By Joannès Vermorel, March 2014In commerce, a repricing software - or repricer - is a solution to automatically recompute prices of all the items being sold depending on the market conditions. Repricers typically rely heavily on competitive intelligence tools that collect the prices of the competition.
Pricer vs repricer, a matter of automation
The word
repricer emphasizes that the prices of the merchant are much more frequently updated than they typically are when a manual pricing process is in place. Indeed, many repricers take care not only of recomputing the prices, but also of republishing the prices on multiple channels (Amazon, Rakuten, Play.com, etc). The expected benefit is to offer retail prices that are much more aligned with the quasi real-time market conditions while reducing the manpower required to continuously keep track of the competition.
Typology of repricing solutions
Since pricing is one of the cornerstones of commerce along with
inventory control, dozens of repricing solutions are available in the market. In this section, we establish a small typology of the solutions that can be found in the market.
Management vs Optimization
The management of the prices focuses on
keeping a master record of all the prices - which typically also include all the past prices – and on keeping all the channels synchronized with this master record. In particular, this synchronization can become a bit complex when many channels are used (the merchant online store, popular marketplaces, etc).
The optimization of the prices is a much more analytical process, where the goal is
to maximize both short-term and long-term revenues and profits of the merchant. The management of the prices and their optimization can be coupled into the same software, however, in practice, the tasks are very distinct, keeping the two tasks distinct offer a lot more flexibility when implementing and revising the pricing strategies.
White box vs Black box
A white box solution emphasizes pricing strategies elaborated by the merchant herself, where the merchant keeps the
full control on every price. The main benefit of this approach is to offer the possibility to the merchant of injecting her how in-house market know-how into her prices, which would not be accessible to the software vendor. However, this approach require more effort and time from the merchant.
A black box solution emphasizes automation and pure quantitative optimization. The repricer vendor is fully in charge. The merchant benefits from the expertise of the vendor, possibly greater than her own, and from a
highly automated system with low manpower requirements. The main drawback of the approach is the loss of differentiation against competitors that might be using similar generic tools.
Rule-based vs Programmatic
A rule-based pricing system emphasizes
simple strategies built out of pre-designed templates. The merchant can choose the rules to be applied, picking the rules from a rule library. The main benefit of this approach is its simplicity. However, this approach also emphasizes simplistic strategies primarily based on a few input variables, such as the prices of the lowest priced competitor.
A programmatic pricing system typically emphasize a scripting or programming language to express
arbitrarily complex pricing strategies. This approach gives to the merchants a lot more freedom to reflect their market know-how in their prices. However, unlike rule-based approach, a programmatic approach requires upfront efforts to master the corresponding technology.
Competition-only vs Holistic
A competition-only strategy is a pricing strategy that
quasi-exclusively focuses on competitive prices to calculate the revised prices. This type of pricing strategy is mostly found in eCommerce. Indeed, as all prices can be scrapped from online stores, a repricing software that relies on competition-only strategies can offer a very low IT setup, as it does not even need to import the sales history of the merchant (or any other data) to propose revised prices.
In contrast, a holistic pricing strategy tries
to leverage all the relevant data sources, not limited to the prices of the competitors, to establish the new prices: sales history, loyalty data, stock level, web traffic, conversion rates, … are as many data sources that can be leveraged to refine the pricing strategy. In practice, holistic pricing strategies are much closer to the behavior of an actual marketing expert, however the IT setup is more expensive as multiple data sources are involved.
