Vera Bradley Integrates Web-Based Data Into In-Store Pricing
As retail brands evolve into omnichannel organizations, sharing and integrating data across channels has become critical to their success. In a session yesterday at the Internet Retailer Conference & Exhibition in Chicago, Stephanie Scheele, senior director of strategic intelligence for Vera Bradley, a retailer of fashionable handbags, accessories and luggage, discussed how the brand is using data collected online to dictate in-store pricing decisions. Scheele specifically focused on Vera Bradley's recently launched baby collection.
Vera Bradley traditionally focuses on three factors when it comes to pricing, Scheele said:
- competitive analysis (i.e., what are its competitors charging for the same or similar product);
- pricing tiers based on product assortments, product features and product benefits; and
- product margin, which can depend on whether the product is being sold in one of Vera Bradley's company-owned stores, on its e-commerce site or via a retail partner.
With the help of First Insight, a company that provides inventory investment recommendations and go-to-market price point insight, Vera Bradley is now using customer data and feedback collected online to inform pricing decisions. To gather its data, First Insight engages consumers via social media, web, email and mobile applications, typically in the form of a game.
Here's how the process works: Vera Bradley uses computer-aided design (CAD) software to develop images of potential new products, then emails those CADS to customers and asks them to play the game, "What Would They Pay," helping it to get an average price its customers would pay for a product. For pricing for its baby collection, this process began 18 months before the products went to market.
The Difference $1 Can Make
Scheele cited a couple of examples of how Vera Bradley has used insight gained from First Insight's predictive analytic models to optimize pricing for its new baby products. For example, a stuffed animal bunny that was originally priced at $18 was raised to $19 based on data from First Insight. Our customers indicated they were willing to pay more, Scheele said. The $1 change in price resulted in an 8 percent gain in revenue for the product.
Similarly, a $1 price increase for a Vera Bradley baby dress and bloomers ($48 to $49) also saw no price resistance from customers, Scheele said. The price change lifted the product's revenue by 6 percent. Overall, Vera Bradley has realized a 4 percent increase in revenue for its baby collection products based on First Insight analysis, Scheele said.
Another example of Vera Bradley leveraging insight gained from First Insight to manage its merchandise and pricing involves its baby bags. When tested individually, the bags received extremely high sentiment scores (nines and 10s, on average) with its customers. When the bags were added to Vera Bradley's travel bag category, the sentiment scores dropped drastically (five and sixes, on average). The lesson learned: To optimize sales of its baby bags — as well as to get the highest possible product margin — Vera Bradley needed to sell the baby bags separately from its travel bag category.
None of this pricing optimization would be possible if Vera Bradley didn't have a highly engaged customer base. In order for First Insight to "close out" a test, it requires a minimum of 200 responses. Vera Bradley routinely gets 200 "completes" within the first hour of emailing its customers, Scheele said. The retailer is constantly testing its pricing to ensure it's not leaving any money on the table. Vera Bradley averages six tests per month, but as of her session, Scheele said the company had nine tests ongoing.
