Build Profit & Boost Loyalty? Learn Why Both Are Possible With AI Powered Pricing | Ask An Expert
How can AI-driven pricing optimization boost retail profits and customer loyalty? 🚀 Chris Walton & Anne Mezzenga sit down with Matt Pavich, Senior Director of Strategy & Innovation at Revionics, to discuss how AI-powered pricing is shaping the future of retail and what retailers must do to stay competitive.
📌 Key Moments:
- ⏩ 00:00 – Intro
- ⏩ 02:00 – Why pricing optimization is the biggest lever in retail
- ⏩ 07:15 – The evolving complexity of pricing in retail today
- ⏩ 12:45 – AI-powered price optimization: How it benefits both retailers & consumers
- ⏩ 18:30 – The impact of tariffs, inflation, and economic trends on pricing
- ⏩ 24:15 – AI ethics & pricing: How retailers can ensure fair and strategic price changes
- ⏩ 29:00 – The future of AI in retail pricing: What’s next with generative & agentic AI
- ⏩ 35:00 – Closing thoughts & how to get started with pricing optimization
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#retailinnovation #pricingstrategy #pricing #retailtech
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Transcript
Foreign.
Speaker B:Hello, welcome to another exciting and elucidating episode of the Omnitalk Ask an Expert series.
Speaker B:I'm one of your co hosts for today, Anne Mazinga.
Speaker A:And I'm Chris Walton.
Speaker B:And we are the founders of Omnitalk, the fast growing retail media organization that is all about the companies, the technologies, and the people that are coming together to shape the future of retail.
Speaker B:Chris, you and listeners are going to love, love, love this session because I'll never forget one of your stories from way back.
Speaker B:You were telling us all about when you were a regional manager.
Speaker B:Regional manager.
Speaker B:What was your like at Target?
Speaker A:Technically, I was a district manager is.
Speaker B:What they call district manager.
Speaker B:Thank you.
Speaker A:Oversaw 12 stores and 12 stores.
Speaker B:Okay.
Speaker B:The district manager, I remember you telling us about one time when you told somebody in the store that the single most important thing that they could do to, like, impact the business in their job was to make sure that a pricing label, a promotion label was on a product.
Speaker B:Do you remember that?
Speaker A:A hundred percent?
Speaker A:I do.
Speaker A:Of course I do, Ed.
Speaker B:Yeah, it shows you're listening to me.
Speaker B:I'm always listening to you.
Speaker B:But why was that one of the most important things?
Speaker B:Chris, if you can briefly share with our audience.
Speaker B:Cause I think it.
Speaker B:It lends itself to our conversation today.
Speaker A:Share that anecdote again today.
Speaker A:Yeah, sure.
Speaker A:I mean, I remember.
Speaker A:I'll never forget it.
Speaker A:I was walking, I think I was walking through a store, one of my stores I ran in Colorado, and I had a team member with me, and I was just walking in the back to meet the manager and.
Speaker A:And I saw a price sign on the floor.
Speaker A:And I said to him, hey, dude, pick that up and put it back on.
Speaker A:And the guy was like, no, dude, really?
Speaker A:Are you serious?
Speaker A:Like, you're going to make me pick that up in front of you?
Speaker A:I was like, yes.
Speaker A:And here, let me tell you why that's important.
Speaker A:I said to him, like, because I knew from my merchandising days at Target HQ that any time we took a promotion, sales were going to go up at least 20% to sometimes as much as six times or more.
Speaker A:And so there was no single activity that he could do on a given day that would be more impactful than him putting that price sign back on that item.
Speaker A:And so, so I told that story almost every time since.
Speaker A:And because I saw the light bulb go on in his head, he's like, oh, I didn't know that.
Speaker A:You just put that in a context that I can understand.
Speaker A:And so, yeah, it's a really powerful anecdote that I think tells you just the power of promotions and getting them executed correctly at the store level.
Speaker B:Yes.
Speaker B:And the importance of pricing optimization.
Speaker B:So we've heard from.
Speaker B:We just came back from a conference fmi, the Food Market Institute down in Florida, where we were talking to tons of retailers, especially retailers in the grocery space.
Speaker B:They're all looking into how they can like optimize pricing because of how impactful that is to getting customers in the door and retaining existing customers.
Speaker B:So, Chris, I did some digging and I found someone who could help us who's an expert on this process about how retailers can get their pricing strategy in order and also provide better customer experiences as a result.
Speaker B:We have called on Matt Havich, the senior director of strategy and innovation at revionics, so let's welcome him to the show.
Speaker B:Matt, how are you doing?
Speaker B:Thanks for joining us and taking time to educate all of us here on omnitalk today.
Speaker C:Doing great.
Speaker D:Thanks for having me.
Speaker D:Very excited to talk with you both today.
Speaker A:Yeah, I'm excited to pick your brain and get your opinion on how do you.
Speaker A:How retailers should navigate the pricing environment, especially in today's, today's macroeconomic climate, too.
Speaker A:There's a lot going on here, Matt, that we're excited to talk to you.
Speaker A:So.
Speaker A:But before we get started, just a quick reminder.
