In a recent survey by Prosper Insights & Analytics, 41 percent of consumers stated that they are shopping for sales more often, while 30 percent reported doing more comparative shopping online. These findings highlight a growing resistance towards high prices among shoppers, indicating that retailers need to be careful with their pricing strategies to maintain customer loyalty while preserving profit margins. According to Matthew Pavich, senior director of strategy and innovation at Revionics, finding the right price has always been an art, but in today’s complex environment, retailers must also apply science, specifically artificial intelligence (AI), to inform their pricing decisions.
Consumers are currently facing a budget-conscious mindset due to rising inflation, credit card debt, and the return of student loan payments. This makes having the optimal shelf price more critical than ever for retailers. Setting the right price point is particularly challenging in categories like produce, meat, seafood, and trendy electronics. The rapidly changing demand for newly introduced products, limited sales history, and multiple influencing factors make it difficult to determine the optimal pricing strategy.
Misguided promotions can also impact retailers’ pricing strategies. Retailers often fall into three major pitfalls when it comes to promotions – relying on past effectiveness, vendor-initiated promotions, and lack of sophisticated analytics. Pavich emphasizes the need for retailers to use the right tools to understand the holistic impact of promotions and optimize prices across the full product lifecycle, including base pricing, promotions, and markdowns.
The use of AI pricing technology is on the rise, with 46 percent of retailers already leveraging AI to optimize prices according to the 2024 Retail CFO Outlook Survey. AI pricing technology enables retailers to make intelligent pricing decisions aligned with the product’s true market value, offering better, fairer, and more value-driven prices to consumers. By analyzing data from multiple sources, retailers can use AI-powered pricing software to address challenges and provide prescriptive decision-making on setting price points.
AI pricing technology gives retailers insights into buyer behavior and market dynamics, allowing them to understand all factors contributing to setting the optimal price point for a product. Despite misconceptions that AI pricing solutions prioritize profits over consumers, most retailers focus on the competitive advantages that AI provides by offering lower, more enticing prices on the right products. Ultimately, leveraging AI pricing solutions allows retailers to stay competitive, make informed pricing decisions, and meet the evolving needs and demands of today’s budget-conscious shoppers.
