Digital media offers a very compelling and strategic toolset for the retailer’s arsenal. It always has. This naturally includes Digital Signage to satisfy the visual sense. However, unlike verticals where Digital Signage can stand alone and succeed as a purely information tool – think corporate or campus communications– Digital Signage becomes the tool to drive profitability as it enhances the retail experience. After recently attending several industry conferences (i.e., National Retail Federation, Digital Retail Forum, and Digital Signage Expo), listening to industry analysts and retailers address how retail is evolving and reading a number of research articles about the evolution of retail, one thing is very clear: Digital Signage is the mechanism for addressing specific trends impacting the way businesses serve the consumer. In this article Irene Chow looks at one of the more intriguing new trends in retail: Dynamic Pricing–the practice of increasing pricing based on supply and demand, which can happen throughout the week or even throughout the day. Other organizations take it a step further by addressing this concept as pricing elasticity and how much a consumer would be willing to pay for what they feel they need. The reason for the popularity of dynamic pricing is primarily to increase profit, while managing the demand, and it is working. The reason why it’s working is because of the access to more efficient methods available – digital displays, computers and reporting software – for promoting price changes and analyzing the pricing data against the sales data in near real-time to make meaningful adjustments to improve profit.
Examples of dynamic pricing can be found in recently published articles on amusement park pricing (e.g., Disney theme parks and Universal Studios). Amusement parks have gone beyond offering peak-season pricing to offering peak-day and non-peak day pricing throughout the week. This tactic is used to encourage more traffic during non-peak days or the alternative is that you pay a significant premium, if you visit the park on peak days. The same tactic for profit lift can occur during high-demand games at a sports venue or entertainment events, peak season at a resort and casino, and peak times at a restaurant or winery. Retail establishments could take note of this for their “in demand” products and services instead of always undercutting prices in an effort to drive demand. Using data analytics allows an establishment to assess trends in peak times of business, determine what is “in demand” during that time, and to drive more profit by a small bump-up in pricing during that peak time. The data already proves the demand, and most of the time the demand is driven by a “need to have” mentality. Thus, most of the time the slight bump in pricing is insignificant in comparison to the need to have the product or experience. Testing price elasticity with consumers is where Digital Signage becomes useful.
If pricing is changing based on supply and demand throughout a day or week, the best way to communicate this information is with Digital Signage. Digital Signage enables the efficient promotion of the price changes. The Digital Signage solution recommended would be conveniently placed digital displays – small digital shelf-type displays near payment counters or payment areas, kiosks, and digital menu or event boards. Powering those displays would be Digital Signage media players – with the capability of being remotely managed via the Cloud or “on premise” — running content management software that can incorporate price files or price changes by the establishment’s pricing team. The software typically enables scheduling of the pricing to be displayed on the digital display during specific times of the day for a week, month or year. More importantly, the software should be able to provide some key analytics from the pricing campaign through its reporting capability. The data file could be compared with or even integrated with the pricing analytics program that is used at the customer location. Outside data analytics consultants could offer their expertise with the measurements and modeling of the data, if this competency does not exist with the Digital Signage service provider or with the customer. This methodology is becoming more prevalent in retail, as the retail industry tries to respond to changes in retailing.
The world of retailing is evolving. Today, retailing permeates entertainment venues, fast casual restaurants and hospitality, in an effort to drive more profit. While more purchases are being made via the Web, bricks-and-mortar retail establishments are still relevant yet are trying to evolve to bring new experiences to the consumer. Maybe it’s bringing non-traditional retail experiences and combining it with retailing that creates that new experience for the consumer. Regardless of what the future holds for improving the retail experience, dynamic pricing has yet to be fully realized in retail. The opportunity to drive profit with dynamic pricing starts now. And, the best mechanism for making that pricing be seen by the consumer is through Digital Signage solutions.