Personalized Pricing: A Conversation With Retail Analyst Kevin Sterneckert

Mihir Kittur, Co-founder and Chief Innovation Officer, Ugam,

pricing intelligence, price intelligence, personalized pricingGPS is most commonly associated with driving or navigation, but it could soon become an even more valuable shopper marketing tool. Earlier this year, Apple introduced its iBeacon technology to give retailers the ability to share customized messages about special deals and product information based on where customers are walking in the store.

The iBeacon is currently being tested at the Apple Store in Manhattan as well as a limited number of Duane Reade drug stores in New York. The device uses geofencing and Bluetooth signals emitted from specific shelves for a new level of “micro-location” targeting. At Duane Reade, the iBeacon can woo shoppers with impulse purchase incentives – such as 25% off new nail polish colors or offering umbrella sales on a rainy day.

When a pharmacy detects that a customer has entered the store, and “knows” from loyalty card data that she has a sweet tooth, offering her a coupon on Dove Chocolate makes sense. But sending her an alert as she is walking down the candy aisle is the optimal personalized offer.

Could retailers soon be making similar real-time offers to every customer? To explore this brave new world of personalized pricing, we sat down for another chat with retail analyst Kevin Sterneckert, a former vice president of research for Gartner. (Sterneckert previously shared his insights on why price matching is a self-defeating retail strategy that will make you weaker in the long run.)

pricing intelligence, price intelligence, personalized pricingQ & A With Kevin Sterneckert

Q: How advanced are retailers now with personal pricing and where are things headed?
KS: We’re seeing retailers today beginning to offer coupons or discounts to consumer classes – so for example, to my best customers who are female 39-45, I’m going to offer them 20% off all fragrances. Or I’m going to give 15% off all Dr. Dre Beats headphones to men 18-24.

Where I believe we’re headed is offering specific promotions to individual consumers. We see this already beginning to occur. For example, CVS Pharmacy uses a very sophisticated CRM approach and has been sending tailored custom coupon books to households. They are beginning to eliminate the printed coupon books and beginning to directly communicate with consumers relative to the individual household.

So these profiling systems begin to understand not just that you’re a college student, but you’re a wealthy college student and you prefer the school supplies that are in our location, but you also don’t use our over-the-counter drug section. So we’re going to encourage that over-the-counter deal during appropriate times for allergy, cold and flu or pain relief medicine. We’re going to probe to understand exactly what it will take to get you to buy in another category.

Q: Does a personalized pricing offer need to be done through an app or rewards card or is there another way?
KS: Retailers are using lots of ways, but there has to be some kind of engagement with the consumer to begin to learn consumer behaviors. Some are using an app, some are tying that app to a loyalty card, but it’s always an opt-in proposition. When you’re close to one of those stores, a message will pop up and say, “Hey, here’s an offer for you right now!”

Q: Do you think iBeacons will be successful at shopping malls?
KS: We’re just starting to see stores experiment with the beacons. Again, the real test of this will be: ‘How relevant will the retailer be with the consumer?’ If you’re only doing generic offers, then this is not really going to be popular. But if they apply some very intelligent listening solutions and truly personalize the offers, then the iBeacon has an opportunity to really take off.

The technology of the beacon isn’t what’s going to make it happen – it’s going to be the intelligence behind it that understands and extends relevance to the consumer in an engaging way.

(To read the rest of our interview, click here.)

The widespread adoption of personalized pricing would be a game changer: The luxury of always knowing what your competition is charging may eventually disappear. There will be a public price and then perhaps the real price for you – a customized calculation based on your demographic, spending history, brand loyalty, your competitive options on the market and a slew of other demand signals.

Right now, gathering Pricing Intelligence is relatively easy. It’s like being a gas station owner at a busy intersection. All he has to do to keep tabs on the competition is look out his window at the giant sign above the pumps. But what would the gas station owner do if those prices weren’t posted – if the customers were privately given the price beforehand on their smartphones?

The service station owner would need to figure out what his customers were willing to pay per gallon, based on the customer’s needs, desires and resources instead of just automatically matching the price across the street. Like any retailer, he would need to develop his own pricing demand model – beyond setting up rules responding to the other guy.

How these challenges will all shake out is uncertain. What is clear is that staying ahead of the competition requires alignment with the needs of the customer. Standing still is not an option.

To further explore the possibilities of personalized pricing, download a complimentary copy of our new eBook, “Pricing Intelligence 2.0: The Essential Guide to Price Intelligence and Dynamic Pricing,” for retailers and brands.

Download your copy today!

The Author:
Mihir Kittur is a Co-founder and Chief Innovation Officer at Ugam. He oversees sales, marketing and innovation and works with leading retailers and brands with insights and analytics solutions around their category decisions to improve business performance.


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