Speaker A:For those watching live on LinkedIn, feel free to ask your questions of Matt or Anne or myself at any time via the chat session window in LinkedIn.
Speaker A:Just the right hand side of your stream.
Speaker A:If you're on your desktop or below, if you're on your mobile phone, put them in there and let's get it going.
Speaker B:All right.
Speaker B:Well, Matt, before we dive in, we mentioned that you're an expert in this area, so why don't you give us a little bit of your and a little bit about your role and what Revionics does, if you don't mind.
Speaker D:Yeah, great.
Speaker D:So.
Speaker D:So a lot of people say they grow up in retail.
Speaker D:I actually did grow up in retail.
Speaker D:My parents owned a store.
Speaker D:I was walking around the store as a toddler, like learning really.
Speaker D:Running a small store.
Speaker D:Yeah.
Speaker D:So what kind of store was a convenience store?
Speaker D:Gas station, you know, selling all the, you know, traditional convenience store things, you know, candies, you know, coffee, tobacco, that sort of stuff.
Speaker D:So I did literally grow up in retail and that continued all the way through stocking shelves at Myers as I was growing up in Michigan, you know, to pay for college.
Speaker D:So I've been in the trenches.
Speaker D:I've hung those price tag signs.
Speaker D:But, you know, More.
Speaker D:More probably relevant to today's audience.
Speaker D:I've also, you know, I also worked at Target, so good to see a fellow, you know, person from my Target time where I worked at headquarters as a merchant in several functions.
Speaker D:A grocery buyer, I was a pharmacy buyer.
Speaker D:I helped develop some private label products and it also helped with some strategic initiatives like the launch of the original Cartwheel app, which is now called Circle.
Speaker D:Oh, yeah.
Speaker D:From there I moved to Revionics.
Speaker D:And what's great about Revionics is I've been here for 12 years and multiple roles, really continuing to wear that retailer hat and helping retailers develop the best pricing practices possible with the best pricing solution to really help them drive their business objectives.
Speaker D:So a little more about Revionics.
Speaker D:You know, we do price optimization.
Speaker D:We're really focused on having the best pricing AI in the market.
Speaker D:We work with, you know, many top retailers, 12 of the top 50 retailers, you know, in more than 35 countries.
Speaker D:And our goal is to really help them have the right price for their consumers at all time and really help them implement their strategies in a way that's meaningful for them.
Speaker D:You know, every company has a different strategic need, a different goal objective.
Speaker D:But, but you mentioned it.
Speaker D:Right now, pricing is king.
Speaker D:So it's a good time to be in pricing.
Speaker D:And we're really lucky to have some great retail partners and work with them to build some fantastic pricing strategies.
Speaker A:And Matt, because this question, this question is actually more important than probably people realize, is that pricing optimization both in stores and online.
Speaker D:Yeah.
Speaker D:I mean, pricing optimization is whatever channel, whatever store, whatever customer.
Speaker D:You know, it's base, it's promo, it's markdown, it's, you know, it's those TPRs.
Speaker D:It's all the things that really matter.
Speaker D:It's making sure that you have the right and analytics to say, hey, these are, these are the items that are most important to price, you know, for your customers.
Speaker D:And then, you know, having the science to help you figure out all the other stuff, you know, along the way from, you know.
Speaker D:Yeah.
Speaker D:How do you, how do you make up the margin on the back end if you're, you know, really working to grow your price perception on some key items.
Speaker A:So interesting.
Speaker A:All right, so let's get started with this.
Speaker A:Let's get this webinar kicked off here.
Speaker A:So, you know, pricing, it's not a new thing.
Speaker A:I mean, retailers have been trying to get right price forever, but it's, it's more complicated now than I think it was probably 20 or 30 years ago because customers can See your competitors prices online at any time, hence why I asked that question via their mobile phone while they're shopping in your store.
Speaker A:So give us a little bit of the landscape here.
Speaker A:What is going on right now that makes this a particularly complex battle for retailers?
Speaker D:Yeah, no, it's a, it's a, interesting time to be in pricing.
Speaker D:So you have to, what you just called out.
Speaker D:You have the most competitive era ever in pricing.
Speaker D:You know, I personally, when I'm shopping groceries, I will have multiple tabs open to see, you know, because it comes to my door, really, you know.
Speaker B:Yeah, super grocery shopper.
Speaker B:Matt, like you are the, you are the powerful grocery shopper that most powerful.
Speaker A:And he knows the game too, right?
Speaker A:He knows the.
Speaker D:Yeah, when you're, when you, when you have the inside track, you know, you know, you know the different pricing things going on.
Speaker C:Right.
Speaker D:But, but I will say, look, people have access to a wide range of retailers online in store.
Speaker D:They have different ways to have the product delivered to them.
Speaker D:They have different levels of convenience.
Speaker D:So it's hyper competitive.
Speaker D:Coming off of that, we're coming off of, you know, multiple years of inflation.
Speaker D:Consumers are down, trading in record numbers.
Speaker D:And that downtrend could be anything from looking for more promotions to switching the retailer to shop at a more affordable retailer to, you know, trying more private label products to trying to volume purchase so they can get more bulk, you know, more warehouse, those sort of things, or bigger, bigger containers.
