In many product categories, consumers expect there to be differences in price from one channel to another.

We may be in the midst of one of the most divisive periods in modern political history, but in retail we can all agree on this: The pace of change has never been faster, and it continues to accelerate. Nowhere is this more evident than in the arena of pricing. Amazon alone executes millions of price changes daily, creating enormous pressure on retailers, particularly in e-commerce, to become more agile in their pricing practices.

Let’s start from the viewpoint of the consumer.  The financial crisis of 2007-2008, growth of e-commerce and the rise of the Gen X and Millennials have changed the face of retail.  Today loyalty is a long-lost luxury for the retailer, and consumers are rapidly embracing digital commerce, which is leading to increased challenges for brick-and-mortal retail.

Cheryl Sullivan, Revionics

Cheryl Sullivan, chief marketing and strategy officer, Revionics

Today only 6% of consumers claim loyalty as the top driver when making their purchases, whereas a whopping 70% of consumers say price is the most important factor for on-line purchase driver.  To add salt to the wound, only 12% of consumers remain loyal to a product brand, according to the 2017 “Consumer Trends Report” from Kibo Software.

Next, let’s look at the hostile competitive landscape for retailers.  They no longer compete with the competitor down the street but with competitors of all shapes and sizes worldwide and can vary across channels.  The threat from Amazon continues to intensify with their foray into private label, grocery and apparel and even penetration into brick-and-mortar.


Is dynamic pricing the magic answer for retailers who want to remain competitive—yet profitable—in both their online and physical storefronts?  This is a topic of spirited debate, including a panel that I recently participated in at Retail Week Live in London.

First, let’s consider what dynamic pricing is—and what it is not. A retailer pricing dynamically is not changing prices on all items daily or even intraday. How often a retailer reprices, and on which items, should be a function of their customers’ shopping behavior, price elasticity for individual products, and other market dynamics such as competitive pricing and increased costs.  It should also factor in the retailer’s ability to implement price changes across channels. Having helped retailers successfully implement optimal dynamic pricing for some years now, it’s my view that dynamic pricing means the retailer makes surgically focused price changes on the items that matter to its customers at a speed that keeps the retailer competitive in its chosen markets and channels, all while adhering to the retailer’s pricing strategies, business rules and price image.

I disagree strongly with the school of thought that equates brand consistency with identical prices across all channels.

For some retailers, this may indeed involve intraday price changes on some items, while for others it may be at a daily or even weekly cadence. There is much discussion around how customers feel about having prices change so frequently and the risk they will view data science as “voodoo” that will somehow take advantage of them.  In reality this could not be farther from the truth.

We recently commissioned a consumer study with Forrester Consulting.  The findings revealed that 78% of consumers felt it was fair for retailers to use data science to help determine price changes as long as they felt prices were appropriate and something they were willing to pay.  In our view, this fact is highly evident with Amazon.  Consumers are keenly aware that Amazon prices change rapidly, but they remain very loyal based on the fact that they believe they will get a fair price from Amazon regardless of frequent price changes.

Yet most retailers don’t have Amazon’s deep pockets and massive infrastructure, so how can they meaningfully keep up?  Fortunately, today’s agile price-optimization solutions cost-effectively generate detailed shopper price sensitivity and competitive elasticity analyses to tell retailers when and where to update prices for optimal business impact. The underlying machine-learning tools can separate true demand signals from background noise and pick up real-time shifts in competitive, market and shopper trends to keep the retailer’s pricing current, competitive and relevant.  The result: a fair price to consumers while increasing demand, improving top-line sales and maximizing margins. This new-age science is both predictive and prescriptive, allowing retailers to simulate the impact of multiple pricing strategies tailored to increase demand, improve top-line sales, and grow margins while prescribing the actions necessary to operationalize pricing at the optimal frequency.


With current, informed and highly targeted strategies, a retailer can implement those price changes that give customers responsive prices where they matter most while still meeting business targets. And because modern price-optimization solutions prioritize suggested price changes based on their impact on the business, the retailer can implement those that matter most based on their ability to execute price updates, both in-store and online, while deferring others.

Which brings us to another topic of fierce debate: pricing across a retailer’s various channels.  Retailers struggle to present “one face” to their customers to ensure consistent brand identity and price image. But I disagree strongly with the school of thought that equates brand consistency with identical prices across all channels.  Although there was a day when consumers expected the same price between online and in-store, those days are gone.  Today’s consumers have been raised on discounts, have learned to wait for them and know which channels are going to provide them with the best prices.

The findings of the Forrester study mentioned above also revealed that consumers do expect prices to be different between online and in-store, and that expectations varied depending upon the category. Depending upon the type of merchandise, 59-79% of consumers said they expected prices to be different between online and in-store, with higher expectations for cheaper prices online.  Grocery was the only exception where consumers continue to expect items to be cheaper in stores or the same price online almost equally.

Retailers do not need consistent pricing but what they do need is a coherent omnichannel pricing strategy.  Our scientific models confirm this behavior and show that shoppers’ price sensitivities for the same item vary across channels.  They also reveal that they are only price-sensitive to a subset of the items within a retailer’s assortment.

After repeatedly digging into the implementation goals, challenges and impact with retailers across a range of sectors, I know that a proven ROI case exists for using more frequent or dynamic pricing for bricks-and-mortar, online and omnichannel retailers alike.  The frequency of updates and the number of items updated varies widely, but the end result is the same: cultivating and continually improving the ability to offer meaningful, responsive but fair prices to customers on the items that matter most to them, while avoiding the race to the bottom and its inevitable destructive impact on margins and the bottom line.


Dynamic price optimization is here to stay. Retailers who address it proactively are those who not only survive but also thrive in the fiercely competitive environment today. Is it a silver bullet?  Not in isolation, as dynamic pricing neither defines a price strategy nor establishes a price image, but it does serve as a powerful and even indispensable tool to execute and achieve your strategic objectives and enhance your image.

While it’s not a silver bullet in isolation, price optimization is a foundational element for a retailer with an eye on long-term success, and one that your successful competitors will be fully exploiting. Agile, cloud-based technology can be used at any frequency a retailer chooses and is equipped to execute. Those that use it to compete in a dynamic fashion to ensure customers have a fair price at the point of purchase while remaining competitive and profitable will be those who remain relevant in our retail world.  The time for talk is over, and the time for action is now.

Revionics provides price-optimization software for retailers.