How to Reduce Product Return Rates
Product returns have a huge impact on a retailers profit, with 30% of products bought online being returned. That’s a lot of money‚ and it also...
December 13, 2022
Remaining profitable is a challenge if you can’t track sales accurately. Understanding your top sellers, the products sitting in a warehouse unloved, and the items that sell better when sold in bundles and kits enable you to determine what products you should be discounting at any given time. However, you need a method, otherwise known as price optimization, to access real-time data to understand these trends and improve your agility so you can make price changes quickly.
When you have your product data in one central location, you can track data and optimize pricing for your range of products automatically. A PIM software not only provides a central data source but also enables you to track factors such as supply chain and inventory status for each product with complete visibility regarding how each product performs.
Price optimization uses customer and market data to make smart decisions on your pricing strategy. You avoid the guessing game and instead rely on data to price products so they are more enticing to customers. This in turn, maximizes profitability. It also enables you to reduce losses on products that don’t sell. Your team becomes more agile and learns to adapt to different scenarios, whether it is seasonality, inventories, or trends. When you keep track of what’s happening in your market, you can respond quickly with competitive price changes. You can also address supply chain shortages.
Price optimization is your ticket to achieving your sales goals and an effective marketing strategy that maximizes profits. Benefits include:
A PIM enables you to adapt price optimization strategies to improve ROI, maximize sales and profits, and react quickly to market shifts.
Your centralized product data offers insights into the products that call for altered pricing. For example, your starting price is the first impression customers have of your affordability. In this case, you need to ensure the price reflects the product’s value so people are willing to pay full price. This kind of price optimization works best for products with longer life cycles, not driven by things like the seasons, a holiday, or a trend. These are products people need all the time. If people aren’t willing to pay your initial price, then there is an issue with perceived value. You either need to convince customers the quality is better than they think or adjust the price to reflect the market.
When it comes to discounts, they apply to shorter life cycles, such as fashion and holiday items. As the season or trend comes to an end, it’s time to start offering discounts. This helps you decrease stale inventory to make room for the product shift driven by seasonality.
The final consideration is promotional pricing with temporary reductions that create a sense of urgency to purchase. This works well when you need a boost in sales or a way to attract new customers. Promotions include kit and bundle strategies, buy-one-get-one-free offers, exclusive pricing via a special product code, etc.
Visibility into product performance is made easy when product data is centralized. You can track SKUs, figure out what items need to move faster from your warehouse or store shelves, and quickly make changes to information and prices to take advantage of market trends.
When choosing discounts, you need to be strategic with every discount you push forward. Discounts send a signal of value to customers. However, while you might increase sales volumes, if the volumes come at a loss, then your price strategy isn’t working.
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