Wednesday Mar 21, 2012

Personalized Pricing

In past postings I've spent a fair amount of time talking about targeted promotions.  Using a complete view of the customer that includes purchase history, location history, and psychographics gleaned from social media, we can select the offer with the greatest chance of redemption.  This is done to influence shopping behavior, which might be introducing the consumer to a new product line, increasing their basket size, increasing frequency of purchases, etc.

Safeway seems to be taking a slightly different approach with their personalized pricing.  In additional to offering electronic coupons and club card offers, they are also providing a personalized price for certain items based on purchase history.  So when Sally want to shop at Safeway, she first checks the "Just for U" website for three types of deals.  She starts by selecting manufacturer coupons to load into her loyalty card, then she checks the Club Card for offers like "buy one get one free."

The third step is the interesting one.  Safeway will set a particular lower price for Sally good for 90 days on items she buys often.  Clearly this isn't enforcing a new behavior but rather instilling loyalty.  I would love to know exactly how they are determining the personalized price.  Of course bargain hunters can still stack the three offers so they can, for example, get their $4.99 Oatmeal for $0.72.

I like this particular question and answer from their website's FAQ:

My offers are not that great. Can I tell you what offers I need?

That's a good idea. That functionality is not currently available, but we appreciate your input and are constantly improving our just for U program. Stay tuned for exciting enhancements!

I suppose if Safeway is tracking all the purchases, they can easily determine whether the customer if profitable.  As long as the customer stays profitable, why not let them determine a few offers themselves?  Food for thought.

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David Dorf, Sr Director Technology Strategy for Oracle Retail, shares news and ideas about the retail industry with a focus on innovation and emerging technologies.


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