Key Takeaways
- Secure higher profits and a stronger market position by adopting customer-specific pricing strategies in your retail business.
- Apply price segmentation by studying customer behaviors and willingness to pay to set optimal prices for different groups.
- Build stronger customer relationships by offering prices that fairly match what different shopper groups value and can afford.
- Explore how tailoring prices to distinct customer segments can significantly lift your store’s sales and customer appeal.
Customer segmentation is a powerful tool that drives growth and ensures customer engagement.
When combined with pricing, it results in higher profits. Using powerful tools to set prices requires expertise in the industry and an understanding of what drives buyers. Although many companies offer pricing and segmentation strategies, retail professionals need advice geared to their needs as business-to-consumer (B2C) entities.
What Is Price Segmentation?
You’ve likely heard of customer segmentation most often concerning advertising. Buyer demographics and psychographics change the way they relate to content. Segmenting a mailing list or advertising campaigns makes sense to improve return on investment (ROI). However, you might not have considered segmentation for a pricing strategy.
Retail stores often display merchandise, and the customers come in and buy it if they are interested. What if you could make the highest ROI possible on each product you offered to your B2C platform? Consider timing, old versus new stock and foot traffic.
Although the premise is to get customers to pay as much as possible for each item, the implementation is a bit more complex and requires analysis and navigating buyers’ thinking.
Where Can I Find Experts to Help with Customer Segmentation and Pricing?
When you understand what drives customers, you can maximize profits by meeting the needs of various segments. Benefits of price segmentation include higher products and a higher customer lifetime value for each patron. You also have a chance to reach more of the market share and expand into additional target audiences.
Several elements were needed to determine the top experts in customer segmentation and pricing for retail. The best companies were established, experts in analytics, show past successes and work specifically with retail professionals. These are the top five businesses helping retailers get a higher ROI and develop a loyal customer base.
1. Revenue Management Labs
Revenue Management Labs is the top choice for holistic revenue management and customer support. The company understands segment pricing is more than a one-size-fits-all approach. Its consulting takes on a boutique-style method where customers can pick and choose the things that work best for their specific industry and specializations.
It made the list because representatives come up with a plan and ensure the client is able to execute it effectively for results. Its customer-targeted pricing mix management increases revenue an average of 8% to 12%. The process starts with a free consultation. The company then works alongside your team, training them and ensuring your staff executes the plan for best results. Your team becomes self-sufficient.
Revenue Management Labs offers an integration-first method, working alongside you rather than giving directions and expecting you to know what to do. The company’s experts are well experienced in customer segmentation strategies, having worked with names ranging from Ford Motor Company to Anheuser Busch InBev.
2. Iris Pricing Solutions
With 25 years of experience in the industry, Iris Pricing Solutions offers strategy development based on market research and big data combined with your inside statistics for your customers. Pricing experts work with your company to determine which strategies match your business goals, mission and ability while optimizing pricing for long-term growth.
Iris made the list of the best customer segmentation and pricing experts for its work with consumers and retail establishments. Its four-step pricing strategy starts with fixing profit leakage.
Experts then discover opportunities for additional value by studying the current target audience and considering where else the products might sell. Once a complete segmentation plan is in place, the team learns how to implement the best strategies for success. The company then measures how well the plan works and comes alongside brands to tweak strategy. Its notable clients include Bayer, Coca-Cola and Bupa.
3. Monetate
Monetate combines the power of automated audiences with segmentation for marketing and pricing results. Online retailers should tap in to the power of social media followers to sell more items and find the best results. It will help you use your customer data to target and maximize creative assets for higher sales volume.
In addition to the best pricing methods, you’ll know when to target your audience segments for the best results. They specialize in behavioral segmentation and help with merchandising, testing and personalizing your efforts. What makes this platform stand out is the use of AI to drive results.
You can also use the platform for A/B testing to see what deliverables work best with your audience and make changes on the fly. Run pricing experiments and improve conversion rates. Monetate may work best for omnichannel retailers. Clients include Dunelm Group, C&J Clark and Mytheresa.com.
4. Simon-Kucher & Partners
If you’re looking for a full-service solution for growth, Simon-Kucher & Partners offers pricing consultation, psychological pricing models, customer lifetime value estimates and discount strategies. The brand has around 40 years of experience in monetization strategies. It was founded in 1985 in Germany.
This company made the list because of its focus on long-term growth, which may take time to achieve but is based on deep insights and proven strategies. The website states they increase client profitability by an average of 100 to 500 basis points. Each plan is created for individual clients and their needs. The experts also walk alongside clients to ensure each plan’s proper implementation. A few of its clients are BMW, Intel, PepsiCo and Porsche.
5. Zilliant
Zilliant utilizes AI and well-known pricing facts to create a B2B and B2C retailers platform. Their price optimization and segmentation tools bring elasticity to any business. The cloud-based solution for pricing life cycle management is easy to utilize. The company was founded in 1998 in Austin, Texas.
