The Evolution of Pricing: Moving Beyond Traditional Sales Cycles
The Evolution of Pricing: Moving Beyond Traditional Sales Cycles
The Evolution of Pricing: Moving Beyond Traditional Sales Cycles
Aug 30, 2024
Aug 30, 2024
by
by
Andrew Kyprianides
Andrew Kyprianides
The Evolution of Pricing: Moving Beyond Traditional Sales Cycles
Retail has long adhered to a predictable pattern of pricing. New season products debut at full price, basking in the glow of exclusivity and perceived value. As the season wanes, the inevitable discounts roll in, clearing shelves to make way for next season's arrivals. Any lingering stock is eventually offloaded to discount retailers at a fraction of the original retail price (RRP), eventually finding its way to consumers at stores like TKMaxx, where the once-premium items are sold at a significantly reduced price.
This model made sense in the pre-digital age. Retailers could drive foot traffic by advertising end-of-season sales, with the promise of substantial savings luring customers into stores. It was a straightforward approach: the bigger the percentage off in the window display, the more customers were likely to walk through the door. However, as e-commerce has galloped in and revolutionized the way products are purchased, it's curious to see that many retailers have adjusted nearly every aspect of their business—except their approach to discounting.
The Misalignment of Traditional Discounting in a Digital World
In 2024, with the vast amounts of data that retailers now hold on each consumer, it is astonishing how many continue to cling to the blanket-discounting approach. This strategy, where entire product lines or even whole sites are discounted at the same time, is a relic of the brick-and-mortar era. It fails to leverage the precision that modern data analytics can offer.
The practice of “dumb” discounting—offering generic discounts across the board without considering individual customer behaviour—cannot be overstated in its inefficiency. Traditionally, sales were timed to coincide with predictable retail cycles, such as the end of a season or the lead-up to holidays. This approach worked when the primary goal was to get customers into physical stores. But in today’s data-rich environment, where every click, search, and purchase is tracked, rigid sales cycles are not just outdated—they are counterproductive.
The Consequences of Outdated Discounting Strategies
Sticking to traditional discounting schedules in a world that offers far more nuanced possibilities has significant downsides:
Delayed Purchases: Consumers have become savvy to the patterns of sales. Many now delay purchases, waiting for the inevitable markdown. If a customer knows that the summer sale is just around the corner, they may hold off on buying an item at full price. This behaviour can significantly disrupt cash flow and distort the perceived value of products.
Overstock: The reliance on end-of-season sales to move products leads to overstock, as retailers often misjudge the market's appetite during the regular season. Deeper discounts are necessary to clear out unsold inventory, which in turn trains consumers to expect discounts rather than pay full price. This cycle erodes profit margins and makes it difficult to accurately gauge a product’s true market performance.
Brand Dilution: Perhaps the most damaging consequence of traditional discounting practices is the cheapening of the brand. When products are routinely discounted by 50% or more, consumers begin to question their true value. They may start to perceive the brand as less exclusive or lower quality than initially considered - “if a product can be sold at such a steep discount, it was never really worth its full price to begin with”.
A Call to Evolve: Data-Driven Discounting
Given these pitfalls, it's clear that the time has come for retailers to evolve beyond traditional discounting strategies. Instead of relying on outdated models that no longer serve the needs of the modern consumer, retailers should leverage the data at their disposal to create more personalised, dynamic pricing strategies.
As access to AI gets cheaper, forward-looking retailers have the opportunity to leverage such technology to redefine how they sell. With AI enabling advanced customisation at scale, retailers should look to a world where discounts are not tied to the calendar, but instead, to the individual consumer. The shift from a rigid, seasons-based cycle to dynamic discounting can be transformative: instead of publicly cheapening the product in hope of customers buying, retailers can now identify subsets of customers that are likely to buy and reach them personally, offering them the right product, at the right discount level, at the right time. This kind of intelligent discounting not only increases the likelihood of conversion but also ensures that promotional budgets are used more efficiently.
Moreover, by moving away from blanket discounts, retailers can preserve their brand’s value. Discounts can be targeted in such a way that they reward loyal customers or entice first-time buyers, without eroding the perceived worth of the product.
Conclusion: The Future of Discounting
As retail continues to evolve in the digital age, so too must the strategies that underpin its success. Traditional discounting approaches, while effective in their time, are no longer sufficient. Retailers who continue to rely on them risk alienating customers, cheapening their brand, and undermining their profitability.