Speaker D:So they're trying everything.
Speaker D:So they absolutely need to find good prices and they are voting with their share of wallet and they're making that decision every day, live in real time.
Speaker D:Also the data is getting better, the speed is getting better.
Speaker C:Right.
Speaker D:Retailers who used to price once a month or once a week are now pricing weekly or daily.
Speaker C:Right.
Speaker D:It's at different speed.
Speaker D:And now we're coming off kind of the, the peak inflationary concern and now we're moving into a period where we have to worry about tariffs and there's some other supply chain challenges that are kind of creeping up on the horizon and crop shortages which could lead to supply chain challenges that could lead to higher pricing.
Speaker D:And you mix all of this together and retailers really have this unique puzzle where they're really trying to, you know, continue to win over those loyal customers with the right prices on the right products and the right promotions, while also trying to figure out, hey man, my costs are going up or they will go up pretty significantly with tariffs.
Speaker D:Like how am I going to balance this out and how am I going to do this in A way that really meets all my business objectives.
Speaker A:Matt, you also mentioned something that got me thinking too.
Speaker A:Like, how much, how much do you at Revionics and how much do you consider, like, all the other factors that go into the final price, like the shipping costs, the.
Speaker A:The assembly fees.
Speaker A:Like that is an interesting dynamic depending on, you know, which vertical you're talking about as well.
Speaker D:Yeah, I mean, the one thing that's true about retail is every vertical has unique challenges.
Speaker D:They have different mix of base, promo and market.
Speaker D:Even within a vertical, you low versus your EDLP retailers.
Speaker D:And, you know, it really comes down to, you know, the more data you have, the better informed decisions you can make.
Speaker D:So we meet a retailer where they're at in their journey.
Speaker D:But the reality is, is, you know, you want to make data, informed decisions and, you know, if you have that information, you can use that information to do a lot of things.
Speaker D:So some of the things we're talking about here are things like pricing architecture.
Speaker C:Right.
Speaker D:So just making sure simple things like strawberry yogurt is price same as a blueberry yogurt.
Speaker D:Right.
Speaker D:Seems simple, but without, you know, a system and a structure that, that can sometimes break.
Speaker D:Or making sure you get a better deal on a, you know, never thought about that pack than a six pack.
Speaker D:Right, right.
Speaker D:You know, I want to get a better bar or per, you know, whatever per ounce.
Speaker C:Right.
Speaker D:So there's some simple rules, but then you get into some of those more interesting complex guardrails.
Speaker D:Like, hey, I just, you know, got a price increase on a product that I took a price increase on or a price, you know, I'm thinking of doing a price increase, but I already did in the past three months, so maybe I don't want to do that.
Speaker D:Two things that are more, you know, along lines of ethical pricing.
Speaker C:Right.
Speaker D:Like I, you know, I took the price up on men's razor blades and women's razor blades at the same time.
Speaker D:So I'm not, you know, disenfranchising any customers.
Speaker D:Right.
Speaker D:So these are the things that retailers want.
Speaker D:And then you just have tons of other things, like any number.
Speaker C:Right.
Speaker D:You don't want to have a price point that ends in a six or, or four.
Speaker C:Right.
Speaker D:So there's a lot of basic guardrails that you want to apply and rules.
Speaker D:And the more data you send and the more you talk through your strategy and understand what's important to you, the better you can set up your pricing solution to really meet all those needs while really delighting your customer and, you know, getting the business objectives that you want to achieve.
Speaker B:Yeah, Matt, I want to dive into that a little bit more because I think there's no doubt that especially the grocery retailers that are listening right now that are joining us are thinking about that.
Speaker B:But as you mentioned, this is a low margin industry.
Speaker B:It's difficult to take this investment in this.
Speaker B:Like, yes, we want to do it, but do we have the cash to support making an investment in pricing optimization technology?
Speaker B:So I'm wondering if you can just dive into a little bit on like how some of your customers or some of the retailers that you've worked with have seen kind of this return on investment and not just for the bottom line, but I also think there's a really key component here to the customer experience that I want to make that we really dive into as well.
Speaker D:Yeah, no, really great question.
Speaker D:So, first of all, you know, at the end of the day, if you really think about retail, there's multiple levers you can pull, but a lot of them take time.
Speaker D:You can't change your supply chain overnight, you can't rebuild your assortment overnight.
Speaker D: You can't build: Speaker D:Though some retailers are pretty good at building a lot of locations fast.
Speaker D:Right?
Speaker D:But one thing you can do really quickly, the fastest lever you can pull is pricing.
Speaker D:And pricing impacts so much, impacts margin units, volume, price perception, brand perception, your competitive position, your private label relationship with national brand products, or your private label strategy, your inventory situation.
Speaker D:You have too much inventory, you take prices down, you can move through it.
Speaker D:Right?
Speaker D:So pricing is critical.
Speaker D:And I think we know over the past four years, looking at survey after survey after survey, consumers care about pricing.
Speaker D:Pricing is a top concern for consumers.
Speaker D:So first of all, if it's the most important thing to your consumers, it's worth investing in.
Speaker D:Second of all, the beauty of pricing is it's quantitative.
