May 16, 2020

PROS insight: How to avoid living or dying by peak: Personalisation and price optimisation

Retail
profitability
Sustainability
Peak
Valerie Howard
5 min

Valerie Howard, Director, Solution Strategy, PROS, advises on how to avoid reliance on the retail peak months.



The peak buying period (October-Decem...
Valerie Howard
Valerie Howard, Director, Solution Strategy, PROS

Valerie Howard, Director, Solution Strategy, PROS, advises on how to avoid reliance on the retail peak months.

 

The peak buying period (October-December) is an important time of the year for all retailers. Traditionally, it’s a time of heightened sales around the holidays that has consumers flocking to their devices or the storefront. But some retailers are more reliant on peak than others. 

For these retailers, the majority of their revenue is made during the peak period. Which means their business lives or dies by their success during those months. The challenge is that many businesses have gotten into the habit of trying to draw attention to themselves through deep discounts. This makes the climb from red to black (i.e. to profitability) even more challenging, drives buyers to expect these deep discounts, and continues the endless cycle of increasing competitive price pressure. These behaviours are not sensible, and many familiar case studies showcase that they are not sustainable either.

So, what is sustainable? How does a business transition from a dependency on success in these peak period months to year-round profitability?

We live in a real-time era. 

Thanks to the transparency of the internet, the marketplace is more competitive than ever. And when a buyer’s switching costs require little more than opening up a second tab on their browser to compare pricing, businesses will want to ensure that the price differential the potential buyer sees is in line with intended strategy.

While more and more buyers are shifting their purchasing to mobile app experiences and eCommerce sites, rationality needs to be maintained between the prices received in these self-serve experiences and the high-touch purchase experiences of working with salespeople. Buyers increasingly understand that prices may change with shifting market conditions, but they want to be able to trust that the vendor is not taking advantage of them.

For this reason, businesses are increasingly leveraging algorithmic approaches to pricing that enable them to automatically incorporate competitive and market relevant information into each pricing calculation. According to a survey of 1053 B2B purchasing professionals, 66 percent in fact find pricing based off of data science to be fair.

Using tech that can support modern eCommerce

Thanks to price optimisation solutions powered by artificial intelligence (AI) businesses are better able to predict a buyer’s perception of value for each unique transaction. What’s behind the scenes in these price optimisation solutions is a powerful segmentation model that leverages AI to continually learn and adapt the model to incorporate new information, changing market trends, and shifting buyer behaviour. With these capabilities, the model can effectively predict the willingness-to-pay for the unique conditions of each buyer transaction – which may change based upon time of day, inventory levels, and buyer loyalty. 

Secondly, real-time calculation can help to maintain the harmony of pricing across channels by enabling a centralised pricing source. Often, price coordination is challenged when each channel sources pricing from a different list or database, and these prices may lose market relevancy if they are not updated frequently. With real-time calculation, price rationality can be intentionally programmed into the model. The only caveat with real-time calculation is ensuring that the price calculation engine can deliver on the speed, scalability, and availability that the eCommerce channel needs. If customers find themselves looking at a spinning website as they await the pricing calculation, it’ll be less than a handful of seconds before they are inclined to move on to a competitor’s site. 

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A personal touch expands value delivered and value received

Fair and relevant pricing is a key element of every successful transaction, but that alone is not enough to ensure the loyalty of a buyer. Today’s buyers now see the purchase experience as a key differentiator in their valuation of a brand. Brands that deliver these great experiences put a lot of effort into removing friction from the purchase experience through personalisation.

Most businesses offer a variety of goods and services. While a loyal customer may be familiar with what they’ve purchased in the past, they are likely not familiar with the entirety of the seller’s catalogue and the meaningful ways in which the vendor could be offering expanded value. It is the job of the seller to remove friction from the purchase process by continually improving the personalisation of each offer to a buyer’s changing needs – and the most effective businesses are personalising offers through the application of AI.

Flourish year-round through personalisation and price optimisation

A customer experience differentiated by meaningful personalisation and reliably fair, market-relevant pricing can significantly persuade a buyer’s vendor selection. When sellers put the effort in to reduce the friction in two key sources of purchase frustration: 1) product selection and 2) pricing, they will be rewarded with the repeat business of loyal buyers that will save them from dependency on ‘peak purchase periods’. 

While few businesses are delivering on effective personalisation alongside harmonised pricing, there is a meaningful opportunity for industry leaders to gain competitive advantage by satisfying these buyer expectations. Getting started down this journey simply requires making use of the data businesses are already collecting. Through the application of AI, personalisation and pricing systems can help businesses stay in tune to what buyers really value so that they can deliver on those needs in peak and non-peak times throughout the year. 

