Mastering Your Ecommerce Pricing Strategy with ShopGrok | #374

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Aaron talks pricing strategy and data collection


Aaron is the founder and CEO of ShopGrok - one of Australia’s leading retail analytics software companies. As the former Head of Price Strategy at Woolworths Supermarkets and previously a retail-focused management consultant at McKinsey & Company, Aaron has been instrumental in helping businesses optimise their strategies for revenue management, pricing, and promotional effectiveness for over a decade. He is passionate about using big data in an agile manner to make fact-based decisions.

In this episode of Add To Cart, we are joined by Aaron Cowper, Founder & CEO at ShopGrok.

ShopGrok is a pricing and range analytics platform for retail and consumer brands. Aaron was formerly Head of Price Strategy and Analytics at Woolworths, and while he was there, the idea to develop an alternative to sending humans out to gather data on competitors’ pricing began to take root…in 2018, he set up ShopGrok.  The business has worked with clients like KFC,  Super Cheap Auto and Oroton. 

In this chat, Aaron shares his thoughts on dynamic pricing, his top pricing tips for anyone looking to overhaul their strategy in this space and gives us the low down on data collection.

“You need to understand the purpose of each product in your range”

Aaron Cowper
Aaron Cowper

Episode Timestamps
[00:01:19] Emerging pricing concerns for ecommerce retailers
[00:04:30] The origins of ShopGrok’s unique name
[00:07:46] Setting pricing in the current economy
[00:14:34] How to set an ecommerce pricing strategy and execute on it
[00:17:25] The psychology of in-between pricing
[00:19:07] How ShopGrok helps retailers set prices
[00:24:23] Developing different pricing for different channels
[00:25:47] Creating differentiated pricing strategies
[00:30:05] The import relationship between e-com and buying teams
[00:34:32] How to explore new product categories and their pricing
[00:37:22] Recommendations for key pricing strategies
[00:41:31] How personalized offers and loyalty fit with your pricing strategy
[00:45:56] Summarising the key pricing strategy tips for ecommerce

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Ecommerce Lessons from Aaron Cowper

#1 The art of not pricing too high or too low

“In really simple terms, I suppose that there’s really two ways that you can leave money on the table with pricing. And it’s either you’re pricing too high to try and earn higher margins, but you’re going to lose sales because people will go elsewhere to buy the product, or you’re actually chasing the market and pricing down and chasing the market down on absolutely everything unnecessarily. And then obviously at worst case you’re going to be unprofitable and best case you might be running on really razor thin margins. 

#2 Using the 80/20 rule to improve your pricing

“So number one would just be to really understand your own product range and the purpose of each product within that range. It could be as simple as just two groups. For example 80-20. What are the 20 percent of SKUs that basically give me 80 percent of my sales? And those are typically the really important products.

The second step would be, what’s the strategy for those different groups? So likely for the KVI known value item or key value item products, that top 20%, usually the strategy will need to be, I need to be competitive. I need to be within the consideration set for a consumer. And depending on the category, that might be, I need to be exactly line ball. I need to be within 5%, I need to be within 10%, it really depends on the category. But what’s my strategy? 

And then on the rest of the range, that’s where it gets interesting. That’s where you’ve got your private label range. You’ve got profit generating products. You want exclusive products. So how do I convert customers? They might come for the traffic driving product but then they put these other products in their basket and that’s where I get my margin. 

So you need input from everyone, not just pricing, it’s how does my e-comm team help me with that with recommendation engines, et cetera? How does my store team, if it’s a store-based retailer, execute in store to make sure that there’s cross-shop items in the right places? How do I do above the line? How do I do EDM that will align with these objectives? So the third piece is probably the execution, which is the cross-collaboration between all these different parts of the business to make sure that you have a cohesive, omni-channel strategy that really tells customers what you’re doing and explains the value to them.”

#3 Don’t be afraid of dynamic pricing. Even McDonald’s use it.

“I think you can’t really get away these days with having a different price online to offline, just your standard kind of visible effective price. If it’s different online versus offline, you’re just going to drive customers away because I think the stat, even when I was at Woolworths ten years ago, the stat was something like 70% of in-store purchases start with some sort of online view. So if a customer’s looking at your mobile app or your website, seeing a price, and then they go into store and it’s different, customer trust is going to erode pretty quickly. 

But then there are definitely things that retailers are doing to try to optimize in that space. So time of day, that is something that we have seen in the quick service retail space.  The golden arches would be one where dynamic pricing definitely happens. You may not be aware as a customer, but the price of a Big Mac differs quite widely depending on the store you go to. I think store based pricing, Metro versus regional, etc. That’s definitely something that a lot of retailers are playing with. There’s always a trade off between the complexity involved in implementing that and the benefit of improved margin, etc. and also the potential for customer trust to be eroded if it becomes clear that you know the pricing is different depending on where you are. 

Another thing that a lot of retailers do is have online only promotions or specials or personalized specials or member only type specials. So those things are definitely good ways to both drive loyalty and also be able to differentiate somewhat online versus offline and be a bit more nimble. So it’s particularly for those retailers who have both an in-store presence and an online presence and they’re trying to compete against the likes of Amazon who do move prices multiple times a day in some cases.” 

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