Even if we all make mistakes from time to time, most drivers would consider themselves “driving fluent.” With years of practice and a heavy dose of structure, we’ve mastered the art of moving ourselves (and others with us) from one location to another. This certainly didn’t happen overnight, but with driver’s ed, a lot of practice, and a high level of trust in the established rules of the road and technology like GPS, everyone tends to get where they’re going without too much trouble.
Even so, very few of us are equipped to take on the best drivers in an F1 supercar. There’s a base level of capability needed to get about our day-to-day lives, but to be elite, it takes a dedication to excellence, a more advanced skillset, plenty of training and technology far superior to what you’ll find in the family minivan. There’s a measurable difference between serviceable driving ability and true fluency.
Retailers often have the same experience when it comes to their own pricing fluency. Most have an operational understanding of pricing that allows them to keep up with traffic. But in order to get through the gridlock and set out on the open highway, they need to actively commit to optimizing their processes and technology.
Let’s look at the four key areas to focus on to ensure the journey to pricing fluency is a smooth ride.
1) A plan, strategy or roadmap as a guide
Pricing-fluent organizations have centralized and data-informed strategies in place that serve as a map to achieving enterprise-wide objectives. Such retailers leverage all the data available to them that can inform a pricing strategy: market data, shopper data, loyalty insights, and advanced analytics, all to inform decisions around key item classification and promotion selection.
Beyond a robust strategy, pricing-fluent retailers also embrace their technology and the insights provided to constantly evaluate other strategies. They make informed decisions after the technology aids in considering the forecasted outcomes of several possibilities. Organizations working toward pricing fluency never allow a collection of unaffiliated pricing strategies to steer them in the wrong direction.
2) The driver, navigator, and others along for the ride
Just as the person behind the wheel of a car needs to be analytical and strategic, pricing-fluent organizations are driven by thought leaders and experts who have an acute awareness of surroundings, and who work to enforce their company’s pricing strategy. They work closely with merchants, buyers, and executives in their organization to ensure the business stays the course – always developing, adopting, and measuring the most optimal strategies to achieve goals. Their teams do not spend time manually executing merchant-derived prices in unsophisticated spreadsheets, nor perform menial or unanalytical tasks. These people are upwardly mobile value generators, playing a critical role to drive profit through pricing.
3) A clear process for an efficient trip without too many wrong turns
Even the best strategy (map) and people (drivers) can fail if road conditions are suboptimal. That’s why governance and compliance – the ability to course-correct and troubleshoot problems on the route that arise – are critical to the success of any pricing strategy. Pricing-fluent organizations don’t just optimize the pricing process to improve efficiencies and execute pricing more seamlessly – they also institute a rigorous process and have procedures in place to ensure strategies are being adopted, executed and analyzed appropriately. Additionally, the most fluent pricing teams also develop processes to increase the number of prices they are able to execute.
4) The vehicle itself for maneuvering to that final destination
Just as a car is critical to getting an endpoint on the map, the use of technology and your level of trust in its science is paramount for achieving pricing fluency. Most drivers on the road today are comfortable that their brakes will work when engaged, or that traffic lights will function as expected. They have confidence that the fuel gauge is accurate and that the car’s odometer will reflect their true speed. Pricing fluency requires the same adoption and trust.
Retail organizations need to go a step further from just adopting the best pricing solutions and analytics – they also need to inherently rely on it, incorporating it into their processes the way drivers do with GPS and other vehicular features. The ability to drive pricing excellence through the power of AI is also extremely powerful.
Becoming pricing fluent – a master of pricing nuances, responding in real-time to changes in market demand and consumer preferences – should be the end goal, the destination of choice, for today’s leading retailers. Each of these four key factors are absolutely critical in today’s dynamic and competitive retail landscape, and executing each one well will open up endless roads of possibilities for your company.
Matthew Pavich is the managing director of global strategic consulting for Revionics, where he develops data-informed, industry-leading pricing strategies, processes, analytics and organizational fluency to help retailers meet the challenges of today’s increasingly dynamic and competitive landscape.