With drugstores anticipating a near-term uptick in foot traffic, there is particular urgency in knowing – and meeting – shopper price and promotion expectations while protecting price image.
Two recently completed recent research studies, one surveying retailers with RIS News[i] and one surveying global shoppers with EnsembleIQ and Progressive Grocer,[ii] yielded eye-opening insights into the retail landscape and shopper behaviors in the COVID era and beyond. The results in some cases quantified already evident trends, such as an abrupt shift to online channels and heightened shopper price sensitivity across every retail sector, including health & beauty. With drugstores anticipating a near-term uptick in foot traffic as they administer COVID-19 vaccines, and a longer-term uptick as shoppers grow more comfortable with store visits as pandemic infection rates taper off, there is particular urgency in knowing – and meeting – shopper price and promotion expectations while protecting price image.
Three in four shoppers said they encountered prices that they believed were arbitrary or unfair during COVID-19.
But there were other more surprising findings. It was startling to learn that three in four shoppers – 74% – said that during COVID-19, they had encountered retailers charging prices that they believed were arbitrary or unfair. Put another way, a large majority of shoppers believe retailers were price gouging. While this perception was most widespread among people shopping for groceries (at 55%), it was also significantly perceived in drugstores (29%) and health and beauty (27%).
It’s clear that many responsible retailers were not deliberately price gouging during the pandemic. Still, these widely held shopper perceptions are noteworthy, particularly since many of those shoppers who perceived unfair pricing say they will not return to shop at that retailer. While the overwhelming majority of retailers are acutely aware of statutes forbidding and penalizing price-gouging sellers in times of emergency, the root problem is that many do not have available science-based tools that keep up with fast-changing shopper, competitor and market behaviors. Without the ability to dynamically pick up on changing demand signals and shopper sensitivities, these retailers fall out of touch with rapidly changing shopper expectations. Even once-stable KVIs – those items that drive a disproportionate amount of price perception – have been shifting at unprecedented rates.
KVIs have become a matter of ongoing, dynamic analysis and refresh rather than a consultant-driven one-off deep-dive once every 1-3 years.
Retailers worldwide in multiple retail sectors, including drugstores and health and beauty, use DemandTec to gain real-time insights into shopper price sensitivities by channel, and down to the store-item level. The solutions reveal the items where prices are most important to shoppers right now and deliver price and promotion recommendations that focus where they will have the most impact. For these retailers, the approach to KVIs has become a matter of ongoing, dynamic analysis and refresh rather than a consultant-driven one-off deep-dive once every year or three. Leveraging combined real-time price sensitivities and competitive elasticities, these AI-driven models reveal where retailers need to price aggressively to keep shoppers engaged and attract new shoppers who are abandoning competitors that are less in tune with customers. Equally important, they also target exactly where in the assortment retailers can safely recover margins to sustain a long-term healthy business. Ultimately these retailers can better gain market share, support their price image, and achieve their desired business results.
61% of shoppers have stated they are more price-sensitive than pre-pandemic and trust is hanging by a hair.
True science-generated price recommendations fully factor in real-time demand signals, shopper price sensitivities, KVIs, competitive factors, business goals and price strategy. At a time when many shoppers’ wallets have shrunk, they are hyper-vigilant about prices. In fact, 61% of shoppers have stated they are more price-sensitive than pre-pandemic and trust is hanging by a hair. In this environment, retailers must ensure that they present prices that are in line with shopper expectations, and they need science to do that successfully and consistently.
If you get your pricing wrong once, it may be the last chance you have to get it right.
Your shoppers are in control, and they do not have patience for unfair and arbitrary pricing. It’s time to update your pricing playbook now. With a leading-edge price technology solution, you can elevate your price strategies, drive engagement with shoppers and maintain revenue. As consumer behaviors continue to evolve, next-generation AI capabilities will keep your pricing aligned with KVIs and shopper sentiment, while powerful analytics enable you to identify prime markdown cadences, develop promotions that resonate with shoppers, enhance your omnichannel strategy and protect your price image.
[i] “Smart Pricing Strategies for the Post-COVID World,” Tim Denman, Editor-in-Chief, RIS News, June 2020.
[ii] Navigating Current and Future Headwinds: 5 Critical Pricing Lessons from the COVID-19 Pandemic, Progressive Grocer, October 2020.
