real-life price and promotions...

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Real-Life Price and Promotions Optimization

Pro Tips to Maximize Success

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Introductions – Agenda

• Introduction to dunnhumby

• Regular Pricing Case Study: Chris Hunter, VP of Pricing, AutoZone

• Promotional Pricing Case Study: Brian Duff, EVP Merchandising, Associated Food Stores

• Additional Pricing Lessons from dunnhumby clients

• Q&A

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The benefits of a global view

$500 BILLIONRETAIL SPEND

NEARLY 1 BILLIONCUSTOMERS GLOBALLY

NEARLY 2,000EXPERTS

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KSS Retail is now/dunnhumby Price and Promotion

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dunnhumbyPortfolioComprehensive portfolio of strategy, research, consulting and software

• MERCHANDISE AND CATEGORY MANAGEMENT: support to retailers in the optimization of product assortment, display, pricing, promotions, inventory availability

DATA

SCIENCE

CUSTOMERSTRATEGY

CUSTOMER ENGAGEMENT

CHANNEL AND FORMATS

MERCHANDISE AND CATEGORY

MANAGEMENT

Customer Loyalty

dunnhumby BAR

ShopperThoughts

Sandtable Media Centre

Sociomantic Campaign Management

BzzAgent

Scoring Engine

Customer Strategy & Change

Connected Insights

Store Layout

Multichannel Proposition

Local Tailoring

CRM

Inventory & Stock Management

Category Leadership

Price & Promotion

Assortment, Display,and New Product Launch

ClickstreamInsights

Space Optimiser

Store Reporting

PriceStratShop LaunchPad

ShelfReview

Promotions Analytics

RetailHeartbeat

Software-led Tools

Propositions

CapabilitiesReal-time Decision Engine

Advocacy Marketing

Shopper Marketing

ProgrammaticDisplay

Digital Marketing

Media Partnerships

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Price and Promotion Services

Price and Promotion

Healthcheck

Pricing and Promotion

Loyalty Drivers

Customer KVI

Analysis

Price Perception

Tracking

Promotions and Flyer

Optimisation

Price and Promotion

Balance Matrix

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99 © dunnhumby 2015 | Confidential

USING DATA TO DRIVE INCREMENTAL IMPROVEMENTS AND IMPROVE CUSTOMER PERCEPTION

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AutoZone Background

• Opened July 4, 1979 in Forrest City, Arkansas

• As of end of Q1, 5,635 locations in US, Mexico, and Brazil sell automotive products to the DIY & DIFM customer

• Locations include AutoZone, AutoAnything, ALLDATA, DataZone, and IMC

• Over 80,000 AutoZoners

• Culture-driven organization hyper-focused on providing our customers with outstanding service

• More than 750,000 product-level SKUs in over 70 distinct categories

• Fiscal year ended August 29, 2015, sales were $10.2 billion, $712MM over last year


Why Optimization?

• Historically priced using manually set rules and/or gaps for products• Tested to validate price gaps for our tiered categories• Time consuming task that was laborious to update• Very generic, usually leaving a lot of opportunity• Tests were driven by “gut” feelings not science

• Goals for Price Optimization• Increase sales, profit, customer count, while maintaining customer

price perception• Set limits to maintain recommendations within our comfort zone• Improve gapping between product tiers • Improve private-label product performance

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Why PriceStrat?

• Evolving our work flows to get more efficient and improve pricing metrics

• RFP for pricing management systems

• Selected PriceStrat and evaluated forecasts vs. actual results for 6 months

• Ease of use

• Solution that “learns” with each price change

• Ability to partner more with Merchants on setting prices

• Maintainable solution scalable with our evolving business

• Expanded PriceStrat to additional Hard Part and Sales Floor categories

• Not all categories are optimized


Challenges

Challenges with implementation

● Hiring and training a strong core pricing team

● Unique skillset (strong interpersonal skills with an analytics background)

● Change management of the teams we support

● Educate and have an open dialogue about performance and recommendations

● Establishing internal and external rules to guide recommendations

● Me too pricing challenges

Current challenges

● Maintaining excitement about optimizations

● Over time the “shock value” of the optimization diminishes and we end up only doing minor “tweaks” without significant category activity

● Experience dealing with explaining the unknown without portraying insecurities

● “Why did PriceStrat do “X” ?”

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Sales Floor Category Optimization

Using PriceStrat we:● Adjusted gapping on all choice families

– No longer standard gap

● Raised Premium tier retail to new pricing threshold

● Set boundaries we let PriceStrat adjust prices vs. current retails

● Gross margin exceeded expectations● Drove unit increase with a price

increase– Previously thought unfeasible

● Improved price perception● More distinguishable value proposition

on levels of choice

● Improve units, mix, and gross margin● Online researched destination category● Multi-tiered category with more than 4

levels of choice

RESULTS

CONTEXT

ACTION


Application-Specific Optimization

Using PriceStrat we:● Priced by competitive zone● Adjusted gapping on mid and premium tiers● Raised mid tier retails● Lowered premium retail

● Incremental sales dollars that offset lowering of premium tier● Incremental growth in units ● Improved value perception of our category● Increased market share

● Improve retail dollars, gross, and mix● Online researched destination category● Multi-tiered category with more than 4 levels of choice

RESULTS

CONTEXT

ACTION

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CHRIS [email protected]

Thank You

IMPROVING PROMOTIONS

PLANNING WITH PRICESTRAT

ANALYZER

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Associated Food Stores Background

● Cooperatively owned wholesale distributor to almost 500 independently owned supermarkets in a nine-state region: Utah, Idaho, Colorado, Wyoming, Montana, Nevada, Oregon, Arizona and California

