As a lever used to in-crease profitability, pricing has an unpar-

alleled ability to boost profit-ability when leveraged strate-g i ca l l y. In deve lop ing economies, price has an even more critical role to play since the marginal value of money is higher than that typically found in advanced nations.

The exploding number of brands, channels, and dis-tinct customer segments means that many companies must now juggle hundreds of thousands—in some cases, millions—of price points

while seeking to maintain consistent pricing strategies and communications across an ever-increasing number of products and outlets.

When it comes to putting a price tag on the final product, it's not uncommon for lead-ers of small and medium-sized businesses to miss the importance of spending time

to figure out the right pricing model. The Economic Times Pricing Strategy Summit drew on the learnings of leading industry practitioners as they deliberated on the future of pricing strategies in India as they analyzed the im-pact of recent policy and structural changes on the business ecosystem.

AN ET EDGE INITIATIVE

As written by Karan Karayi � Letters may be addressed to Karan.Karayi@timesgroup.com

As consumer expectations evolve, an increasing number of retail companies are taking a closer look at the way they approach their pricing strategy

With the world churning out more data than ever before, how can we lever-age predictive analytics to enhance revenues and the customer experience?

To put into perspective what we mean by ‘more data than ever’, nearly 2.5 quintillion bytes of data is generated every day. Ama-

z o n a l o n e m a k e s $258,751.90 in sales every minute. Retailers who lever-age the full power of predic-tive analytics could increase their operating margins by as much as 60%.

Currently, less than 0.5% of all data is ever analysed and used, so the potential here is as wide as your im-agination can go. It allows for far more accurate forecasts based on predicted buying habits of old, new, and stray-ing customers. Your pricing can adapt to competition in matters of seconds, recom-mendation engines can go beyond generalisations and averages, marketing budgets can go down to a fraction of what they were. We’re talk-ing hyper-efficiency at every step of retail operations.

What used to be based on past sales and pure gut, has been replaced with sophisti-cated algorithms that weigh in past and present buying habits to project future sce-narios retailers can build price architectures, promo-tional strategies, and inven-tory plans around. In this new fickle world of retail, predictive analytics can help you deliver a level of person-

alised customer engage-ment like never before.

Even in the face of over-whelming upheaval, how has analy t ics and AI evolved into a strategic as-set and competitive differ-entiator for retailers?

Big Data analytics and AI will soon become common-place. What will turn them into strategic assets is the quality of the data itself. In the right hands, it is clean, accurate, and evolved to machine-learn the finer pat-terns that differentiate meaningful insights from the noise and clutter. If your data team is looking at sales and historical data, you are get-

ting only part of the picture. Without a real-time pulse of the market and the consum-er, these half-baked insights can restrict your scope in un-derstanding the newer, unfa-miliar, multi-faceted chal-lenges haunting the retail industry today.

Whether it is designing a pricing structure or optimiz-ing stock replenishments, an intuitive AI-powered analyt-ics can trigger automated, adaptive responses based on rules and targets set by you. This means more and more of the grinding is auto-handled, while you step back and shape bigger deci-sions from the new vantage point.

Retailers often feel alien-ated by the acronym. Most conjure an image of chatbots at the mention of AI, but the fact is it’s a wide umbrella of applications using machine-learning to add value to the vast amount of data that would otherwise go un-mined and under-utilized. AI-fueled self-learning lets retailers surprise and delight shoppers without making their shopping experience feels like interacting with a database.

“Analytics and AI will soon be commonplace”Sanjeev Sularia, CEO & Co-Founder, Intelligence Node tells us his mantra for driving profitability in a fiercely competitive retail industry

Mastering the art & science of pricing

“In my head, I split India into 3 types of consumers. Firstly, there are those that pay

more and get more. Then there are those that pay less and still get more, and this is the bulk of the market, they’re looking for value. And then there’s the pay less, get less segment, and

that’s a pretty large part of the market too.”Mithun Sundar

HEAD OF STRATEGY, PEPSICO, INDIA

“Speaking specifically about the mobile business, while we see growth happening at the premium end with revenue growth at almost 30%, this is happening because products are moving up the price ladder. It’s not just about the number of people moving up to the premium category. But we have noticed our premium customers are loyalists and stick with the brand.”Sukesh JainVP – ENTERPRISE BUSINESS, SAMSUNG ELECTRONICS

“Till about 2015, we saw a distinct trend towards premiumization, especially in FMCG. There was a

huge growth across categories in the launch as well as adoption of premium brands. This has definitely slowed down in the last 2 years, which makes us believe that it is not so

much about a category of consumers, but rather about the categories in which we operate.”

Soumya MohantyMANAGING DIRECTOR & CHIEF SOLUTION OFFICER, KANTAR IMRB

“Premiumization is definitely happening, although not as fast and as much as we’d like it to be. But we see distinct trends towards areas where consumers are willing to premiumize and areas where they’re not. Equally, it is incumbent on us to go ahead and experiment, because there’s a strong risk averseness towards increasing prices in India.”Gunjan SoniHEAD OF JABONG & CHIEF MARKETING OFFICER, MYNTRA

VOICES THAT MATTER

>> With pricing acting as a lever that impacts overall business, it is little surprise to see pricing as a topic that is front and center these days. The Economic Times Pricing Strategy Summit helped business leaders gain the expertise and tools needed to make sophisticated pricing decisions and as a result be more strategic than ever as they drive increased sales and higher levels of profits.

ET Edge - SPEAK:DEEPAK LAMBA, PRESIDENT, TIMES STRATEGIC SOLUTIONS LTD.

A s pricing emerges as the great-est opportunity for improving profits, it increasingly resides

at the heart of forward-looking busi-ness decisions. Indeed, technological advances born of big data, e-com-merce, and the explosion of om-nichannel retailing has brought about an overhaul of retailers’ pricing strat-egy and capabilities, as noted in a few trends highlighted by expert speak-ers.

The power of value-based pricingIf you’ve ever tried to buy a last-

minute airline ticket, only to cry silent

tears at the exorbitant price you’ll in-evitably end up paying, you’ve quite a tale to tell about value-based pricing. Significantly more complex than most other pricing strategies, it also requires an understanding of the cus-tomer’s mindset. However, tapping into it can open avenues for profit maximization that other strategies simply cannot hope to access.

Making the most of dataThey say you can’t manage what

you can’t measure, and they’d be right to say so. The good news is that we’re now generating more data

than ever, and gleaning insights from it is a matter of knowing what to look for. Companies are increasingly plac-ing a demand on highly detailed, transaction-level data that is actiona-ble.

An evolution in applicationsA proliferation of data and devices

means transaction-level data is often strewn across multiple systems, which means pricing managers must embark on an exhaustive process to find the data that explains any slip in margins. What’s worse, these manag-ers then often import the data into a spreadsheet that doesn’t make it easy to uncover actionable insights. Pricing-specific business applications are changing the rules of the game though, making it easier for manag-ers to embark on a journey of critical thinking that makes a meaningful dif-ference to their organization.

Big decisions with Big DataLeveraging the full gamut of data available to it allows companies to reap the rewards of intelligent pricing