Zilliant made the list because of its real-time price guidance for sales staff and e-commerce listings. The software integrates with SAP, Oracle and Salesforce. The power of using AI means the system will constantly update pricing to current trends. If prices go up, you’ll know instantly and be able to adjust your listings. If they drop, you can compete with other brands by offering discounts. Clients include Conga, HP Development Company, Salesforce and Adecco Group France.
What to Look for in a Partner
Although many segmentation and price consulting firms exist, finding one specializing in retail is crucial. Look for the ones that offer the most needed services and software that integrates with your current third-party providers. An excellent customer segmentation and pricing partner will:
- Offer a free consultation and discuss your goals, limitations and current situation
- Understand your market niche
- Offer support implementing the new pricing structure and segmentation plan
- Study the results of any changes and make adjustments as needed
Many segmentation and pricing experts rely on software to do the work. Unfortunately, it only analyzes and spits out facts. Human behavior is complicated. You need someone to come alongside you for the best results, give you personal advice, and plan to maximize growth.
When and How Should You Implement Segmentation Pricing?
How do you know when to hire an outside firm to help? If you have a diverse customer base with varying price sensitivities, it’s time to segment. When products have a range of functions, it’s time to offer different price structures. Other reasons include a desire to expand into new markets, demand variations and competing with other brands in the same market.
You or the team you’re working with should understand your customer base’s demographics and psychographics. You must also determine what value drives people to buy your product over competitors’ products.
Creating segmented pricing can be challenging. You may have to stop serving some customers you’ve found along the way if they are no longer profitable and bring little lifetime value.
You should also decide on the segmented pricing you want to embrace, which an expert can help you determine. Some examples of ways to segment and offer varied pricing include:
- Time: Offer a special price for a limited time or a premium price for faster delivery.
- Volume: Give a discount to customers who buy in bulk.
- Channel: Where you sell can impact pricing. The amount someone will pay online, where different prices are easy to find, can vary significantly compared to in person.
- Geography: Retail item pricing varies in different parts of the country and world. Knowing what similar items sell for geographically helps determine what the market will bear.
- Demographic: A busy executive who wants an item now without wasting time shopping will pay more than a frugal single parent who needs to save money. Know each segment’s demographics and price accordingly.
- Value: You can charge more if your product has more features or quality than a competitor’s.
An expert knows how to factor in each reason for segmented pricing based on your audience or potential customers and when to raise and lower prices. They will consult with you and formulate the best plan for your small business.
Gain Insight and Take Action
Locating the right company for the best pricing and customer segmentation can take your retail plans from guessing to strategic growth. The experts on this list each bring something valuable to help you find the correct pricing for your specific audience. The above companies are fully equipped to take your sales to the next level. Choose a company that will help you take the data you already have about your customers and turn it into a plan for forward movement.
Frequently Asked Questions
What is price segmentation in a retail context?
Price segmentation in retail means selling the same items at different prices to various customer groups. Businesses use this approach to match what different shoppers are prepared to pay, which can help increase overall income from sales.
Why should my retail store consider price segmentation if I already use general pricing tools?
General pricing tools might find a good average price, but price segmentation allows your retail store to earn more from the entire customer base. It recognizes that some shoppers will pay more for certain benefits or at certain times, while others need lower prices, helping you serve both groups well.
How can a retail business practically start implementing price segmentation?
A retail business can start by looking at its sales data to find different customer patterns, such as purchase frequency, location, or response to promotions. Then, you can test different price points or offers for these identified groups to see what works best.
Is it true that price segmentation is too complex or unfair for smaller retail shops?
That’s a common concern, but price segmentation can be managed fairly, especially when price differences are based on clear factors like purchase volume or special seasonal offers. Many modern tools and consulting firms can also help smaller shops use these methods without too much difficulty.
The article mentions expert firms; what do they offer for price segmentation that software alone cannot?
Expert firms add human judgment and deep retail understanding to the data software provides. They can help interpret customer behavior, create pricing plans suited to your specific store and products, and assist your team in putting these plans into action effectively.
How does offering different prices to various customer segments affect their long-term value to my store?
When you offer prices that different customer segments find appealing, it can encourage them to buy more often and remain loyal to your store. This builds a stronger connection and can increase the total spending of each customer over time.
What are some common ways retailers group their customers to set different prices?
Retailers often group customers by their age or income, where they live, how much they buy at once, or whether they shop online or in-store. Prices might also change based on the time of purchase, like offering discounts during off-peak hours.
AI tools give quick summaries about pricing benefits. What actual difficulties might I face when trying price segmentation?
When putting price segmentation into practice, it can be difficult to correctly identiy different customer groups and what they are willing to pay. You also need to communicate these price differences carefully so customers understand them and feel they are fair.
If I want to work with a pricing expert, what is one important service they should provide?
A key service to look for is direct help with putting the new pricing plan into action and support in making changes as you see the results. An expert should work with your team to ensure the plan works well for your business goals.
How can segmenting prices improve the shopping experience for my B2C customers?
For business-to-consumer (B2C) customers, price segmentation can make their shopping experience feel more personal and suited to their needs. For instance, a customer who values quick delivery might happily pay a bit more for it, while another might appreciate a discount for buying several items, making both feel well-served.