Speaker D:So not only is there an easier way to calculate the ROI of investing in your pricing strategy, but it's a proven investment.
Speaker D:It's been a proven investment now for over 20 years.
Speaker D:In fact, Gartner came out with a study.
Speaker D:AI is all the rage.
Speaker D:Everyone likes to talk about AI.
Speaker D:I'm going to talk a lot about AI, hopefully later, because we love AI.
Speaker D:But they looked at over 20 use cases for AI in retail, and at the end of the day, said pricing promo and markdown optimization is the number one use case, both in feasibility and in value for retailers.
Speaker D:It's proven, it works.
Speaker D:We work with a lot of retailers, they invest in their pricing and then the profits and ROI that they've Generated from that, they've been been able to reinvest in other areas of their business or further expand their pricing journey.
Speaker D:Okay, they invested in having better promotions and now they're able to invest in better markdowns or better base pricing practices and now better promotions or they're just taking that profit and they're reinvesting in their price position.
Speaker D:So it's a virtuous cycle.
Speaker D:Right.
Speaker D:So there's a lot of things you can do.
Speaker D:But one thing's for Claire, it's pricing is important to customers.
Speaker D:It drives value, it's a high ROI investment.
Speaker D:And retailers should be, you know, looking at their pricing capabilities now more than ever, especially with tariffs and other things on the horizon.
Speaker B:Matt, is there any way that customers are like seeing this visibly?
Speaker B:Like, I mean, I think back to the days where like you'd see like other retailers are charging this much, we're charging this much.
Speaker B:I mean, how does that take shape in like from a customer view perspective?
Speaker D:Yeah, Price perception is interesting, right, because there's a psychological element of it.
Speaker D:So there's a, the real time truth.
Speaker D:You can go on two browsers and see price A versus price B.
Speaker D:And in real time, this, this one has a better price.
Speaker D:But for true price perception as set in, it's, it's those thousands of little things, those kind of Gladwellian sort of, you know, like, I'm experiencing this now.
Speaker D:I'm experiencing this.
Speaker D:There's all those heuristics.
Speaker D:So to really have a great pricing strategy, it's not about the one and done.
Speaker D:It's not even about necessarily, you know, just having lower prices on everything.
Speaker C:Right.
Speaker D:It's about using the analytics to say these are the products that matter most to customers based on what the data is saying and what they're actually choosing with their purchase behavior.
Speaker D:So a good example, right, is you know, regional pricing.
Speaker D:Let's say you're a national grocer, right?
Speaker B:Yeah, yeah.
Speaker D:You know, you have some products like Goya Black Beans in Miami are going to be a price perception driver.
Speaker D:You have to have a good price on that product there, but maybe not in other markets.
Speaker C:Right.
Speaker D:So, so it's important to not just have good prices, but it's important to have good prices on the items that matter the most and really build that price perception over time.
Speaker D:And we've seen fantastic results from customers who have really invested in their price perception over the past year.
Speaker D: act, during peak inflation in: Speaker D:Like our, our customers who were using optimization to enhance their price perception, they were growing around 10% and doing that at a higher profit.
Speaker D: And as we know,: Speaker D:So it's, it's proven, it works.
Speaker D:But ultimately it has to be about your consumers.
Speaker D:You have to have the right price promotions on the products they care most about, the markets and channels they care most about.
Speaker B:Well, and I imagine that this is getting even more complex.
Speaker B:Like I'm thinking about when these products are taking off on like TikTok or on social media or something like, you know, you, that's something that you're gonna suddenly get a flood of traffic with and if you don't have something set up to quickly respond, respond to that pricing.
Speaker B:Like price perception isn't just like what's in the circular every week, it's now like what are you, what is your price on, you know, the black beans or the cool new freeze dried candy or something like in that moment right then and there when people are going to start flooding the stores.
Speaker B:Right?
Speaker D:Yeah, no, it's moving faster than ever.
Speaker D:In fact, if you look at different studies on how different generations like even build their meal plans and their recipe Ideas, you'll notice TikTok is actually a major influencer for building a meal plan.
Speaker D:Right.
Speaker D:I'm, I'm kind of an old dude, I'm Gen X.
Speaker D:Right.
Speaker D:Like, I don't get recipes off of TikTok.
Speaker C:Right.
Speaker D:But, but like younger generations are, and Gen Z is growing, they're exploding.
Speaker D:Right.
Speaker D:So you do get these trends.
Speaker D:So you need to have scientific models that can really understand, you know, what is causing the trend.
Speaker D:Why is this thing growing?
Speaker D:Why is it not growing?
Speaker D:What should we do, how do we react?
Speaker D:But also you need to have the processes and the technologies in place to execute those pricing strategies or make changes in real time.
Speaker D:It's happening every day.
Speaker D:Kind of a fun story.
Speaker D:My son also works at Target.
Speaker D:He's frontline trenches.
Speaker D:He's you know, working, stocking grocery shelves and you know, one day not too long ago somebody came in and asked about Stanley Cups and where could they find Stanley Cups?
Speaker D:And we live in Texas and like we grew up in Michigan so you know, we think NHL immediately.
