For today’s cost-conscious consumers, price matters. According to September’s consumer price index report from the Bureau of Labor Statistics, food prices are 2.1% higher than they were 12 months ago. By comparison, prices rose 4.2% over the previous one-year period in 2023. Looking at one essential item: egg prices rose 4.8% from July to August and 28.1% from a year ago! The reality is consumers are facing some of the highest food costs they’ve seen since the 1970s, which means they’re looking at price closer than ever.
As customers remain increasingly concerned about the growing cost of groceries, right-pricing based on a set of automated rules (rules-based pricing) becomes especially important in the world of grocery and supermarket retailers.
What is rules-based pricing?
Rules-based pricing is a dynamic pricing strategy that allows you to use a series of pricing rules to create your own pricing strategy. With it, you can right-price to meet fast-changing consumer behaviors and market conditions.
Why automating price rules can improve customer loyalty
Without the automation of price rules, your customers may get mixed messages about your prices.
In today’s inflationary environment, right-pricing ensures customers can easily recognize the value of what they’re purchasing making it clearly visible on a shelf tag, ESL, or online. To do this, you need the ability to manage price rules across the categories in your stores.
Automatically applying a set of prioritized rules based on your category strategy while narrowing rule constraints to specific zones, stores, or items based on their demand characteristics will allow you to be transparent about pricing and set it to match market and competitive trends.
How to right-price with a rules-based pricing strategy
Owned brands must be priced to reflect a better value than national brands.
If you have premium private brands, they need to be priced accordingly. When you can forecast alternatives and determine which price gaps drive the best-desired consumer behavior, you can encourage the desired purchasing behavior.
Unit pricing needs to reflect a better value based on size.
Larger sizes of the same product need to be priced to reflect a better value per unit than smaller sizes. For example, if dust is gathering on the 48oz or 68oz olive oil, it could be because the larger-sized products aren’t offering a better value per unit sold. Visibility into your product relationships will help you maintain and apply the right-pricing strategies to products within a category.
Check to see if flavor options within the same product size are priced equally.
Line rules will help you control the price of a line based on the cost of a specific item within the line so you can make sure nothing in the line is priced higher than others.
Ensure products are competitively priced.
This one is important. Being within pennies of a competitor’s price works to your benefit. Applying specific competitive rules based on store location, competitive intensity, or product characteristics, including profit drivers and key value items, will enable you to react in real time and keep your prices competitive.
Utilizing these rule sets strategically, and automatically adjusting prices for all products in a category when the market changes—cost changes, competitive changes, or assortment changes—means you can right-price to create a better customer experience.
How a rules-based pricing solution can help
A rules-based pricing solution allows you to set pricing that meets how customers respond to price dynamically–is it value-based, too high, or too low? —so you can change it quickly. It looks at past sales data, customer behavior, and market conditions to determine optimal pricing levels that maximize revenue and profit margins. With automation, you can improve your base pricing processes.
Right pricing can be a factor in maintaining or improving pricing. We can help you with the solutions and strategies to get your prices right. Contact our experts today.
