Let's review a common process of waning customer loyalty due to suboptimal pricing and the gradual return of these customers to the store with automated pricing optimization. Step 1. Overpricing specific products.
For some time, the store sets customer-perceived excessive prices for a significant portion of products.
Reason: Without quality automation, it is challenging to effectively manage the prices of a wide assortment across thousands of SKUs while promptly tracking all competitor, demand, and internal factor changes.Step 2. Disappointment and switching to competitors.
Some customers realize they can find better prices for important products at competitors, and they stop visiting the store, or visit much less frequently.Step 3. Lowering over high prices to the optimal levels.
On this step, the specified grocery chain launched dynamic pricing. Dynamic pricing platform made the following required actions:●
Set enticing KVI prices, compared to the retailer's competitors.
KVIs are products that are frequently purchased and for which consumers seek the best deal price. READ MORE●
Lowered the over high Foreground and Long Tail segment prices to optimal levels. Step 4. Communicating the "new good deal prices" to customers.
Customers return to the store (either by chance, due to effective advertising, or for "anchor" items with agreeable prices).
The new optimal prices create a perception of the store being "advantageous" and having "excellent prices." Step 5. Increase in store visits and profit growth.
Returning customers start visiting the store regularly again, considering it beneficial.
Here is how this process transpired for the specified grocery chain: