Tell me a bit about Revionics. What service do you offer retailers?
Revionics is a global leader in price optimisation technology. For over 20 years, we have leveraged data-driven science and AI to support retailers with their strategies for regular pricing, promotions or clearance discounts and markdowns. Our solution produces pricing recommendations which drive the retailers’ strategy, to maximise profit and consumer loyalty.
What exactly is price perception?
Price perception is one of the key elements in defining customer loyalty, because its relates to how they perceive your pricing in relation to competitor pricing, namely do your customers believe they are getting good value for money? Is your price level adequate for the products and services you offer? Is the resulting price/value ratio more or less compelling than that of your competition?
What are the key drivers of price perception?
It is called perception because it is exactly that – subjective opinion not reality – and so it becomes difficult to determine drivers and therefore, to influence. For instance, a retailer may have lower prices than their competitors but are still struggling with poor price perception. Each retailer, depending on their brand positioning and promise, needs to identify the particular value drivers for their customers. This may well include an analysis of assortment in terms of carrying premium segments of the assortment or breadth of choice across categories), or store experience attributes including service, quality of furniture and lighting, etc. The actual price level on the relevant items needs to correspond to the rest of the value equation.
How can retailers address/change price perception?
Firstly, a retailer needs to understand what attributes are most important or memorable to customers. What are the references or “alarm bells”? It is important to use qualitative research to capture all the nuances, but it is critical to base decisions on accurate information. And by this, I mean the price elasticity index as a factual indication of how important an item is in terms of price perception. At the start of any client project, we conduct this type of analysis, because it is a key to defining the rest of the pricing strategy.
Does price perception mean dropping prices on as many items as possible?
Not at all and sometimes quite the opposite. The phenomenon of psychological pricing is judging the quality of a product by its price. For instance, if a customer is trying to choose a product in an unfamiliar category, they might take price as an indication of quality and favour a more expensive product. It’s not common in mass retailing but it happens.
For mass market retailers, the first step to improving price perception is to define a clear list of KVIs (key value items). It can vary by channel and by region and our solutions can manage this without increasing operational complexity for the retailer. Most of the time the actual list of KVIs is shorter than the retailer anticipates, so we are actually reducing not increasing the number of price aggressive items. The next step is to calculate the exact competitive index for each item by looking at both a retailer’s own price elasticity and also at competitive price elasticity to make sure that the retailer invests the right amount and only into the right items.
Why is price perception difficult to achieve and maintain?
If I take “only” the price element of the whole price perception equation (not including assortment, store, communication etc), it is a very scrupulous and detailed process involving KVI definition, identifying relevant competitors, target indices, etc. With the complexity of formats, channels and regions, it is hard enough to go through this process once, but in reality, consumer preferences and trends are changing faster than ever. Revionics solutions continue to optimise demand models every week, recalculating elasticity indices to make sure that all recommendations are made based on the most recent and relevant demand signals.
What can retailers do to help improve their price perception?
Retailers need to keep in mind: what is my customer promise? Who am I competing with? Which are the important products for my customers? The first answer is purely a human strategic decision, but for the others, every retailer should strengthen their expert judgement with data-driven science and supporting evidence. Implement a new approach or correct the current one, then measure. If you are going in the right direction, continue consistently – and here it is only with technology that you can achieve consistency, without losing responsiveness to market changes.
Why should retailers consider taking on Revionics?
We transform pricing from what is often a manual or legacy process into a digitized, actionable strategy, which improves financial and customer KPIs at the same time. AI-based technologies, and pricing in particular, are the only way to ensure competitive advantage for retailers. Today we refer to competitive advantage, while tomorrow we will reference competitive parity, because the number of retailers jumping on the wagon is growing as we speak.
Can you give me some examples of retailers that have benefited from Revionics’ service?
We have a lot of customer success stories published in the news and on our website. Among our customers are renowned retailers such as Ahold Delhaize US, the largest European cash and carry operator, Co-op Italy, a leading European grocery discounter, banners of ICA Group and many more – more than 90 brands globally. In each case, we measure the value we bring as an increase in revenue and number of units sold, and profit uplift. Retailers monitor how price perception improves or stabilises as the financial numbers grow and this is the best confirmation that we make a long term and sustainable impact.
Has the pandemic affected price perception? How or why not?
During 2020, as the pandemic went through various stages in different countries, we have observed – and helped our customers respond to – many trends. Initially, there was a lot of stockpiling which does not follow any trend for normal consumption, as the focus switched to availability and safety. As consumption became more normal, behaviours have rationalized. In some categories sustainable brands have gained market share, in others overall demand became more value focused as incomes decreased and consumer confidence dropped. When we analyse our solution usage, we’ve seen that the number of individual price changes implemented by our like-for-like customers increased by 50 per cent. It has been a highly volatile, abnormal year and the reliance on technology has become even more critical.
What’s in store for Revionics in 2021?
Our strategy for two new feature releases each year continues unabated, and with requirements for omnichannel fulfilment growing at speed, we are committed to optimising omnichannel pricing. We are working closely with ESL vendors – because electronic labels enable fully automated responsive pricing, and store automation is another focus area for retailers – so this is another important trend which we are reflecting in our roadmap.
How is Revionics addressing some of the challenges facing the retail industry?
Our company was created to respond to the challenges of the retail industry. We have always developed in line with the needs of retailers and their markets, and as an Aptos company, we can continue to do so. Our solutions are robust and scalable, processing billions of data points and making price recommendations in (near) real-time. We work hand-in-hand with our customers to always support them in their upcoming challenges, technological or commercial.
What would you say is the biggest risk for the retail sector, given the current climate?
I believe it is not retail but rather our society who is facing the biggest risk, speaking globally. For the UK market, Brexit is – in relation to the economy and consumer demand – a serious factor affecting consumer demand, operational and product costs and the reliability of the supply chain. As a technology vendor, we cannot reduce the overall impact, but we can help retailers to simulate and predict, in order to reduce the risks.
Pricing in the age of uncertainty calls for the alignment of processes, strategy, people and technology. In order to have a pricing strategy that is truly responsive in times of disruption and geared towards future profits, pricing fluency is needed. Retailers that have optimised their processes, strategy, people and technology see an average of 2-4 per cent profit lift above their non-pricing-fluent competition.
To find out more, visit: https://revionics.com/topic/pricing-fluency/
Revionics is an Aptos Company