Speaker D:So he was confused.
Speaker D:He's like, what's going on?
Speaker D:Why do people in Texas suddenly care so much about hockey?
Speaker D:So it's, it's interesting how these trends can just happen so fast and you just have to have the model, the technology, the processes, the people, and a strategy that's really willing to react in real time.
Speaker D:We have some retailers who can take their prices down to match competitors within 15 minutes.
Speaker D:So, like, there's a lot of different things, but the faster and smarter you can move, the better you can position yourself to have a really good price in the market on the items that consumers care most about.
Speaker A:Wow, Matt, to hear you're a Gen Xer.
Speaker A:As a fellow Gen Xer, man, I wish I looked as good and as young as you do right now.
Speaker A:Man, you're making me feel jeal.
Speaker D:But the other thing I want to.
Speaker A:Just call out too, like, this is why I love doing this show, because you gave, you gave me and all of us watching a new way to think about pricing.
Speaker A:Like, I love how you said, because I've never thought about it before.
Speaker A:Like, pricing is the quickest lever that you can turn and also the lever that your customers care the most about.
Speaker A:And so when you put it in that context, it is a really interesting context shift for retailers when they think about where to invest their money.
Speaker A:All right, so with that said, I want to shift gears a little bit because there's been a lot of talk of AI and the things you can do with AI in regards to pricing, but there's also been some concerns in the industry about how that could potentially lead to unfair pricing practices as well.
Speaker D:So.
Speaker A:So how do you respond to retailers in general that, you know, present you with those concerns?
Speaker D:Yeah, I think it's actually a really good thing to have concerns about any new technology, including AI.
Speaker D:Right.
Speaker D:I think it's important when you're investing in something and you're trying to figure out your vision for the future, that you're really considering all the facets of what you're investing in.
Speaker D:Right.
Speaker D:And AI is no exception.
Speaker D:I mean, you know, I call out my son, I'm going to call my daughter.
Speaker D:She's a writer in Hollywood.
Speaker D:There's obviously concerns about Gen AI there.
Speaker D:Right.
Speaker D:So, you know, different industries, different things.
Speaker D:But in retail, here's the thing I would say about AI.
Speaker D:Right.
Speaker D:Again, Gartner, they came out, they said, you know, it's the number one investment from a pricing perspective that you can do in AI.
Speaker D:The other thing is, is that AI is proven.
Speaker D:You know, AI has been used in pricing for over 20 years, and it's a very quantitative thing.
Speaker D:And we at Revionics and other companies, I'm sure, who are using AI, if you're doing it right, you're setting guardrails.
Speaker D:So I talked about some of those rules and guardrails, things like not taking prices up on, you know, women's razor blades without men's razor blades, or not taking two price increases at the same time.
Speaker D:Right?
Speaker D:So to build a really good pricing solution that leverages AI, you also have to build in those rules and guardrails to make sure that when AI is recommending a price, it's following your strategy.
Speaker D:It's not recommending a price that ends at 4.
Speaker D:It's not recommending a price increase of 35% or 40%.
Speaker D:It's not going to take your margin below like negative 10 on a product.
Speaker D:Right?
Speaker D:So having all these rules in place is important.
Speaker D:And then because it's so complex and there's so many moving pieces, you think about things like a do it yourself retailer where like, you know, think of the wall of paint, right?
Speaker D:Changing the price on one of those paints will influence all the other paints.
Speaker D:Smaller sizes, bigger sizes, slightly higher quality versions.
Speaker D:You know, you build these complex relationships or even furniture rising, you raise the price on a queen size bed.
Speaker D:What about a king size bed?
Speaker D:You change the price there, right?
Speaker D:So all of this stuff is highly connected.
Speaker D:So having AI be able to solve these complex problems while creating some of these guardrails to make sure that, for instance, you wouldn't take the price on a queen size bed above a king size bed, or you wouldn't raise the price on a small can of paint where it will be higher price than a large can of paint.
Speaker D:These are really, really critical.
Speaker D:So I think that that's a, a major thing is to make sure when you're investing in AI that you know, your strategies, you're talking to your strategies, you're setting those guardrails, right.
Speaker D:And, and that's why our retailers, you know, have been very successful, you know, in building their price perception via AI, because it has prevented them from taking multiple price increases in a row or raising prices on highly, you know, elastic items.
Speaker D:Even if you get a cost increase, maybe it's not the right thing to even take your price up if an item is that important to your consumers, right?
Speaker D:So AI is proven, it works.
Speaker D:It has high roi.
Speaker D:You can use it for profits or you can use it for revenue, but right now, honestly, like retailers are using it for price perception.
Speaker D:And you know, I think that, you know, if you have the right strategies in place, you don't need to worry about some of those concerns.
Speaker A:So, Matt, it sounds like you're, it sounds like indirectly you're also arguing that pricing optimization is good for then both consumers and, and retailers.
Speaker A:Am I reading between the lines here or is it not that simple?
Speaker D:Yeah, it's a win win.
Speaker D:And why?
Speaker D:Think about it, right?
Speaker D:What is AI trying to do?
Speaker D:AI is trying to tell you, you know, and price optimization, when you combine them, it's trying to tell you which items should I take prices up on, which I'm trying to take prices down on.
