Casino abandons dynamic pricing. A rarity in the industry. What are we to make of it?
This article follows on from the article published in La Dépêche.
First of all, let’s put the right words behind Casino’s practices. Strictly speaking, it wasn’t a question of dynamic pricing, but of price increases on Sundays, which is very different, even if all the media picked up on this inappropriate terminology (Ladépêche.fr, Midi Libre, BFM, Cnews, 24matins, Le Figaro, Ouest France, France Live, etc.).
What is Dynamic Pricing ?
In Revenue Management terminology, dynamic pricing is the practice of varying the same product over time according to a certain number of business rules and parameters.
In the accommodation, ticketing or transport industries, this involves varying prices for a given consumption date according to the rate of fill, the stock available, the history of prices charged, and a number of other parameters such as the market mix, the channel mix, the competition, and so on.
The challenge is to ensure that a train, hotel or theatre is filled under the best possible pricing conditions to maximise sales (volume x average price).
Moreover, in a virtuous principle of dynamic pricing, prices only go up as the consumption date approaches, to take advantage of the scarcity of stock. For a yoghurt in supermarkets, this makes no sense: a yoghurt that expires tomorrow cannot be more expensive than one that expires in 3 weeks’ time – in fact, the opposite is true. At the very least, if the price is the same, you’ll choose a yoghurt with a longer expiry date. We’re a long way from the problems of the hotel or airline industries, where the use-by date is a different matter.
So, technically, Casino was not practising dynamic pricing, but a seasonal price with a specific grid for Sundays, worked out on a « cost + » basis (salaries are higher on Sundays, and Casino passed on the rise in costs in the price). This has nothing to do with true dynamic pricing. Here, the price is not « dynamic », it is rather « static », but different on Sundays from the other days.
What other RM levers are available for Casino?
Sunday’s price hike was clearly not accepted by the market. And understandably so. There were not enough customers on that day, no doubt partly because of the price increase, which reached more than 35% for certain products. As the profitability of the operation was not proven, Casino had to back out.
However, there are other ways of attracting more customers on Sundays and generating value through a good pricing policy: seasonalise prices for weather-dependent products, grant differentiated discounts for self-checkouts, reduce unsold stock by lowering prices for perishable products, …..
It’s a shame they didn’t consult us beforehand, we have some ideas on the subject.
Keywords: Casino, dynamic pricing, filling, mass retail, pricing policy
