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Agenda1. Stress Testing Your Pricing Strategy
2. A Market with Greater Price Transparency
3. Adapting to the New World of Price Transparency
4. How Retailers Can Unlock a Competitor’s Playbook
Stress Testing Your Pricing Strategy
Bill BishopChief Architect, Brick Meets Click
How are you Managing Price?
Key Competitors
KVIs
Gap Management
Value Offering
● Focus on several● Broad, but not deep
● ~3,500 – 4,000
● Center-store only● Within 10%
● Little focus on PPU● Commonly 20% - 40% above
comp.
Today
How are you Managing Price?
Private Label
Price Communication
Price Transparency
● Gaps averaging 30%+
● Little focus● Blend into décor● Shoppers must find values on
their own
● Little transparency● Infrequent price checks
(quarterly/monthly)● Selected items only
Today
Have you updated your assumptions about pricing practices?
#1: Who is the competition
Have you updated your assumptions about pricing practices?
#2: How customers decide where to shop
Have you updated your assumptions about pricing practices?
#3: Where customers get their price info
Have you updated your assumptions about pricing practices?
#4: How much customers spend on food
What’s Your Online Pricing?
● Store specific prices• Online purchases
• Product• Services
Key Takeaways >>>
● Pricing practices vary widely● Shifting shopping patterns requires
verifying assumptions● When pricing extends online, it gets
“more interesting”
A Market With Greater Price Transparency
Ken OuimetCEO & Founder, Engage3
Where did the book store go?
Mobile has bought the Internet in-store.
Be prepared for deep and rapid change!
Online Price Comparison Engines
In-Store Comparison Engines
What does it mean?
● HI-LO model will be ineffective
● EDLP will be difficult to achieve
● Price elasticities will increase dramatically
● DON’T discourage crowdsourcing and showrooming
Key Takeaways >>>
● Price transparency is here. Accept it!
● Find an alternative to the HI-LO and EDLP pricing models. Prepare now!
Adapting to the New World of Price Transparency
Bill BishopChief Architect, Brick Meets Click
So what happens when price becomes transparent?
● Greater pressure on margins● Price leadership is riskier● Competition is harder to
identify● Speed is more important
than precision
How Will You Manage?
Key Competitors
KVIs
Gap Management
● Focus on 1 or 2● Overall and by category
● ~250 SKUs (all) + personalized KVIs
● Total store● Within 5% on identical items● Premium for differentiated items
Tomorrow
Value Offering ● Strong value offering● Economy PL● Neutralize PPU gap
How Will You Manage?
Private Label
Price Communication
Price Transparency
● Gaps averaging 20%
● Strong focus● Cohesive program● Educates shopper about how to work the system
● Transparency● Real time● All items
Tomorrow
Key Learnings from online pricing
● Be a “fast follower” – not a “price leader”● Need to develop “known value categories”● Dynamic pricing helps:
• Increase purchases
• Maintain margin
Key Takeaway >>>
It’s never been more important to
Invest margin dollars where you can drive profitable sales
How A Retailer Can Unlock Their Competitor’s Playbook
Ken OuimetCEO & Founder, Engage3
Competitors’ Pricing
● Everything you assumed about your competition is no longer valid
● Today, retailers are blind to over 99% of competitors’ prices
● Your survival requires a broader, deeper and more dynamic understanding of the competition
Price Optimization (Today)
Pricing StrategyPricing Rules
Price Optimization
(P*)
Online PricesShelf Prices
Promotional Prices
Comp Pricing
Blind to 99%
Crowdsourcing
Benefits
● Lower Costs
● Increase Coverage
● Control Quality
Predictive Comp Pricing
Competitor Pricing Strategy & Rules
Comp PriceModel & Forecast
Accuracy
Soft Drinks ±4.3%Dairy ±3.8%Laundry ±1.2%
Comp Price Sampling Optimization
Forecastsvs.
Actual Prices
Online PricesShelf Prices
Promotional Prices
Price Optimization (Predictive)
Pricing StrategyPricing Rules
Price Optimization
(P*)
Online PricesShelf Prices
Promotional Prices
Comp Visibility1%
100%
PredictiveComp Pricing
Key Takeaway >>>
● We are entering a period of deep and rapid change
● You can’t afford to be 99% blind● There is huge first mover advantage.
The technology is here today!
Q&A
THANK YOU!