Speaker D:Right.
Speaker D:But where is it getting that information?
Speaker D:It's getting that information from what consumers have voted for with their own purchasing behavior.
Speaker D:So if consumers have clearly demonstrated that a product that's highly elastic, meaning highly susceptible to if you change the price, you're going to change volume significantly, then AI and price optimization is going to do everything it can to lower price on that product.
Speaker D:And that is the goal.
Speaker D:You want to have the best price because here's the reality.
Speaker D:Most retailers can't get into a price war on every single item with Walmart, Amazon, you know, all the price leaders like Aldi.
Speaker D:Right.
Speaker D:So you have to be strategic and analytical and say, these are the items that I'm going to go all in on price very aggressively and then leverage the AI and optimization to find opportunities to balance out the margin in other areas.
Speaker C:Right.
Speaker D:But it's not just the direct impacts as well.
Speaker D:It's also understanding affinities and cannibalizations.
Speaker D:I change the price on this item, how does it impact these 15 other items?
Speaker D:Right.
Speaker D:The thing that's interesting though is that the primary use case for AI and price optimization is price perception.
Speaker C:Right.
Speaker D:It's easy to gain profits.
Speaker D:Anyone can raise prices and increase margin, increase profits.
Speaker D:But to be fast to match your competitors, beat your competitors to really price well on the items that they care most about without, you know, bleeding margin, you need to have a sophisticated solution.
Speaker D:And the beauty of it is in these past several years of inflation, I look at the portfolio of reviance customers in every region, every segment of retail, they raise their aurs less than their competitors.
Speaker D:So prices were actually raised less by our customers than the market in general.
Speaker D:So it was a net benefit to consumers.
Speaker D:And price perception is such a key.
Speaker A:Factor for driving traffic.
Speaker A:That's really, I've never thought about that in terms of we had a customer.
Speaker D:Gained 33% share in a major European market because customers flocked to them at a time when inflation was high.
Speaker D:You know, we've had all sorts of wins like this where, you know, gaining share, gaining volume, outperforming the market in revenue because at the End of the day, you know, it's really hard when your costs are going up, to do it in your head, to do it manually, to do it in Excel, and then to do it across your entire assortment and all your stores.
Speaker D:So you really need help to build that price perception.
Speaker D:And it really is a net benefit for consumers.
Speaker D:And if you're always focused on your consumers because, again, pricing is visible to them, there's a lot of great things in retail, but very few things are visible.
Speaker D:You know, behind the scenes, pricing is the most visible thing.
Speaker D:So that is, that's going to be critical.
Speaker D:Right, so, yeah, that benefit to consumers.
Speaker D:Yeah.
Speaker B:Matt, have you seen any retailers who are using AI for pricing optimization, like in those adjacent categories like you're talking about, like, if you're pricing avocados or something, like, are you seeing that, like, chips might be priced in a certain way?
Speaker B:Or like, are they, are they doing any, like, bundling in those scenarios too, now that they have so much data at their fingertips?
Speaker D:Yeah, no.
Speaker D:And actually, I mean, that's, that's the critical element of, you know, a lot of merchants are pretty good at forecasting impacts.
Speaker D:Right.
Speaker D:They do it a lot as a day job.
Speaker D:They work with, you know, their, their replenishment person.
Speaker D:So they know probably if I take my price down 10 on this one item, I might be able to, you know, you know, guess the lift on this one item.
Speaker D:Right, sure, sure.
Speaker D:It's so much more complex.
Speaker D:What about the affinity to those other products?
Speaker D:So, okay, avocado.
Speaker D:What about, like, you know, corn chips?
Speaker D:Now I sell more avocados.
Speaker D:I might.
Speaker D:More corn chips or bread.
Speaker C:Right?
Speaker D:Avocado toast.
Speaker D:Right, yeah.
Speaker D:Or what about cannibalization?
Speaker D:Okay, I buy more of this avocado, maybe I'm buying less of something else.
Speaker D:Maybe there's something else that they want or pantry loading.
Speaker C:Right.
Speaker D:There are certain products, like paper towel, you know.
Speaker D:Yeah.
Speaker D:You can lower price and sell out of paper towel, but are people going to use more paper towel as a result?
Speaker D:Or cat food or dog food or litter or any of these categories where, you know, you're not expanding consumption necessarily?
Speaker D:Dog food's a classic one.
Speaker D:Right.
Speaker D:People don't feed their dog bore because they got on discount.
Speaker D:So it's good to understand that, you know, if you sell more because it's on promo, what's the impact two weeks after the promo ends?
Speaker D:Are people buying less?
Speaker B:Yeah, yeah.
Speaker A:I gotta tell you, I've.
Speaker A:I mean, as a former merchandising executive in both grocery and in home furnishings, like your, your Queen mattress thing stuck with me.
Speaker A:The avocado example.
Speaker A:Sucker.
Speaker A:I never once thought about the actions that my price, that I was taking on price would have on other categories in the store.
Speaker A:That was a conversation that I've never even seen before, never even heard.
Speaker B:Yeah, so.
Speaker B:Yeah.
