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Dealing with Prices and Promotions in Omnichannel

Dealing with Prices and Promotions in Omnichannel

Challenges in Omnichannel Retailing

Prices and Promotions – Challenges in Omnichannel Retailing
Data Management
Retail & Consumer Goods

Sales prices in retail can become very complex – especially if several sales channels are used, e.g. stationary stores and online shops. Last but not least, in order to provide the customer with the optimal customer journey, a system is required that knows the relevant prices and promotions at all times and can calculate them ad hoc.

What the Customer Wants

Basically, the customer should experience an optimal customer journey. That is clear. From his point of view, it no longer matters whether he buys online or offline – he chooses the most convenient and fastest way for himself. The result is a merging of stationary retail and e-commerce.

The omnipresent customer journey has many facets; a neuralgic point is the check-out process coupled to the payment. This is where the customer's money is at stake, and nothing should go wrong! Stumbling blocks in the form of irritations due to deviating prices or invalid offers must be avoided. Whether the customer orders the goods online and either picks them up at a selected store via Click & Collect or chooses delivery to their doorstep – the price has to be correct. This means that the cost of the online order must be identical to the price when the goods are collected from the store. It gets tricky when the shopping cart is changed in the store, i.e., the items are exchanged or supplemented by others.

Buy 2 Get 1 Free! Promotions: Both a Blessing and a Curse

Get 3 for the Price of 2! Promotions: Both a Blessing and a Curse - Blog Arvato Systems

What actually makes promotions so difficult for retailers? First of all, they are a very effective means within the marketing instruments to promote sales, e.g. in sales campaigns – it enables cross-selling or upselling, and in addition it has the clear advantage over classic discounts that it only indirectly and proportionally reduces the retail margin. A bundle, for example, combines various items, on which the customer pays a price that offers a price advantage over individual purchases. Promotions or bundles are available on the market in many variants, depending on different sorts. These include, for example: Quantities in different units, sales thresholds, product groups, brands or temporal conditions.

In order to control these, sophisticated systems are needed that map these parameters and determine exactly the right price in the payment process. The big challenge now is to make identical rules work in all channels (online/offline). This is where technology quickly reaches its limits, because not every system has the same "understanding" of the necessary parameters. And what happens if a shopping cart from the online shop, for which a rule such as "buy 2 get 1 free" applies, is changed again in the store – does the rule then still apply? Can the systems involved understand this change?

Let’s Meet Again: Returns Come into Play

What happens if the customer returns one or more items that came from a promotion? Which rule applies now? And do the involved systems even know the transaction? How much money does the customer get paid out? So many questions to ask ... Such cases can be challenging and are often solved manually. In addition, it is important to ensure that neither the customer nor the retailer is favoured or disadvantaged.

What Role Do Coupons and Vouchers Play?

What Role Do Coupons and Vouchers Play? - Challenges in Omnichannel Retailing

Coupons and vouchers have a magical effect – this is where the hunter-gatherer in us is awakened. Whether in paper form or digitally, generally valid or customer-specific, whether multiple or single redeemable, whether valid for items or product groups – there are no limits to the creativity of marketing and sales. For IT architecture, on the other hand, there are. This is substantial for both the maintenance and the booking of transactions. It should be noted that, technically, a coupon is an access to a discount – a voucher, on the other hand, is a means of payment.

The systems involved must have the information on how a coupon or voucher is to be interpreted, where they are created, via which medium they are deployed out and activated, how they can be redeemed and to what extent correct posting in financial accounting must be defined. In addition to the reach of a coupon, its monetary impact must also be measurable. Only in this way, its benefit for the retail and its advertising measures can be precisely evaluated.

Too Many Cooks Spoil the Broth: Dealing With Involved Systems

Which systems are involved in these processes? Often, the systems that are currently in use. These are usually the ERP, the online shop, possibly the store merchandise management and the POS system. Each of these systems involved has more or less sophisticated ways of technically representing the complex pricing models or coupons.

All these systems accompany the customer process in some way; consequently, the prices, values, rules, etc., must be mapped there. But not every system is set up in the same way – there are differences in the data model, in the different interpretation of logical structures e.g., product groups, brands, etc. In addition, there is the temporal component, i.e., when does a rule begin and when does it end? What if the validity of a rule has already ended and a return is only posted afterwards – which price applies and which system provides the correct information?

Another challenge relates to the heterogeneous communication between the systems. One system processes the data online and in real-time; another works with a time delay. One system communicates directly; another may need an FTP server to store the data locally. As a result, the right price is missing at the decisive moment, which can lead to avoidable irritation and annoyance of the customer.

Nice to Know: Couponing

A widespread form in the FMCG sector are advertising and promotion campaigns via couponing, which are pushed by the manufacturers. For the technical handling of such so-called industry coupons, the origin is crucial. This is because the manufacturers put them into circulation with the help of agencies. For customers in digital or print form – for retailers in digital form via service providers with corresponding interfaces. This requires solid IT integration on the retailer side, not least for clean billing and clearing. After all, once the coupons have been redeemed, the retailer retroactively reclaims the discounts granted by the coupons from the industry. A lot of money is involved here, and thus the interest in clean data is high.

Still Important – Don’t Forget the Financial Accounting

Last but not least, financial accounting also wants to be involved – it needs accurate bookings, in extreme cases even at item level, and that is important! Questions arise such as:

  • Is the discount for "get 3, pay 2" to be distributed proportionally to each item or absolutely to a single one? This rule must be defined in advance in order to pass the data cleanly for accounting.
  • What is the situation with VAT?
  • And how is the combination of payment methods handled, i.e. paypal or cash payment in addition to a voucher?

Wanted! Searching for the Single Point of Truth

When it comes to the efficiency of one's own IT systems, the following arguments often dominate:

  • "It can't be that difficult; we have an ERP system."
  • "We have a POS solution that can do the math."
  • "We have an online shop that knows all the prices."

Each statement itself is correct, but many of the involved systems consider only a part of this truth – what is missing is the bundling in one place: The Single Point of Truth! This must exist in the form of a system that independently holds the data in one place.

It allows clear data structures and uniform logics to be created. It ensures immediate provision of the data to those systems that require the appropriate information for a customer transaction. In addition, for more complex rules, it can calculate the payment amount in real time that now applies to the customer. For example, a purchase transaction that takes place across different channels and undergoes changes to items within the shopping cart must be completely recalculated. Even in the case of returns, it can simply take the correct price from a past promotion based on the history data and determine the payout amount without much effort – fair for both customer and retailer.

A continuous customer journey is achieved through which the customer can shop flexibly. Thanks to the Single Point of Truth, challenges such as cross-channel purchases coupled with changing shopping carts are a problem of the past.

What Contribution Can Arvato Systems Make?

aroma® – the Arvato Order Management System – plays a central role in omnichannel retailing. It connects the online and offline sales channels and ensures a "seamless" commerce experience.

Among other things, the challenges described above are bundled and the system organizes all relevant data flows. In addition to routing orders, establishing omnichannel processes and connecting dropshippers, it not only creates full transparency for customer service. With its one specialized module, the Price & Promotion module, it also manages everything to do with prices and promotions and ensures consistent information at all touchpoints. It also includes the so-called promotion engine. This allows real-time calculation of shopping carts from all touchpoints in one central location. Returns are easily solved because the prices and rules valid in the past are directly accessible.

The system is modular, only the functional scope that is really needed is used. The Price & Promotion module can even be operated completely stand alone without the OMS in the background.

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Written by

Dr. Nasser Kaspari
Expert for E-commerce and Omnichannel