Retailers shift their ad spending from TV, radio and print ads to digital ads.
A new online solution measures shopper response in real time to various prices of products.
Optivo Corp. has launched a price optimization solution for web merchants that the company says boosted gross margins on tested products by 30% during a six-week trial at one of the technology’s early users. During the test, gross margins on the online sale of the selected products rose to 39% from 30% for the retailer, a multichannel home improvement vendor. Palo Alto, Calif.-based Optivo’s online pricing solution features a live testing capability that measures web shopper reaction, in real time, to various price offers on a product, and adjusts online pricing accordingly. Based on customer response, the optimal price for a product can be approved and set online manually by the retailer, or automatically put into place through the Optivo application via integration with a retailer’s web infrastructure. Optivo pricing solution users can track shopper response to different price points and use the data to set pricing either to maximize revenues or to increase gross margins, depending on their business objectives.
Research shows that incremental shifts in pricing can generate substantial increases in profit, points out Optivo CEO Robert Drescher. Andersen Consulting, for example, recently reported that on average, a 1% increase in price, without a corresponding drop in volume, can lead to operating profit improvements of 11% or greater. The Optivo solution addresses the different phases of a product’s life cycle, from setting the original price to determining its optimal prices during inventory liquidation. “The Internet enables retailers to measure demand for products like never before,” says Drescher. “The Optivo pricing solution helps retailers identify the right price point for their products to maximize the profitability of their online channels.”