December 28, 2001, 12:00 AM

Getting Top Dollar

(Page 3 of 3)

Racing ahead

E-mail is helping retailers reach targeted segments online. “E-mail is still an untapped opportunity,” Bieganski says. “There are other means of discovering consumer price elasticity than outright modifying prices online, and I’d put e-mail in that category. Right now, e-mail offers are viewed as simply promotional events, but the opportunity is there to start varying price with the goal of obtaining price sensitivity information.” Bundling is yet another way to test the take rate on different products at different prices while minimizing the risk of negative reaction from shoppers, by packaging a printer with cables one week, for example, and with cartridges the next.

Though the web offers the potential to change prices almost instantly based on demand data, retailers are still struggling with how to use the data they can now easily collect and analyze. Technology moves faster than consumers’ acceptance of it. Consumers’ expectations are conditioned to a continuum of pricing that may change from minute to minute at online auctions, to prices they expect to remain stable for days or weeks at web stores, and weeks or months on the shelf or in catalogs. It may be that as channels grow closer together - and as technologies such as electronic shelf pricing develop-consumers will become more accepting of more frequent price changes across channels, increasing retailers’ ability to respond to trends and demand in shorter and shorter cycles.

In the meantime, companies that have catalogs or stores continue to move cautiously in implementing price changes in the interests of price consistency among channels. “They may use the data for pricing the next product, or the next season,” says Zawada. “Others less constrained may use the information to change prices immediately.”

But even though the web and software developers bring a new level of precision to pricing, science will never completely replace the art of merchandising, experts say. “We’ve never had this kind of science in pricing before. It’s gotten phenomenal at making decisions based on large amounts of data, but merchandisers still have to put their perspective on it - the mathematical model may say something is the right thing to do, but a merchandiser knows it just won’t fly in the marketplace,” says Verheuvel. “Pricing is starting to be a blend of about 70% art versus 30% science. We’ll probably see that balance out to 50/50 over time.”

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