The (missing) ingredients of retail pricing

As the holiday season of 2014 starts in full swing, we see news reports of how often retailers are changing prices on their items, how price matching with online retailers is becoming more prevalent and how the effects of show-rooming will be countered. Its obvious that while retailers – both online and physical – change prices based on their internal analytics of customer behavior, the effects of competition are also an important element. Factors such as the following come into play: 1. Competitor shipping times and inventory for an item: How fast are the other retailers, especially the brick and mortar stores able to ship items out to retailers. What are their potential inventory levels given the demands of that item? 2. Closeness to the holiday dates: Closer the holiday, say Christmas, and customers preferences start to weigh risk in – price versus guaranteed delivery. 3. The tendency for immediate gratification: Items and conditions that are likely to trigger the need for instant experience are more important to service as soon as possible than others.  For example, how pumped are you about playing that  XBOX game on your new smart television? 4.  Offers such as bundling other products: The discount or free shipping thresholds (e.g. free shipping for items over $100), are likely to change the trade-offs in customers’s minds. However, in all of the above, the most important ingredient – and the one conspicuously missing – is the ingredient of “context”. Who is the customer? What is causing them to look for the item they are looking at? All of the […]