You’ve probably heard it by now, data is the new oil. Organisations are increasingly turning to data and its cousin, analytics, to find actionable insights that will give them the upper hand in a competitive market.
But how to get beyond the hype as the best analytics are only as good as the decision-making process it feeds into?
With that in mind, here are four things about pricing analytics you must know.
1. The Future is Now
Pricing analytics have come a long way over the past decade and today’s solutions help management teams analyse the data they are collecting better than ever before. Gone – well, almost – are the days of battling through systems integration issues. Instead, we have reached a point of near-real-time insights which drive sales uplift by 20 percent or more.
This data revolution is not just happening in pricing analytics, it is happening across the value chain. According to IDC Manufacturing, the market for advanced business analytics is now more than U.S. 32 billion and it is just beginning to grow as next-generation mobile networks and Internet of Things (IoT) sensor deliver more data than was ever thought possible.
What does this mean for management teams? Access to high-quality data as transactions occur will allow them to micro-target their pricing strategies based on facts and not hunches.
2. End-to-End Data is a Reality
It used to be that organisations needed to manage the ‘black holes’ in their data chain. These gaps could be due to inventory in transport, entry errors, or even a backlog entering paper-based invoices into information systems.
However, many organisations are rapidly approaching a ‘seamless’ data chain – even if the data is housed in different systems at different points in the value chain. This is largely due to the tremendous attention which has been placed on integration, either through APIs or data merges, of the data captured by different systems.
As such, it is now possible for a chain store to peak into its POS system either at the level of an individual location or across its network of stores and then tie that information with inventory levels in its distribution centres as well as analysing the demand scenarios based on the activities of the marketing team.
This sort of end-to-end data capture was nearly unthinkable in the not so distant past and when used right it can lead to better decision-making, execution and results. In fact, it is now relatively easy to run and review the impact of pricing experiments – even for brick-and-mortar retailers.
3. Analytics is Now Forward-Looking; At Least It Should Be
Most people expect their pricing analytics system to effectively capture and interpret sales history. However, the real breakthrough is when these systems become predictive. This happens when systems merge proprietary historical data, which is publicly available information, and artificial intelligence (AI) to create data models about the most likely scenarios in the future.
This is powerful stuff as it can be used to not only predict which moves to make internally but can also help decision-makers to predict the most likely moves by competitors as well. As you can imagine, this can be a powerful tool – especially when it is specific to the dynamics of your business.
The lesson is that management teams shouldn’t expect their analytics suite to be a ‘one size, fits all’ solution. Instead, if the purpose is pricing analytics, then the software used to perform this task should be geared for it. Doing so will not only yield better results but it will also cost less to integrate.
4. Pricing Analytics Will Bring You Closer to Your Customers
The importance of pricing isn’t just in the numbers, it’s in how you connect with customers. This is what makes a pricing analytics such a powerful tool for today’s retailers.
Granted customer loyalty isn’t what it used to be, but those retailers who consistently hit the price expectations of their customers can forestall base erosion in an increasingly competitive market. The trick is to use the insights provided by pricing analytics to better understand customer needs and then apply this knowledge in the market place. The benefits include increased customer visits, higher average checks, and the Holy Grail of retail in the age of Amazon – growing your market share.
It’s not a stretch to say that pricing analytics can transform a business by helping to reduce costs, increase inventory turns, and even capture a competitive edge in the market. The one potential downside is that an increasing number of organisations have implemented some form of pricing analytics solution.
Whilst this points to the necessity of pricing analytics, it also indicates that the movement has become something of an arms race. The edge is not to onboard a pricing analytics solution and then consider the job done. Instead, leading organisations understand they need to integrate their analytics into their decision-making process. Only in this way can they have a meaningful advantage over the competition.