Managing Retail Pricing Integrity

It's no secret that retailers are struggling with price integrity. Unfortunately, determining the cause of pricing errors isn't easy. The entire process - from buying to selling - needs to be examined.

Pricing Errors
There are several types of pricing errors, each with varying causes and solutions.
  • Scanning Errors occur when shelf prices and register prices are not consistent.
  • Controller Errors arise when register prices do not match host prices, often because increases are not updated to the store POS controller.
  • Not On File (NOF) Errors occur when items are not in the computer file

Ramifications
  • Diminished customer confidence - Consumers are demanding more than enhanced service. They are more price and value conscious than ever before. Incorrect and inconsistent pricing procedures adds to shoppers' discontent.
  • Lost revenues - Grocers, for instance, are losing an average of 5+ cents per pricing error. In addition, a common overcharge policy is to give the first item to the customer at no cost. Less obvious losses stem from an unproductive use of time, such as balancing underrings and overrings
  • Increased regulation - As a result of consumer litigation, standards are being developed by various state and federal agencies, including the National Conference on Weights and Measures
  • Regulatory fines - Civil penalties, due to price integrity violations, are increasingly impacting retailers nationwide.

In order to help your organization deal with this challenge we recommend that you evaluate existing pricing systems, sample pricing in select locations, determine the depth and cause of the errors,
and develop a process to correct these errors. This should be accomplished through:
  • Store visits
  • Pricing audits
  • Interviews with store managers and pricing coordinators
  • Operational observations; as well as
  • Operational data collection and analysis

This process should include an examination of several areas to achieve optimal
results. These include:
  • The Price Coordinator Position - Review job responsibilities, performance standards and
  • training materials
  • Store Reports - Ensure they are user-friendly and contain pertinent information
  • Pricing Cycle Timing - Implement adequate lead times for various tasks
  • Operating Policies - Ensure they are up-to-date and in use. If not, policies are refined for efficiency and practicality.
  • Communication Process - Establish effective communication between all levels
  • Buying - Review policies and procedures for new item set-up, price changes, DSD, special deals and ad breaks
  • Distribution - Identify and correct unauthorized items and inaccurate UPC codes before products arrive at the store
  • Systems - Evaluate file synchronization on store price files. Review time cycles for new items and item corrections from buyer to store. Determine system gaps.
  • Management Philosophy - Determine if and how each employee is responsible for price integrity

Typical improvements that retailers experience from properly addressing this challenge include:
  • A 98 percent pricing accuracy
  • Establishment of training procedures and performance standards for the store price coordinators
  • More user-friendly reports that provide useful and actionable information
  • Enhanced communication throughout the organization
  • A price integrity corporate focus that leads to better customer service and enhanced profitability


For more information on this topic contact Pat Fitzpatrick at Atlanta Retail Consulting Inc