Does your company operate in several cities? Launch zone pricing, a pricing strategy that increases profits and sales instantly.
What is Zone Pricing
Zone Pricing is a pricing method that takes every location as a different market with a tailored pricing strategy. Every local pricing strategy considers the location's unique characteristics:
Shopper demand patterns,
Competitive environment and competitors' pricing behavior,
Your company's target in that region, such as market share raising or profit maximization,
Inventory turnover, stocks in local warehouses, costs, supply dates, suppliers conditions,
List of suppliers in every region, different scenarios of supplier choosing, various methods and formulas for costs calculation,
Items' roles in the consumers' basket, such as KVIs and profit drivers.
As locations, we can take different cities, towns, city districts, parts of the country, countries. Zone pricing is also known as Localized pricing, Location pricing, Geographical pricing.
What companies leverage Zone Pricing
Generally, Zone Pricing is essential for:
● store chains, including multichannel ones and located in a few cities, ●e-commerce stores, delivering goods within a few geographic areas, including those who have warehouses only in a headquarter city.
What do companies achieve with Zone Pricing
Tailored pricing strategy for every local area considers a local environment and significantly improves business results, such as gross margin, revenue, margin. Results depend on the specifics of your company and its targets in local markets.
Without zone pricing, a retail company loses customers and profits:
1)The company loses profits on some goods.
Example. You have calculated a price of a good, focusing on Milan. There are large competitors in Milan with a low price strategy. Your price is 100€, and you get the optimal level of sales and profits in Milan with that price. In Venice, your Milan competitors do not work. Local competitors have an average price of 130€ for this good. Your price is 100€, and you are satisfied with the revenue. But with a price of 125€, you would sell the same quantity of the good, and 125€ would still be the most attractive price in Venice.
Thus you lose a margin of 25€ on each sold item in Venice.
2) The company loses sales and consumers on other goods.
Example. You have calculated a price of a good, 100€. This price ensures you the optimal level of sales and profits in most geographic areas. A major retailer entered the market of Milan and began to increase its market share fast. The same item costs 95€ in his stores in Milan, and the competitor ran an ad campaign.
Thus you lose sales and consumers in Milan because consumers go to the new competitor.
Leveraging actual characteristics of a specific region for each product segment, brand, and even a particular product, you will be able: ● for one part of SKUs, raise margins, without sales decreasing, ● for the other part of the assortment, increase sales or stop sales decreasing.
With Imprice, your pricing specialist can handle all this pricing process easily for any number of cities.
Our clients' average results of zone pricing launching:
Number of orders growth
Average Order Value growth
Gross margin growth
A hint: Combine zone pricing with performance marketing optimization. For example, use regional feeds in PPC advertising to load zone prices directly into your local ads, particularly for KVIs.
How zone pricing works with the Imprice platform
● Imprice calculates optimal prices for your stores in each region.
● Pricing rules consider your strategy in a specific region, regional competitors' activities, other essential factors and restrictions.
● When important factors change, the platform automatically recalculates prices, uploads them to your website and ERP System, and sends them to your stores. The minimum interval for recalculating prices is every 10 minutes.
● Your company maximizes business results every minute, in each region, for each item, brand, product group, gaining all possible profits and sales.
With our agile pricing tools, you can automate any pricing rules, consider any business restrictions and optimize your pricing at the region- or even store-level.
Examples of pricing custom needs you can implement with Imprice easily:
— It's clear how to launch zone pricing for two or three cities. What if we have stores in 40 cities and towns?
— And we are operating in a hundred locations.
— And our chain covers almost 800 locations. We don't know the market factors of every small town.
With Imprice, you need less than one hour to set up zone pricing rules. Example:
You have set up the optimal pricing for Milan; it considers Milan competitors' activities and other important factors. Imprice recalculates prices every 10 minutes.
There are also your stores in Rome and 40 midsize communes.
● For Rome, you set up zone pricing, considering all essential specifics of the city. In two clicks, copy the rules from "Milan prices" to "Rome prices" and make changes to them, if required.
● For midsize communes, you make a simplification. You set prices for a commune N as a formula based on Milan's prices with the necessary adjustment: markdown or markup, setting in percentage or fixed.
For example, Commune N's price = Milan price + % markup equal to logistic costs compensation for N.
Setting up zone pricing for all 40 communes this way takes less than one hour. Your company starts to receive additional profits or increase sales immediately.
— I adjusted the pricing in Milan according to our main competitors' prices! But these competitors do not work in Munich. In Munich, a local chain competes with me; however, only a half SKUs of our assortments are the same.
1. Set up Munich competitor's prices collecting by Imprice or by integrating Imprice and your competitors' prices vendor.
2. Create a new price type in Imprice, "Munich price".
3.For items that your competitor has in the assortment, in two clicks, copy pricing rules from "Milan Price" to "Munich price". In these rules, change the "top competitors": remove Milan competitors, put the Munich one.
4. For items without competition in Munich, use other parameters for the price calculation. For example, it can be equal to Milan price +% markup for logistics. Another option is AI pricing based on demand sensing.
The setup is complete. If you've launched automatic loading of the Munich competitor's prices into Imprice, all zone pricing settings take no more than an hour.
— In Amsterdam, I sell part of SKUs from my warehouse, and when it's out of stock, from the warehouse of a local supplier partner.
The prices this partner offers me are higher than my cost price. During promotions, sometimes our company doesn't have time to track changing our warehouse to partner's, so we sell with losses.
Such losses are easy to avoid.
1.Set up automatic loading of partner prices into Imprice. Set up pricing rules for Amsterdam.
2. Complete! When a warehouse changes, Imprice will automatically recalculate prices considering the new cost prices and the minimum allowed margin.
If you have several partners with the same SKUs, Imprice will automatically select the best offer according to the criteria you specify: price, delivery time, stocks.