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Pricing Intelligence: The Most Effective Retail Pricing Strategies

February 25, 2015
Written By

Gartner-owned Software Advice, a trusted resource for point of sale software buyers, recently polled a cross-sector of retailers to learn which pricing strategies they deem most effective. We summarise the key findings from this new report “The Best Retail Pricing Strategies by Sector”, with Profitero’s VP Strategy & Insights Keith Anderson providing commentary on how pricing intelligence software can work in conjunction with the most popular pricing strategies.

Software Advice recently surveyed retailers about their experiences across 13 different pricing strategies, ranging from discounting and bundling through to dynamic pricing (prices change based on the willingness of a customer to pay) and MSRP (the manufacturer’s suggested retail price).

Department retailers made up the largest single segment of respondents to the survey (31 percent), followed by specialty retailers (24 percent). Rounding out the top four were grocery (14 percent) and e-commerce retailers (13 percent).

1. More than 50% of retailers use 10+ pricing strategies

What’s most surprising from the report findings is that more than half (52 percent) of retailer respondents said they use more than 10 pricing strategies – with just 2 percent of retailers saying they use two or fewer pricing strategies.

Discount pricing is shown to be the most popular pricing strategy for retailers across all sectors, used by 97 percent of survey respondents, with MSRP used by 85% of retailers as a means to raise the perceived value of their products.

Figure 1: Most popular pricing strategies overall

source: Software Advice

2. Discount is cited as the most effective for eCommerce retailers

66 percent of e-commerce retailers rated discount as an effective pricing strategy, while 62 percent rated below competition as effective. Just 28 percent of eCommerce retailers rated MSRP as an effective pricing strategy – where online price comparisons are quick and easy for customers to conduct, MSRP can often be a tough strategy to use.

The price resellers pay is determined mostly by the MSRP. If a reseller is willing to make less they can undercut the competition. That’s where MAP monitoring comes into play: the minimum advertised price that a reseller agrees to advertise a brand or product at. Profitero works with many global brands to ensure MAP isn’t being voliated by resellers.

Figure 2: Most popular pricing strategies by eCommerce retailers

source: Software Advice

3. Pricing Management software is becoming more commonplace

More than half (51 percent) of respondents say they use software to manage product pricing, showing that this technology is gaining widespread appeal.

Of the respondents who use software to manage pricing, 61 percent say that software is part of their retail management or POS systems, while 39 percent use a standalone pricing management application.

Interviewed for the report, Profitero’s VP Strategy & Insights Keith Anderson said that the use of software to inform and manage pricing began with the largest companies and online retailers – however more and more retailers now understand the benefits of pricing intelligence.

With the growth of online retail and big data, retailers are now able to collect exponentially larger competitive pricing data sets, more frequently and more efficiently than traditional analog methods which are costly and difficult to scale.

A growing number of Profitero’s customers also integrate our competitive price intelligence with optimization solutions to make pricing decisions even more efficiently and on the basis of even more complete information.

To find out more about how Profitero works with retailers and brands to more effectively manage their pricing, contact us for your complimentary demo.

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About Profitero

Profitero is the leading global provider of eCommerce intelligence for global brands and retailers.

Profitero provides dozens of global brand manufacturers with critical eCommerce insights, helping to enhance their online sales and market positioning. We deliver key online metrics, including pricing, product content quality, search ranking, share of online shelf and promotions, in any country and from any online or multichannel retailer. Profitero collects online insights from 275 million product pages at more than 4,000 online retailers in 50+ countries every day.

Profitero also provides both brick & mortar and online retailers with their competitors’ prices, promotions and full product assortment information. More than 50 global retailers, including Staples, Waitrose, Ocado, Morrisons, Walmart-owned Sam’s Club and Worten, rely on Profitero’s accurate and timely competitor price intelligence to make better informed and more profitable pricing decisions, helping them to increase sales as well as margins.

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