Pricing vexes retailers

18 December 2012

NEW YORK: Around 70% of leading retailers are failing to make pricing a source of competitive advantage over their rivals, a study by the Boston Consulting Group has suggested.

Drawing on data provided by 72 executives from major chains, the US consultancy's report found that only 33% thought their company's pricing and business strategies were aligned in an "above average" or "excellent" way.

By contrast, a further 42% perceived results here as being "average" and 26% fell below even this standard, indicating that considerable room for progress remains.

For 34% of the sample, their firm was either "above average" or "excellent" with reference to influencing customers' value perceptions, while 31% were sub-par and 35% pegged this status as "average".

Turning to communicating prices and value in stores, a 45% plurality of featured companies stood largely in line with the wider norm, alongside 27% lagging behind and 26% claiming better achievement levels.

Scores for communicating these details externally proved somewhat higher, as 39% of organisations expressed confidence about leading the market, and 41% described themselves as "average".

Exactly 33% of contributors regarded their approach to promotions as being ahead of the sector at large when considering this issue, whereas 45% opted for "average" and 22% were even less complimentary.

Leveraging the web was another problem, as 42% of retailers had been "poor" or "below average" at exploiting channel-specific opportunities, and an additional 33% gave themselves an "average" rating.

Similarly, while 33% of operators respondents agreed their cross-channel pricing models led the industry. A rather greater 40% were largely on trend and 27% faced struggles in this space.

In keeping with this trend, only 30% of retailers currently effectively match prices to store clusters or zones, and 31% had fallen short so far.

One area of comparative success was private label pricing strategy, as 36% of chains believed they were above average, rising to 42% for passing on the cost of raw materials.

However, although 53% of the panel stated pricing should be among their two top priorities, just 38% felt it had attained this status, and a limited 34% boasted dedicated teams responsible for the matter.

"Basically, retail executives saw the crucial importance of pricing, but few of them said that their companies had figured out how to turn it into a means for consistently winning in the marketplace," the study added.

Data sourced from Boston Consulting Group; additional content by Warc staff