Price is a major force in the retail industry. If not considered as a strategic capability, it will be a strategic liability. Although it is such an important area, surprisingly few companies manage pricing in a structured manner. Companies that manage their pricing effectively can raise operating margins by 2 to 6 percentage points.
To be successful, pricing strategies must be aligned with the overall corporate strategy, while taking into account the market environment, and should establish the customer’s desired price in line with the overall brand strategy. There are three main types of pricing strategies, each with a particular approach to pricing: cost oriented, demand oriented and competition oriented. Research shows that the most successful approach is a combination of these strategies adapted to fit the respective brand, category, channel format and market conditions, called customized pricing. Consequently, pricing becomes more closely connected to the category strategies, which in turn increases the need for meaningful insight and analytics.