● $2 Billion US in wholesale sales

● Value Added Services include Retail Pricing and Marketing which provide a weekly printed Ad (among multiple other services)


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Challenges before PriceStrat/

• Limited visibility on tactical/strategic decisions

• Lack of data during vendor negotiations

• Unable to measure full effect of an ad

• Difficult to estimate ad fund costs and compare items competing for same space

• Unable to see cannibalization effect of ad prices and like items on the ad


AFS Advertising Planning Process

AFS Ad Planning

Pre-Ad Planning

Ad Planner Report

Post Ad Review

Promo History Recap

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Example: Sour Cream

Certain items will sell regardless of being on ad


Example: Sparkling Water

Some ad retails do not increase dollar sales

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Example: Pizza

Items that lift on ad, but the ad location does not change the lift


Example: Tomato Paste

Identify items that were not initially chosen to be in the ad, but should be

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Challenges we’ve overcome/

• Quality of data

• Capturing our 2 week Case Lot data

• Planning timeframe

• Unify goals between Category Management and Marketing with PriceStrat Analyzer


Challenges going forward/

• Capture data on Direct Store Delivery items

• Difficult to model perishables

• How to measure ads shorter than a week (one day, two day, weekend, etc.)

• Digital Ads

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Final Thoughts

• Best suggested ad items with data

• Detailed data for the printed ad at a glance

• Unify correlating department directions

• More effective vendor negotiations

• Thank You�

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AFS

Brian DuffSenior Vice PresidentProcurement and Supply [email protected](801) 978-8490

afstores.com

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IMPROVING PRICE PERCEPTION:

CLIENT LESSONS

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My Price Perception is driven

byB

Base Prices

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Personalized Offers

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Promotions

2Private Brands

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Assortment Price Perception

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Communication

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7Store format, layout,

service levels, returns policies

7 Drivers of Price Perception

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Optimize

Analyze

Plan

Strategy

CUSTOMER 1st Price & Promotions

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Optimize

Analyze

Plan

Strategy


How many valuable customers do I have?More EDV or more Promotions?More vouchers or lower prices?

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Optimize

Analyze

Plan

Strategy


What is the right price index?Which lines do my most price sensitive customers care about?Is 50% off better than BOGO for soft drinks?Which promotions cannibalise sales?

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Optimize

Analyze

Plan

Strategy

CUSTOMER 1st Price & PromotionsWhat happens if I run this promotion?What are my optimal price points?How can I get personalized coupons or digital messages to my key customers?What is the best assortment by store to drive price perception?

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Latest Projects

• South Africa

• North America

• France

• UK

• Japan


Questions

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Thank You

Stop by Booth #3217

dunnhumby.com/priceandpromotion

[email protected]

linkedin.com/in/howardlanger

@howard_langer

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PERSONALISED

STRATEGIC PROMOTION PLANNING

INVESTMENT OPTIMISATION

LEVEL 4

CUSTOMER DRIVEN PROMOTIONS PLANNING

FORECASTING

PRICE OPTIMISING

LEVEL 3

PRICING BASICS

PROMOTIONS SCORING

LEVEL 2

TRADING DRIVEN

KVIs

LEVEL 1

DYNAMIC

PREDICTIVE

OPTIMIZED VALUE PERCEPTION

LEVEL 5

LEVEL

AB

ILIT

Y T

O C

AP

TU

RE

S

UP

ER

IOR

VA

LU

E

CAPABILITY LEVEL

30% of retailers

40% of retailers

20% of retailers

<10% of retailers

<1% of retailers

The Price and Promotion Maturity Curve

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Case Study - COOP Norway Research

SOLUTION

• Identify customers price perception drivers and share investment amongst each

• Create better Promotions plan

PROBLEM

• Expensive follower strategy

• No payback in price perception

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Case Study – COOP Norway (2)

SOLUTION

• Price & Promotions Healthcheck

• Clear Plan for next year

• Rules Based Pricing

• Competitor Strategy

PROBLEM

• Desire to move to ‘next level’

• Need to prioritise

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Case Study – Shoprite (South Africa)

SOLUTION

• Identify correct lines for price-sensitive customers

• Implement List Based Pricing Approach

PROBLEM

• Price matching wrong lines

• Price Sensitive customers losing sales

Product Sales: 5-8% volume increase

Total Store Sales: 1% increase

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Case Study – Shoprite (2)

SOLUTION

• Price & Promotions Healthcheck

• Clear Plan for next year

• 3 streams

PROBLEM

• Desire to move to ‘next level’

• Not clear how

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Case Study – Grocery

SOLUTION

• Comprehensive price perception improvement plan

• Resulting in a similar price perception to Walmart with +7pp difference in price indices

PROBLEM

• Losing LFL sales

• Large competitive price gaps

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Case Study – US Specialty

SOLUTION

• Promotions Analytics science

• Creating Guardrails for merchants

• Pricing team act as ‘concierge’

PROBLEM

• Poor Promotions

• Lack of Promotion understanding


7 Key Recommendations

1. Competing only where you need to without overinvesting

2. Re investing in base prices on essential products – in those areas that will drive volume for your best price sensitive customers

3. Manage full SKU portfolio – Good, Better, Best, Competitive position, substitutions, logic at the shelf

4. Removing ineffective promotions to conserve margin

5. Re investing in targeted/personalised loyalty reward or rolling campaigns for valuable customers

6. Target assortment competitiveness

7. Communication plan balancing price image drivers and trade driving

Focus on valuable customers, defend price sensitive customers

real-life price and promotions...

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