Imagine you need a new mattress. You might do some research on your phone to check styles and prices, visit a store to try them out in person, chat to a sales person on social media, then finally place an order on your laptop.
What is Omnichannel Pricing? Shopping is no longer a single-channel process. Customers expect a seamless experience when interacting with brands and retailers, whether it’s in-store, online, on mobile apps, or via social channels. This presents opportunities and challenges for retailers. The complexity of engaging with customers has significantly increased, but with omnichannel pricing strategies, businesses can set channel-specific pricing rules that automatically maximize margins on each sale.
Let’s look at how omnichannel pricing works, the benefits and challenges of this retail pricing strategy, and how to implement it in your business.
What is omnichannel pricing?
Omnichannel pricing gives businesses the ability to execute pricing across any commerce channel with a set pre-defined of rules. This ensures companies can maximize the profit margin on every sale, no matter the channel. For example, omnichannel pricing rules might be based on customer location (regional customers may pay more due to delivery logistics), store location (customers based in affluent areas may be willing to pay more for the same item), or online vs. brick-and-mortar store (customers who click and collect may pay less than those who select home delivery). An effective omnichannel pricing strategy considers the different pricing dynamics of each channel and ensures that pricing is competitive while maintaining profitability.
What is an e-commerce omnichannel experience?
An e-commerce omnichannel experience refers to providing a joined-up, cross-channel shopping experience. This means ensuring customers can easily move between online and offline channels without experiencing any inconsistencies or disruptions.
What is the importance of omnichannel pricing strategies?
Today, businesses must contend with savvier customers and proliferating sales channels. Research by Google and Ipsos found that 53 percent of customers said they always research before they buy to ensure they’re making the best possible purchase, 87 percent said it’s important they know they got a good deal, and 56 percent of shoppers used their smartphone to research items while in-store.
Omnichannel pricing strategies help businesses address the nuances across their sales channels, so they can maximize revenue from each transaction while providing a seamless experience to the customer.
What are the types of omnichannel pricing?
Retailers use different pricing strategies depending on their goals and sales channels. While some omnichannel pricing focuses on consistency across all channels, others may be channel-specific, or combination pricing strategies. Each can help retailers account for cost differences and encourage customers to buy more products.
1. Uniform omnichannel pricing
Uniform omnichannel pricing refers to a pricing strategy that retailers use to offer consistent pricing across all their channels, including online and offline. This includes omnichannel promotion pricing, where sales are deployed across all channels. The goal is to create a cohesive customer pricing experience. The advantage of omnichannel pricing is that it builds trust and confidence with customers who can see transparent pricing across all channels. The downside is that retailers may be leaving profit on the table with some customers who are willing to pay more.
2. Channel-specific omnichannel pricing
Channel-specific pricing involves setting different prices for products depending on the channel. For example, a retailer might offer a product at a higher price in a physical store than online, or vice versa. A channel-specific strategy is often used to account for differences in operating costs across channels. The advantage of channel-specific pricing is that retailers can increase profit margins by charging more to less price-sensitive customers. However, this must be handled carefully to prevent backlash.
3. Combination pricing
Combination pricing or hybrid pricing is unified omnichannel pricing, with exceptions. It involves offering different pricing options for different combinations of products or services. For example, a retailer might offer a discount if a customer buys a certain number of products together or offer a package deal that includes several products at a discounted price. It can also be applied where a retailer wants to entice a particular customer to purchase with a personalized, loyalty-based offer. This strategy can encourage customers to buy more products at once and increase the retailer’s overall sales.
Examples of omnichannel pricing
Let’s look at how omnichannel pricing strategies work in action.
Target: Uniform Omnichannel pricing
U.S. retail giant Target uses uniform omnichannel pricing to offer the same prices on its website and mobile app as in its brick-and-mortar stores. This allows customers to compare prices and make informed purchasing decisions easily.
The Outnet: Channel-specific pricing
Luxury online fashion retailer Net-a-Porter created The Outnet as a clearance channel for its unsold stock. This gave more price-sensitive customers the opportunity to snap up designer fashion at a fraction of the retail price. This use of channel-specific pricing works well because it’s clear and transparent. The company has not devalued the Net-a-Porter brand or angered its customers. Those who value purchasing new season’s stock hot off the racks are willing to pay full price. Those who are happy with last season’s stock can shop at discounted prices on the outlet site.
