, focus in on the customers and products that matter most, get the most bang for buck, save margin, and drive price perception.

  • Utilize Customer-led data science
  • Forecast competitor outcomes with powerful demand models
  • Smart tooling: quick builds, low training overhead, low deployment costs
  • Result +0.5%-3% profit uplift annually

 

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