en

Solutions

Jan 27, 2023

7 min to read

What Is Price Management for Retail eCommerce?

Price management software can be an invaluable resource for retailers everywhere. But what does it actually do, and how do you know which platform is the best fit for you?

Keywords

Digital Commerce

eCommerce

Price Management

Have you ever tried to walk a tightrope, balance on a balance beam, or juggle three balls in the air at a time?

You may have an idea what retail price management feels like. 

But unlike a circus act or street performance, price list management isn’t a sideshow—it’s one of the most important elements of retail eCommerce. And while it can be a balancing act, once you master it, your organization can reach new levels of profitability. 

You don’t have to go it alone. Performers have instructors. Gymnasts have coaches. And retailers have price management software to help them. Here’s everything you need to know. 

 

What is price management for retail eCommerce?

Retail price management is the process of determining the value of your product. Finding the optimal price involves more than just simple math. You need to know:

  • Business revenue and profits
  • Competitors’ pricing
  • Costs of production
  • Market trends and analytics
  • Value to the consumer

Effective price list management keeps a finger on the pulse of supply and demand, as well as trends not only in your industry, but in other industries and in current events. Who could have predicted that exercise bike and laptop sales would go through the roof during the lockdown—or that jeans and skirt sales would rise as we emerged? Businesses with good price management strategies, that’s who. 

Retail price management is a key part of building a winning sales machine. It’s also more than knowledge—you need processes in place to turn that data into pricing. As we’ll see later, that’s where price management software comes in.

 

The main components of a price

Price list management goes beyond the end price that you charge the consumer. You also need to manage these components:

  • Supply and demand. Material shortages, plant closings, increased competition, demographic shifts, new technologies, and economic fluctuations can all affect your supply and demand. This creates “pricing pressure” that drives prices up or down, and it’s essential to be able to predict and leverage this pressure.
  • Marketing and value. Your product’s value goes up and down based on how your customers perceive it, rather than how much it actually costs you to make. If they are willing to pay more, you can charge a higher price than your competition. After all, a Samsonite suitcase and a Louis Vuitton serve the same purpose. 
  • End-user transactions. Knowing when to apply discounts, rebates, and other incentives is a transaction-level decision, as supply and demand vary by location. Mismanagement at the transaction level can cost enterprise businesses hundreds of thousands, yet it’s often a neglected part of retail price management.

 

Retail pricing strategies

There’s more to product and price management than simply choosing the lowest price that allows you to still make a profit. Here are the most common retail pricing strategies:

  • Cost-based pricing. While you’ll still take into account the demand side of the equation, in this model your pricing is determined by adding a profit level to your base cost. This will give you the price floor and price ceiling for your product, or the lowest and highest prices you can charge. Most organizations will then set the optimal price somewhere in between the floor and ceiling. 
  • Competition-based pricing. It’s always smart to keep an eye on your competition, but if your product has similar features as others in a highly competitive market, you might choose this price list management strategy. This strategy can work well for newcomers to a market, but businesses will need to closely monitor competitor pricing while ensuring they still make a profit. 
  • Value-based pricing. This strategy puts the emphasis on how much customers value your product. It’s a bit more involved, as finding out what your customers are willing to pay takes research, data, and trial-and-error. It also doesn’t necessarily mean you’ll become the next Gucci—simply that you may be able to charge at least a little bit more than your competitors because your customers correlate your brand with an intangible benefit.

There’s a lot that goes into retail price management. With price management software, you can use elements of all of these strategies to optimize your product pricing. 

 

What is price management software?

Price management software is a tool that allows businesses to set the optimal price for their products. It will help you create, analyze, manage, and refine your pricing strategies, as well as track your current prices so you can see how they impact your margins and profitability. It will also allow you to share accurate, consistent pricing across all of your channels, an important part of product syndication

So why use price management software? The simple answer is that it can improve your revenue and profits, especially as you scale and add more products. More specifically, it can help your organization:

  • Give customers the information they want
  • Increase efficiency with automation
  • Quickly apply updated pricing changes across the board
  • Stay agile in uncertain market conditions
  • Reduce margin erosion
  • Reduce errors and delays that cut into profits
  • Scale complex, global pricing strategies

 

Finding the best price management software

Most eCommerce companies find that a retail price management system is a vital part of their digital ecosystem. You’ll want to look for one that:

  • Integrates with your customer relationship management (CRM), enterprise resource planning (ERP), product information management (PIM), and configure, price, quote (CPQ) solutions, among other technologies
  • Has defined workflows and a clear procedure for determining price changes
  • Can scrape data for the products, regions, currencies, and languages you need
  • Builds logical, flexible strategies based on demand patterns, elasticity, and more
  • Includes a self-service option to choose your own variables and create custom pricing
  • Alerts you to important price management developments
  • Brings everything together in a cohesive, easy-to-use dashboard

 

Integrating price management and product information software

A comprehensive price management system lets you ditch the spreadsheets and create a more holistic strategy across all of your locations, channels, and audiences. But it doesn’t exist in a silo. Price management software is designed to integrate with your tech stack, and can be a crucial part of your overall product information management (PIM). 

PIM software allows you to improve your data quality and consistency across all of your channels, making it a keystone of digital commerce. With the right information at your fingertips, including pricing, you provide a better product experience, and that provides a better customer experience. 

It’s all a part of what the Akeneo team calls product experience management (PXM), and it’s the foundation of what we do. Want to know more? Read more about PXM and learn how PIM can benefit your business.

Continue Reading...

Want to see more?

Join 40,000+ other e-commerce marketers and get proven strategies on email marketing, CRO and more