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    Posted August 9, 2015 by
    jasonadriann
    Assignment
    Assignment
    This iReport is part of an assignment:
    Tell us the Good Stuff!

    It's a Good Idea - Price Optimization in Real Time

     

    Since food is a commodity and we treat it that way at the wholesale level, and since free market economics are all about 'Supply and Demand' shouldn't we take that whole concept and philosophy down to the street level? Well, we kind of do that now right? I mean when supplies are abundant and a particular fruit or vegetable is in season, the prices become stunningly low, and then at the end of the season it rises up again.

     

    Why? Supply and Demand, and somewhere there is a climate where such fruit or vegetables can grow in the off-season, South America and Australia for instance - opposite seasons right? Yes, but figure the cost to transport and hazards of perishables being shipped across the planet and every crop competes for field space, water, and farmers plant what's most profitable or what they think will be at the end of its growing season.

     

    Regular Pricing aligns everyday pricing with overall category strategies across channels in order to meet competitive pricing goals and internal business rules while generating additional revenue and margin – uniquely available to each retailer based on their shoppers, merchandise and market. A concerted effort may increase profitability in the short term, but to maintain margin point gains, sales data must be continually maintained by price optimization. It automates competitive price comparisons, and alerts merchants when existing prices deviate from competitive pricing rules.

     

    Price recommendations are based on a granular understanding of shopper demand (price elasticity); derived using evolved price optimization science, and; delivered at whatever level is required to compete effectively; channel, zone, chain, region, and store.

     

    This is combined with an industry-first competitive cross-elasticity model for a dynamic competitive pricing solution. Prices are most effective if they are reviewed quarterly. New opportunities need to be targeted to replace prices that have become too high. Industry experience shows that more than half of prices need to be changed at least annually. Maintaining a successful pricing strategy in a very dynamic industry requires ongoing dedication of resources. The rewards, however, can lead to robust margins and a sales force that trusts their pricing goals.

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