This report, authored by McKinsey consultants, explores the critical need for e-commerce retailers to coordinate pricing and promotion strategies using advanced analytics. It highlights how uncoordinated decisions can undermine profitability, leading to missed revenue opportunities. The report proposes a three-step analytics process: determining customer price sensitivity using factors beyond the obvious; gauging promotion effectiveness based on transaction and customer-based success; and optimally linking prices and promotions through a price-promotion matrix. This approach allows retailers to categorize products and tailor strategies for key value, foreground, and background items. The report also emphasizes three prerequisites for success: a strong strategy and implementation plan, quality data and resources, and a culture of testing and learning. The report concludes by emphasizing the potential for increased revenue, improved brand perception, and enhanced customer satisfaction through the effective integration of pricing and promotion analytics.
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