For more information on all topics for FinTech, please take a look at the latest edition of FinTech Magazine.

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Jun 10, 2021

FIVE things fintechs must do to keep investors onboard

Fintech
Investment
venturecapital
AI
Brandon Rembe, CPO, Envestnet...
4 min
Fintech innovations drew in first-time investors who reshaped the markets. What new advancements will help them continue their rise?

New investors flocked to the stock market during the COVID-19 pandemic. Thirty-eight percent of investors said they had never had a brokerage or similar account before opening one in 2020.

Low or no-fee trading options have helped accelerate the trend – nearly half of new investors said they accessed their account primarily through a mobile app. As FinTechs, how do we create the trust needed to keep new investors in the market and create a fruitful customer experience for them?

The financial industry does a disservice to individual investors if we merely offer tools that focus on making money quickly, an approach that usually backfires. Instead, the surge of interest presents an enormous opportunity for those who want to help more consumers use financial technology to educate them on responsible spending, saving, and investing in order to achieve financial wellness current fintech tools have welcomed individual investors in the door.

Now, it’s time to focus on education and improving their experience going forward. There are several ways those of us in fintech can step up to shape the future of retail investing so that it works better for everyone, starting with the following areas.

Equal access to financial wellness education

Financial health should be available to everyone — but today, not everyone has the educational resources to achieve it. One study shows that only 3.9% of students from low-income schools were required to take a personal finance class. What they aren’t learning in school or from family members, fintech companies can provide on their platforms.

The companies should move from solely offering financial services to a more responsible model of education, advice, and prescriptive choices to help consumers develop better habits and make wiser financial decisions. Not only can they empower consumers and bridge historical wealth divides, but they can also stimulate growth by opening up new consumer segments.

More personalisation

Just as we’ve come to expect that our fitness routines are tailored to our individual bodies, we’re also ready for finance tools that go beyond one-size-fits-all solutions. But only six percent of financial institutions say they’re using the kind of technology that allows them to deliver a deeply personalized experience. Fintech tools need to reflect that financial success looks different for each of us.

For one consumer, it may mean providing guidance on how to pay off student loans early; for another, it may mean prescriptive actions that enable them to stick to a budget for the first time; for a third, it could look like prioritizing environmental, social and governance (ESG) investments, so that her portfolio aligns with her political beliefs.

Now, we are seeing financial technology beginning to meet the demands of personalized finance in a substantial and meaningful way.

The rise of AI-Powered Advice

Big-picture advice and predictive guidance used to be a feature of high-end financial advisory firms — a perk only available to those who could afford it. But thanks to rapid advancements in data analytics and artificial intelligence (AI), that kind of holistic advice is now more accessible than ever. AI-driven robo-advisors can parse many different streams of financial information, delivering customized answers to key questions: Is it time to buy a home, or is it smarter to keep renting? Can I afford to take out another student loan?

Intelligent connectivity powered by AI can anticipate consumers’ needs and next steps, making proactive suggestions that guide them along the path to financial wellbeing. Fintech companies can also help consumers identify when their financial picture becomes too complex for a robo-advisor, and help them find a human financial advisor to meet their needs. 

Focus on financial mental health

New investors are quickly finding that the market can be overwhelming. That’s not surprising, financial anxiety is common and studies show that financial stress can have an impact on mental health for some.

It’s not enough for fintech companies to give retail investors access; they also must provide the guidance and support that help consumers manage their financial well-being. Educational tools can ensure that consumers are well informed about their options.

Predictive analytics can anticipate consumers’ questions, serving them key information and insights before they ask. Features that emphasize a comprehensive notion of financial well-being, rather than short-term wins and losses, can also help ensure that consumers are keeping their eyes on the bigger picture.

Gamification for good

The surge of gamification apps has done an impressive job making investing as engaging as playing a video game or joining a social media platform.

Much of the current use of gamification emphasizes short-term thinking, but there’s also an opportunity to help consumers think more broadly about their overall financial picture. One example is peer benchmarking, a feature that enables help consumers to see how their financial habits compare to those of friends and fellow consumers.

Gamification can also be used to incentivize making smaller, smarter choices — for example, rewarding saving over making an impulse buy.

The future of fintech is about more than just broadening access to the markets. It’s about making sure more individuals have access to the tools that can help improve their financial well-being—in the ways that suit their own circumstances and needs. The potential to act within their own set of individual priorities, with their long-term financial wellness in mind is much more empowering to a consumer than simply relying on short-term, high-risk investments.

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