Pricing in retail: calculations — to robots, profit — to retailers

Forming the right price for a product is one of the key elements of a successful business. But how to accurately determine the right price so that it is profitable and competitive? How to take into account all the factors influencing its formation and allowing to ensure the profitability of the company? Let’s figure it out!

Most Common Problems in the Pricing Process

The retailer often faces a number of challenges in the pricing process, including:

  1. A large amount of disparate monitoring data that is difficult to put together.
  2. The complexity of the process.
  3. Errors caused by human error.
  4. Product sensitivity to markup.
  5. The need for regular control of goods of the first price and goods-indicators.

Today, despite all the advances in digital technology, many companies manage pricing with methods and applications that do not meet the requirements and capabilities of today, and spend significant resources on the maintenance of entire departments involved in monitoring the information necessary to form the cost of products. 

But imagine that you have found an assistant who is able to take care of most of these problems, relieve staff from a number of routine processes and reduce the number of errors that occur in the pricing process. How is this possible? Let’s talk further!

How to reduce errors and reduce labor costs

Pricing based on a manual or intuitive approach may be acceptable if a single price is applied to all stores in the network. But the determination of the cost of a particular product is influenced by a number of factors, including the format of the outlet, regionality, competitive environment, and even the location of the store within the same city. That is, to make a decision on the cost of goods, it is necessary to take into account a lot of input data.

The lack of this global data in one place with quick access to it complicates monitoring, increases the likelihood of human error and the complexity of the pricing process. 

Pricing management systems specially developed for this purpose help to solve these problems. These modern smart software solutions are a single “management window”, the backstage of which is a huge, deep database with information about stores, products presented in them, as well as the history of changes in the cost of these products.

The user can view the history in one click or sort the stores according to the required formats for efficient work with them.

In addition, it has quick access to data and analytics for a certain period, which allows you to see the elasticity of demand and understand how price changes up or down affected sales of a particular product.

Thus, decisions to reduce or increase the cost of certain products are made by the retailer based not on assumptions, but on a qualitative analysis of the history of changes and the impact of elasticity on the company’s profit for each product. 

And the reduction of manual intervention in the pricing process entails a reduction in the number of errors caused by the human factor. Read more about the benefits of using automatic pricing systems below.

How automatic pricing systems works

A significant advantage of modern systems is a significant share of automation of pricing processes. Such automation minimizes the risk of human error and can significantly reduce labor costs. But for the system to work effectively, it is necessary to set up certain rules, namely:

  1. The user can set certain rules for each category of goods, and the system will automatically recommend the price that falls under these rules. These rules can be both simple (for example, 10% of the cost price) and deep. It all depends on the amount of input the user gives to the system. 
  2. Segmentation by region (at the level of countries, cities, etc.) or by store format (premium, discounters, standard segment, social, etc.) allows you to choose the right behavior model for pricing and set certain rules for its formation.
  3. Having information about the prices of direct competitors (from paid data monitoring systems or from open sources), the user can upload this data to the system and set the rules «price is not higher than …» or «price is % lower than …» at the competitive chain. 
  4. The system supports automatic psychological rounding of prices, for example, setting them at the level of «9.99», which allows you to effectively use the psychological attractiveness of the numbers displayed on the price tag.
  5. The system stores information about purchase prices and will not allow the user to accidentally lower the cost below the purchase price. 

After the user sets the desired rules, automation closes the bulk of the pricing process. That is, the system takes on most of the labor costs for selecting and studying information, correcting tables, writing formulas in Excel and offers the user the best price, depending on the conditions set by him. In turn, the user either agrees with the proposed figures, or can make the necessary adjustments.

In addition, it is possible to transfer ready-made data from the pricing system to ERP in the context of each store, cluster, etc.

It is important to note that thanks to special dashboards, all information contained in the system is available to the user not just as separate figures and tables, but as graphs and reports in any form convenient for the user.

Do you want to learn more about the possibilities of automating retail business processes, use consulting or audit services? Send us an email or fill out the form to request a call back. Our consultants will gladly call you back.

Monitoring of goods of the first price and goods-indicators: why is it needed and how to simplify it

For competitive pricing, it is important to monitor the goods of the first price, as well as indicator goods by which consumers determine the price segment of the network (for example, chicken filet and eggs). The list of such products is quite large, but their monitoring must be carried out regardless of the format of the network or the segment it covers. Unmotivated decrease or increase in the cost of these goods adversely affects the profitability of the business.
For products of the first price, indicator products and KVI, it is also possible to create separate levels of rules in the system. A multi-level system will automatically work out all possible cost options for each product and recommend the best one, which will be based not on expert opinion, but on accurate analytical data.

Promo and sales: the task with an asterisk in pricing!

Promo – are an effective tool for bringing a new product to the market and increasing sales. But for successful forecasting and promotion, it is necessary to take into account many factors, including the sale of similar promotions in competitive networks in the same period.
Sales are one of the most relevant ways to remove goods from the assortment. And each network has its own rules governing this process. Usually, the margin is first reduced, then the margin is removed and the goods are sold at cost, and in some cases below cost. Over time, depending on the number of balances, the amount of the discount may increase, and the cost may decrease.  
The automatic pricing system works with these features in mind. You can set your own rules in the system and it will recalculate the cost of the item depending on the stock and the number of weeks in order to predict and sell out the stock before the date of the item’s withdrawal. Moreover, it is possible to set separate conditions for each store format, region or segment. Thus, the entire pricing process takes place in one window.

10 Reasons to Use an Automatic Pricing System

Automation of the pricing system gives the retailer the following benefits:

  1. Reduction of labor costs for pricing due to the performance by the system of many functions that were previously assigned to the staff.
  2. Improving the quality of pricing, reducing the number of errors, which entails an increase in the customer satisfaction index.
  3. Increasing profits through the formation of win-win prices for goods.
  4. Improving the quality of price control of the KVI group, first price goods, as well as indicator goods.
  5. Saving labor costs for monitoring through connection to e-commerce or paid market data systems.
  6. Taking into account the psychology of pricing in the formation of the cost of goods.
  7. Ability to set up rules for different distribution channels, price calculation taking into account the format and region. At the same time, it is possible to separate e-commerce and offline purchases.
  8. Functionality allows you to rely on the attributes of the goods when pricing.
  9. Possibility to prioritize pricing rules, for example, other pricing rules do not apply to promotional goods.
  10. Qualitative analytics, allows you to clearly see how the buyer will react to price changes within a category or a specific product. Such analytics are available both at the regional level and at the level of one store or a single item.

Atriny`s team specialists have been working in retail for over 15 years, developing their own software and implementing solutions from well-known vendors that effectively help our clients build and automate business processes.

Got questions? Ask them to our consultants: write to the mail or fill out the form below to order a callback.


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