Speaker A:Yeah.
Speaker A:Well, and partly it's because you're in your own category of ownership that you're responsible for and you want to drive your sales first and foremost.
Speaker A:And also because it's too hard for a human to actually comprehend all of that.
Speaker A:Right, Matt?
Speaker A:Like, you actually have to have a system that can understand this to the degree that.
Speaker A:Which you're talking about it.
Speaker D:Yeah.
Speaker D:I mean, you know, we have a lot of great people working in retail, very intelligent.
Speaker D:I was a merchant, right.
Speaker D:I had a huge, huge category.
Speaker D:I was buying a lot of different international food, so I had several hundred SKUs.
Speaker C:Right.
Speaker D:It's just impossible to know the right price point for those SKUs and then really localize those prices to the consumer while balancing your objectives.
Speaker D:And even if I could have done that, even let's say I was just amazingly brilliant, you know, and able to solve all that, I still wouldn't have had the perspective of, how does this impact my fellow merchants sitting next to me, sitting down?
Speaker D:So having that portfolio view and having analytics that can really.
Speaker D:So Avocado is a great example.
Speaker D:Avocado is one of the products that will be hit really hard by tariffs, you know, assuming, you know, things go through.
Speaker D:Right.
Speaker D:90% come from Mexico.
Speaker C:Right.
Speaker D:The 10% that come from the U.S.
Speaker D:rely on, you know, fertilizers and things like that that come from other countries, like Canada.
Speaker D:Potash.
Speaker D:Right.
Speaker D:So price costs will probably go up on that.
Speaker D:Right.
Speaker D:So this is an example where prices might have to go up on that product.
Speaker D:So now what do other produce buyers do?
Speaker D:You know, oranges.
Speaker D:Most oranges come from the U.S.
Speaker D:right.
Speaker D:So now you're looking at total shifts and, you know, maybe like, financial objectives for these different merchants, because the cost structure is changing so much for one of them, while the other one might actually have some surplus on the other side, because now maybe there are fewer exports of oranges now you might actually be able to get better pricing there.
Speaker D:So having analytics to really understand what happens if I change the price here versus here, how do I restructure?
Speaker D:Maybe this category used to be a margin category, now it can be a traffic category and vice versa.
Speaker D:To have that at a portfolio level and present that to, you know, executives, you know, SVP's of merchandising, C suite and say, look, here's a way that we can, you know, you know, even though there's an issue hitting this business, we can make up for it with this business and here's how we're going to do it in a way that makes our customers happy.
Speaker D:That's, that's powerful.
Speaker D:Yeah.
Speaker A:And Matt, the other point too that I just want to, you know, call out for the audience is you're essentially making an argument for centralized pricing operations within a retail organization too.
Speaker A:That there's just such a complex endeavor that you have to have a centralized center of excellence to be able to manage pricing in this way versus, you know, farming it out to different teams, I'm assuming.
Speaker A:Is that correct?
Speaker A:Would you advocate for that?
Speaker D:Yeah, we're actually seeing that is generally the best trend now.
Speaker D:I would say we still see merchants own most of their pricing, right.
Speaker D:They own their P Ls, they own their categories, they know their products well.
Speaker D:So really the best practice are really well informed, strategic minded, analytically thinking.
Speaker D:Pricing teams that are very closely working with their merchants have high adoption, they trust each other, they are the everyday hero to their merchant.
Speaker D:Think about things like vendor negotiations.
Speaker D:Right.
Speaker A:And their vendor partners.
Speaker A:I was just going to say, yeah, vendors are important pieces too.
Speaker A:Yeah.
Speaker D:Like think of that, the ability to negotiate.
Speaker D:Right.
Speaker D:Your vendor comes to you with a 6% cost increase, right.
Speaker D:That starts on this date, right now.
Speaker D:You have a powerful analytical tool that says, well, you know, you want to increase my cost by X percent, why don't you increase my cost by only 4%?
Speaker D:And here's, here's what I'll do for you.
Speaker D:I modeled it out.
Speaker D:Instead of taking this price, I'll take this price.
Speaker D:Your units will be 20% higher.
Speaker D:So I'm guaranteeing.
Speaker D:Or you can use it for other things.
Speaker D:You can say, okay, raise my cost this much.
Speaker D:Look what will happen to your mix versus my private label product.
Speaker D:My private label product is going to gain 10 share of wallet in my aisle versus your product.
Speaker D:So there's so much you can do with these powerful tools.
Speaker A:And I never had that data, ever had.
Speaker D:I know, I know.
Speaker D:I, I, you know, we, you know, we had a decent negotiation situation there in Minneapolis.
Speaker D:But I mean just the power of these tools is just, yeah, just like critical.
Speaker D:I mean, you, and honestly, it's not about us versus them.
Speaker D:If you want to be that type of merchant.
Speaker D:I was always a collaborative merchant.
Speaker D:You can make a win, win, win where the customer is winning and gaining a lower price.
Speaker D:The merchant is winning and then the vendor is actually winning and they're getting, you know, better volume, better units.
Speaker D:It's not.
Speaker D:I mean, if you can model it out and see what's going to happen, there can be some scenarios where everyone wins.