Rewards cards: Combination Pricing
Many supermarket chains run loyalty programs that offer customers rewards based on how much they spend. These rewards allow members to unlock new tiers of discounts, perks, and cashback as their spending increases. These programs are omnichannel, so customers can link their in-store purchases with online and mobile orders. In return, the retailer gets valuable customer data and greater sales volumes.
How to build an omnichannel pricing strategy
Omnichannel pricing has become necessary for many businesses, but how can you implement this pricing strategy?
Understand channel nuances
When creating an omnichannel pricing strategy, businesses must consider the different pricing dynamics of each channel. For example, online channels may be more price-sensitive, while in-store channels may focus more on the overall customer experience.
Use a data-driven approach
Businesses must analyze customer data from each channel to understand pricing trends and customer behavior. Businesses can then use this data to create pricing rules, and algorithms to apply across all channels. For example, companies may use dynamic pricing algorithms that adjust prices in real-time based on customer demand and competitor pricing.
Take a holistic view
Another key element of an omnichannel strategy is ensuring all channels are integrated and work together seamlessly. This way, customers can quickly move between channels without experiencing inconsistencies or disruptions.
Use the right omnichannel pricing tools
Businesses must have the right technology and infrastructure to support their omnichannel strategy. They need to understand things like customer groups, competitive pricing, channel characteristics, pricing trends, and pricing deployment. This may mean investing in advanced pricing technology, customer data analytics tools, and omnichannel inventory management systems. The Flintfox Omnichannel Pricing solution brings siloed data into one, simple, centralized platform, giving you complete real-time visibility across all your channels.
Advantages of an omnichannel pricing strategy
There are several advantages to implementing an omnichannel pricing strategy.
Improved customer experience
In the case of uniform omnichannel pricing, businesses can improve customer experience and increase retention, by providing a consistent pricing experience across all channels. They can also avoid alienating customers with confusing or inconsistent pricing.
Increased profit margins
In the case of channel-specific and combination pricing, businesses can increase profit margins by adjusting pricing rules for various channels and customer groups. In-store shoppers may pay less because the retailer doesn’t have to cover the cost of home delivery, or a brick-and-mortar store in an upscale location might charge more for its goods due to the local clientele.
Better customer insights
By analyzing customer data from different channels, businesses can gain valuable insights into customer behavior and preferences, which can inform future pricing and promotional strategies.
By using data-driven pricing algorithms and rules, businesses can automate the pricing process and improve pricing efficiency, reducing the need for manual intervention.
By implementing an omnichannel approach, businesses can differentiate themselves from competitors and gain a competitive advantage in the marketplace.
Challenges of omnichannel pricing
While omnichannel pricing offers many benefits, there are also several challenges that businesses must overcome to implement a successful strategy.
Implementing an omnichannel pricing strategy can be complex and time-consuming. It requires businesses to collect and analyze data from multiple channels and develop pricing rules and algorithms that can be applied across all channels. Using the right tools can save huge amounts of time and resources.
Optimizing pricing across all channels can take time and effort, especially for businesses with many products and channels. It requires careful coordination and monitoring to ensure that pricing is effective and consistent.
Monitoring competitor pricing
Competitor pricing can be a major challenge for businesses implementing an omnichannel pricing strategy. It requires companies to constantly monitor competitor pricing and adjust their own pricing accordingly, which can take time and effort to manage.
Implementing an effective omnichannel pricing strategy requires businesses to have the right technology infrastructure, including advanced pricing algorithms and customer data analytics tools. This can require a significant investment in technology and resources.
Implementing an omnichannel pricing strategy requires alignment across multiple departments and stakeholders within a business. This can be challenging, as different teams may have different priorities and goals.
Manage omnichannel pricing the easy way
Forget siloed, channel-specific pricing data and head-exploding volumes of spreadsheets. With Flintfox Omnichannel Pricing, you can bring it all together in one centralized, easy-to-manage tool. React quickly to market signals, competitor activity, and new opportunities, and vary your pricing depending on device, application, market, or product (or all four at once). Our intelligent pricing platform is precisely as flexible as you need it to be.
Get in touch with our team of friendly experts today to find out how we can supercharge your omnichannel pricing strategy today.