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Using Predictive Analytics

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Page 1: Using Predictive Analytics

Brought to you by:

Page 2: Using Predictive Analytics
Page 3: Using Predictive Analytics

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

Page 4: Using Predictive Analytics

Stress Testing Your Pricing Strategy

Bill BishopChief Architect, Brick Meets Click

Page 5: Using Predictive Analytics

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

Page 6: Using Predictive Analytics

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

Page 7: Using Predictive Analytics

Have you updated your assumptions about pricing practices?

#1: Who is the competition

Page 8: Using Predictive Analytics

Have you updated your assumptions about pricing practices?

#2: How customers decide where to shop

Page 9: Using Predictive Analytics

Have you updated your assumptions about pricing practices?

#3: Where customers get their price info

Page 10: Using Predictive Analytics

Have you updated your assumptions about pricing practices?

#4: How much customers spend on food

Page 11: Using Predictive Analytics

What’s Your Online Pricing?

● Store specific prices• Online purchases

• Product• Services

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Key Takeaways >>>

● Pricing practices vary widely● Shifting shopping patterns requires

verifying assumptions● When pricing extends online, it gets

“more interesting”

Page 13: Using Predictive Analytics

A Market With Greater Price Transparency

Ken OuimetCEO & Founder, Engage3

Page 14: Using Predictive Analytics

Where did the book store go?

Page 15: Using Predictive Analytics

Mobile has bought the Internet in-store.

Be prepared for deep and rapid change!

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Online Price Comparison Engines

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In-Store Comparison Engines

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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

Page 19: Using Predictive Analytics

Key Takeaways >>>

● Price transparency is here. Accept it!

● Find an alternative to the HI-LO and EDLP pricing models. Prepare now!

Page 20: Using Predictive Analytics

Adapting to the New World of Price Transparency

Bill BishopChief Architect, Brick Meets Click

Page 21: Using Predictive Analytics

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

Page 22: Using Predictive Analytics

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

Page 23: Using Predictive Analytics

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

Page 24: Using Predictive Analytics

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

Page 25: Using Predictive Analytics

Key Takeaway >>>

It’s never been more important to

Invest margin dollars where you can drive profitable sales

Page 26: Using Predictive Analytics

How A Retailer Can Unlock Their Competitor’s Playbook

Ken OuimetCEO & Founder, Engage3

Page 27: Using Predictive Analytics

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

Page 28: Using Predictive Analytics

Price Optimization (Today)

Pricing StrategyPricing Rules

Price Optimization

(P*)

Online PricesShelf Prices

Promotional Prices

Comp Pricing

Blind to 99%

Page 29: Using Predictive Analytics

Crowdsourcing

Benefits

● Lower Costs

● Increase Coverage

● Control Quality

Page 30: Using Predictive Analytics

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

Page 31: Using Predictive Analytics

Price Optimization (Predictive)

Pricing StrategyPricing Rules

Price Optimization

(P*)

Online PricesShelf Prices

Promotional Prices

Comp Visibility1%

100%

PredictiveComp Pricing

Page 32: Using Predictive Analytics

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!

Page 33: Using Predictive Analytics

Q&A

Page 34: Using Predictive Analytics

THANK YOU!