Pricing for the Holidays
Terms like “big data” and “revenue management” can seem intimidating to some small-business owners, but big data has revealed some great insights that are applicable to businesses of any size. Here are some insights small business owners can use this holiday season.
The Power of Price
One important thing big data reveals is that “price sensitivity,” or how much a customer cares about changes in price, drastically differs depending on the product and time of year. Here is an example which small businesses can use this holiday season.
“There are at least two types of customers shopping for Christmas gifts. You have what are called deal-seekers who are out early and are looking for the black Friday deals and for those deep discounts at the very beginning of the season. Then there are the procrastinators who are shopping on December 24th. Their priority is to get something and to get it as close to what their intended recipient wants, and to be able to do it quickly. So you can infer just from those two descriptions that there are different levels of price sensitivity for those two different types of customers.”
Capitalizing on Price Sensitivity
Smart businesses can make more money by approaching the two differently. Offer deep discounts at the start of the season to capture those deal seekers, and make sure to hold onto some inventory at the very end to capture procrastinators at higher prices.
The type of product also matters a great deal. There is a subset of products known as “key value items.” Key value items are the products that a retailer carries that best represent that brand’s price perception. So those key items are front and center in a consumer’s mind when they think “Oh, retailer X is expensive” or “retailer Y is a good value.”
Outside of those core products, customers don’t care quite as much. Keep a close eye on the price of core products related to online and local competitors, but see if there’s wiggle room in other places.
Talk to you soon. ~Norma