For retailers and, to a lesser extent, manufacturers, pricing’s taking on a whole new dimension. Old: cost to manufacture/cost of goods plus markup equals wholesale/retail. New: run it through the price optimization program while you sit back with a Starbucks triple mocha latte and a Krispy Kreme.
Our quick read reveals nothing but a big blur of database variables and multiple spreadsheet what-ifs, but we can report that this first generation of sophisticated software is programmed to take into account soft markers like a store’s “price image” before factoring a dollars and cents relationship.
Other variables might include miles to competitor, seasonal influence, rebates and coupons, and relative generic pricing.
One program, built on a model used to predict the behavior of atoms in gases, predicts reaction to pricing. Another helps companies negotiate contracts. In both instances the notion that we decide as individuals what we’ll buy and at what price is pretty much given a sound thrashing.
Though expensive now, expect future versions with fewer features, and a broader adaptation of the variable pricing concept. Easily tied in with the digital aspects of POP, it’s a sure bet that at least some stores in the near future will be able to have your items ready for checkout before your feet hit the front door.