Effective Pricing in Retail Critical For Customer Loyalty
Only a small percentage of retailers are using advanced, data-driven approaches to power their pricing and promotions.
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A new report from RELEX Solutions and Incisiv looks into the current state of pricing and promotions in the retail sector across the US, UK, France, and Germany. The study highlights the increasing importance of strategic pricing and promotional strategies as both retailers and shoppers navigate an economically challenging landscape.
The report, based on a survey of 179 retail executives, underscores the growing pressure on retailers to adapt to heightened price sensitivity among consumers.
Findings indicate that 93% of shoppers now demand more value from their spending, with 84% stating that price is a crucial factor in their purchasing decisions. In response, 87% of retailers used more aggressive discounting strategies to maintain sales volumes and customer loyalty.
Key findings include:
- Promotions drove $1 trillion in sales in 2023: With economic uncertainty, rising inflation, and shifts in shopper behaviour, promotions became an essential tool for retailers to attract and retain shoppers in 2023. 87% of retailers anticipate maintaining or increasing promotional efforts in 2024.
- Only 12% of retailers are using advanced analytics: Only a small percentage of retailers are using advanced, data-driven approaches (real-time data, advanced algorithms, and AI) to power their pricing and promotions. The lack of adoption impacts retailer agility in responding to market changes and changes in shopper behaviour.
- The number one challenge impeding maturity is data quality and integration: Without accurate, unified data, retailers cannot effectively optimise their promotional strategies. Cultural resistance is the number two challenge in improving maturity.
- 37% of retailers use spreadsheets to manage promotions: They are using spreadsheet and legacy systems to drive execution, which lack the agility and integration needed to respond to changing market dynamics with speed and precision.
The study emphasises the need for retailers to break down silos and integrate their pricing and promotional capabilities. Unifying pricing and promotions and moving to an effective technology stack, it estimates that retailers could achieve an additional $450 billion in incremental sales.
“Consumers today are more aware of and motivated by prices than ever before. Retailers must evolve their pricing strategies to not only respond to this demand but to lead with tools that are faster, smarter, and more integrated across their entire operation,” says Jeff Bulger, Strategic Principal, RELEX Solutions.
“Effective pricing is no longer just an option – it’s a critical driver of both customer loyalty and profitability in today’s retail landscape.”
“What got retailers here won’t get them much further. Driving $1 trillion in sales on the back of outdated analytics and technology platforms highlights the immense growth potential that’s possible,” says Gaurav Pant, Chief Insights Officer at Incisiv.
“The path forward isn’t just about technology; retailers also need to overcome cultural inertia and unlearn years of legacy behaviour.”