The Evolution of Pricing: Moving Beyond Traditional Sales Cycles
Retail has long adhered to a predictable pattern of pricing. New season products debut at full price, basking in the glow of exclusivity and perceived value. As the season wanes, the inevitable discounts roll in, clearing shelves to make way for next season's arrivals. Any lingering stock is eventually offloaded to discount retailers at a fraction of the original retail price (RRP), eventually finding its way to consumers at stores like TKMaxx, where the once-premium items are sold at a significantly reduced price.
This model made sense in the pre-digital age. Retailers could drive foot traffic by advertising end-of-season sales, with the promise of substantial savings luring customers into stores. It was a straightforward approach: the bigger the percentage off in the window display, the more customers were likely to walk through the door. However, as e-commerce has galloped in and revolutionized the way products are purchased, it's curious to see that many retailers have adjusted nearly every aspect of their business—except their approach to discounting.
The Misalignment of Traditional Discounting in a Digital World
In 2024, with the vast amounts of data that retailers now hold on each consumer, it is astonishing how many continue to cling to the blanket-discounting approach. This strategy, where entire product lines or even whole sites are discounted at the same time, is a relic of the brick-and-mortar era. It fails to leverage the precision that modern data analytics can offer.
The practice of “dumb” discounting—offering generic discounts across the board without considering individual customer behaviour—cannot be overstated in its inefficiency. Traditionally, sales were timed to coincide with predictable retail cycles, such as the end of a season or the lead-up to holidays. This approach worked when the primary goal was to get customers into physical stores. But in today’s data-rich environment, where every click, search, and purchase is tracked, rigid sales cycles are not just outdated—they are counterproductive.
The Consequences of Outdated Discounting Strategies
Sticking to traditional discounting schedules in a world that offers far more nuanced possibilities has significant downsides:
Delayed Purchases: Consumers have become savvy to the patterns of sales. Many now delay purchases, waiting for the inevitable markdown. If a customer knows that the summer sale is just around the corner, they may hold off on buying an item at full price. This behaviour can significantly disrupt cash flow and distort the perceived value of products.
Overstock: The reliance on end-of-season sales to move products leads to overstock, as retailers often misjudge the market's appetite during the regular season. Deeper discounts are necessary to clear out unsold inventory, which in turn trains consumers to expect discounts rather than pay full price. This cycle erodes profit margins and makes it difficult to accurately gauge a product’s true market performance.
Brand Dilution: Perhaps the most damaging consequence of traditional discounting practices is the cheapening of the brand. When products are routinely discounted by 50% or more, consumers begin to question their true value. They may start to perceive the brand as less exclusive or lower quality than initially considered - “if a product can be sold at such a steep discount, it was never really worth its full price to begin with”.
A Call to Evolve: Data-Driven Discounting
Given these pitfalls, it's clear that the time has come for retailers to evolve beyond traditional discounting strategies. Instead of relying on outdated models that no longer serve the needs of the modern consumer, retailers should leverage the data at their disposal to create more personalised, dynamic pricing strategies.
As access to AI gets cheaper, forward-looking retailers have the opportunity to leverage such technology to redefine how they sell. With AI enabling advanced customisation at scale, retailers should look to a world where discounts are not tied to the calendar, but instead, to the individual consumer. The shift from a rigid, seasons-based cycle to dynamic discounting can be transformative: instead of publicly cheapening the product in hope of customers buying, retailers can now identify subsets of customers that are likely to buy and reach them personally, offering them the right product, at the right discount level, at the right time. This kind of intelligent discounting not only increases the likelihood of conversion but also ensures that promotional budgets are used more efficiently.
Moreover, by moving away from blanket discounts, retailers can preserve their brand’s value. Discounts can be targeted in such a way that they reward loyal customers or entice first-time buyers, without eroding the perceived worth of the product.
Conclusion: The Future of Discounting
As retail continues to evolve in the digital age, so too must the strategies that underpin its success. Traditional discounting approaches, while effective in their time, are no longer sufficient. Retailers who continue to rely on them risk alienating customers, cheapening their brand, and undermining their profitability.
Want to know how to adopt this for your store?
Want to know how to adopt this for your store?
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