Speaker B:Well, Matt, you've given us so many great examples today, and I think, especially with the tariffs example too, like, I think you're making the case for why this pricing optimization needs to be happening in real time.
Speaker B:It's one thing we've heard just even over the course of the last week, since this has been moving so quickly, is that you just, you don't have the time to do weekly meetings on these things anymore.
Speaker B:You have to be able to respond and react in, in real time.
Speaker B:So I'd love to kind of close with some prognostication from you.
Speaker B:Where do you think, especially with AI being involved in retail pricing, what innovations can retailers expect here?
Speaker B:And especially what are you thinking about as Revionics?
Speaker B:Like, where are you investing time and where do you think things will be going?
Speaker D:Yeah, definitely.
Speaker D:So one of the things we're going to see is just more electronic shelf labels.
Speaker D:So that kind of lives outside of Revionics.
Speaker D:But it's very core to pricing.
Speaker D:As processes are speeding up, pricing is becoming more dynamic.
Speaker D:Consumers are moving fast, competitors are moving fast.
Speaker D:Right.
Speaker D:The ability to have the, you know, change sides really quickly so you don't run into the issue that Chris talked about at the beginning.
Speaker D:Beginning where a tag falls on the floor too.
Speaker A:Right.
Speaker D:It's going to be critical.
Speaker D:And the second Walmart and Loblaws moved, I mean, it used to be this thing that happened in Europe and North America was kind of flirting with ESLs for a long time.
Speaker D:No, it's coming.
Speaker D:It's real.
Speaker D:The biggest retailers in North America are doing it.
Speaker D:So this is, this is happening.
Speaker C:Right.
Speaker D:And that's great from a price optimization perspective, because now you have more power to do a lot of things, even markdowns.
Speaker D:You don't have to take only 2 or 3 marks.
Speaker D:You can take as many as you need because it's going down every time.
Speaker D:The customers love it.
Speaker D:You can be more strategic, more analytical.
Speaker D:What we're excited about at Revionics is the direction of AI.
Speaker D:Right.
Speaker D:So we've had fantastic facing AI for 21 years.
Speaker D:And, you know, that's proven.
Speaker D:It works.
Speaker D:Gartner loves it.
Speaker D:Right.
Speaker D:We've talked about that, but now we've, we've layered in gen AI and Gen AI enables retailers to talk to their data.
Speaker D:So you can really quickly type in a question that says you know, which of my competitors follow me down when I change my prices in the past six months.
Speaker C:Right.
Speaker D:You can.
Speaker D:And I'll really quickly give you that answer.
Speaker A:You can.
Speaker D:You can ask any question, which stores have the highest price gap versus the competitors?
Speaker D:You know, type it in, boom, get a quick answer.
Speaker D:And that's that conversational analytics piece where Jenny is working with pricing AI to really become, like a smart assistant to your merchants and your pricing team.
Speaker D:But now we're moving into this beautiful space of agentic AI, which is even better.
Speaker D:Now you can literally work with your AI, and your AI will be solving problems for you in real time while you're asking questions to it.
Speaker D:So it's not just giving you the information, it's solving the problem.
Speaker D:Right.
Speaker D:The librarian now knows the answer and has read every book.
Speaker D:Right.
Speaker D:So this is.
Speaker D:This is fantastic stuff.
Speaker D:Wow.
Speaker A:We'll have to have you back, Matt, to talk about agentic AI and what that means for pricing at a future time, because that's.
Speaker A:That's a whole nother topic that I think we're just starting to scratch the surface of.
Speaker A:And.
Speaker A:Yeah, man, man, this has been amazing.
Speaker A:I.
Speaker A:I have been loving this.
Speaker A:I've been.
Speaker A:You've been putting pricing in a whole nother light for me, which I, in many ways that I personally have never thought of.
Speaker A:So thank you so much.
Speaker A:And if people want to get in touch with you, learn more about what is you do, learn more about Revionics, what's the best way for them to do that?
Speaker D:Yeah, Visit me on LinkedIn.
Speaker D:You know, Matt Pavage or M.
Speaker D:Pavage at Revionics, but honestly, just come Visit us@revionics.com A lot of great content on pricing, a lot of best practices there, you know, and definitely reach out.
Speaker D:I mean, pricing's an amazing place.
Speaker D:It's where you want to be right now.
Speaker D:You know, consumers care about it.
Speaker D:Tariffs are coming.
Speaker D:A lot is happening.
Speaker D:Right.
Speaker D:You have to have good prices in the market.
Speaker D:And, you know, Revionics can help you with that so well.
Speaker A:And that, I think.
Speaker A:And that wraps us up.
Speaker B:Yeah, well done, man.
Speaker D:Thanks.
Speaker A:Yeah, thanks to the big brain on bread on pricing, Matt Pavich, senior Director of Strategy and Innovation at Revionics, for sitting down with us and taking the time to enlighten us today about where the future is going around this topic.
Speaker A:Thanks to all of you that watch us live on LinkedIn and of course, to those that are listening in and watching at a later date.
Speaker A:And.
Speaker A:And on behalf of all of us here at omnitalk, as always, be careful out.
