Join RIS News Editorial Director Joe Skorupa as he hosts Parker Avery Associate Partner Josh Pollack and Revionics Chief Science Officer Jeff Moore discussing trends and techniques for omnichannel pricing strategies in an increasingly connected world.

1. 1
Wednesday, June 17, 2015
2:00 pm ET
The Price is Right: Strategies
for Omnichannel Pricing
Sponsored By:

2. Moderator:
Speakers:
Web Seminar Panelists
Joe Skorupa
Editorial Director
RIS News
Josh Pollack
Associate Partner
The Parker Avery Group
Jeff Moore
Chief Science Officer
Revionics Sponsored By:

3. Confidential ©2015 Revionics, Inc.
The Price is Right:
Strategies for Omnichannel Pricing

4. Confidential ©2015 Revionics, Inc.
Age of Disruption
• Technological advances are creating two opposing forces
driving regular pricing policies
– Improved ability to price discriminate - leading to differentiated pricing
– Increases in price transparency - leading to enterprise pricing
• In deciding which path to take, retailers must consider and
balance three factors
– Incremental margin derived from differential prices
– Ongoing cost to deploy the different pricing models
– Impact on customer perception
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5. Confidential ©2015 Revionics, Inc.
Differentiated Pricing
• Move to differentiated pricing is driven by:
– Availability of tools / software
– Desire to capture margin
– Increasing customer acceptance
5

6. Confidential ©2015 Revionics, Inc.
Differentiated Pricing: Benefits
• Incremental gross margin
• Ability to respond to local pricing
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7. Confidential ©2015 Revionics, Inc.
Differentiated Pricing: Implications
• A price zone strategy must be developed, considering a variety of
factors:
– Regional / cross-shopping
– Competitors
– Marketing
– Elasticity
– Cost-to-serve
– Sales channel
• Appropriate policies and employee training must be in place to
reduce negative customer perceptions
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8. Confidential ©2015 Revionics, Inc.
Enterprise Pricing
• Move to enterprise pricing is driven by:
– Increase in customer touchpoints
– Omnichannel customers are most likely to
discover price discrimination
– Negative perceptions of price discrimination
from younger, tech-savvy consumers
– Cumbersome mechanisms for isolating price
messages
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9. Confidential ©2015 Revionics, Inc.
Enterprise Pricing: Benefits
• Ease of enabling and maintaining
• Lower investment required
• Ease of managing promotions and
promotional pricing
• Reduced risk of being wrongly identified
as “gouging” or “deceptive”
• Reduced risk of legal action
• May reinforce price leadership position

10. Confidential ©2015 Revionics, Inc.
• Factors that influence customer acceptance
– Product offering
– Cost to serve
– High vs. low involvement purchases
– Ability to isolate price messages to
distinct customers
– Age and tech-savviness of the customer
Which Way to Go?
10

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If your company is considering changing their approach to
omnichannel pricing, how are you evaluating the options?
1. Moving from enterprise (single) to differentiated pricing
2. Moving from differentiated to enterprise pricing
3. Refining existing approach (getting better at it)
4. We are still using Excel spreadsheets, making choosing the 'right'
strategy challenging

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If your company is considering changing their approach to
omnichannel pricing, how are you evaluating the options?
(actual poll results from June 17 webinar participants)

13. Confidential ©2015 Revionics, Inc.
The Price is Right…
Strategies for Omnichannel Pricing

14. Confidential ©2015 Revionics, Inc.
Elasticity Characteristics
• Low Elasticity
• Limited product choices (few
substitutes)
• Strong brand loyalty
• Perishable / not stockpiled
• Inflexible customer consumption
behavior
• Low price per unit relative to basket
• Generally, less commoditized
Low elasticity products:
Candidates for price increases
• High Elasticity
• Extensive product choices (many
substitutes)
• Lack of brand loyalty
• Items that are stockpiled
• Flexible customer consumption
behavior
• High price per unit relative to basket
• Generally, more commoditized
High elasticity products:
Candidates for price reductions
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15. Confidential ©2015 Revionics, Inc.
• Effective clustering is a tradeoff
between opportunity (benefits) and ease
of execution.
• Store cluster analysis helps to find the
“sweet spot” between opportunity and
ease of execution in zone pricing.
Localized Pricing
Opportunity vs. Ease of Execution
Number of Clusters 
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16. Confidential ©2015 Revionics, Inc.
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%ProfitImprovement
Number of Price Zones
Zone Pricing Opportunity
Profit Opportunity
Incremental Benefit
Opportunity from Localized Pricing
5 zones yield 2.1%
profit improvement
over a single-zone
pricing
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17. Confidential ©2015 Revionics, Inc.
• Group stores with similar customer and elasticity characteristics
• Group by two different elasticity variables:
– by revenue, by confidence
Clustering by Elasticity
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18. Confidential ©2015 Revionics, Inc.
• Principal Components Analysis (PCA) is used to
“separate” variables into uncorrelated factors
• The factors are filtered for significance using a
statistical t-test
• Filtered factors are used in a linear regression
against raw elasticity to compute regressed
store elasticities
• Regressed store elasticities are clustered for
similarity
Demographic Clustering
What factors explain differing price sensitivity?
PCA
Demographic
Variables
Store
Attributes
Competitive
Information
Regression
against
Elasticity
Clustering
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19. Confidential ©2015 Revionics, Inc. 19
Customer Price Sensitivity
Confidential ©2014 Revionics, Inc.
Factor Ranking Contribution Interpretation
Latitude (-) 1 12% Elasticity generally increases to the south
Population Growth (+) 2 8% High elasticity associated with high-growth areas
Sales Per SqFt (-) 3 6% Elasticity decreases with greater sales productivity per sq. ft
Population Density (+) 4 5% Elasticity increases with greater pop. density
Longitude (-) 5 5% Elasticity generally increases to the west
Median Age (+) 6 5% Elasticity increases with median population age
Total Competition (+) 7 5% Elasticity increases with competition
WmrtSC Proximity (+) 8 2% Elasticity increases with proximity to WalMart Super Centers
Primary Influencing Factors

20. Confidential ©2015 Revionics, Inc.
Customer Price Sensitivity Varies
High
Medium
Low
Elasticity
0 5 10 15 20
0
0.5
1
1.5
2
2.5
Number of Zones
Opportunity(Percent)
Opportunity versus Zone Count
Current Zones
Random Zones
Optimal Zones
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21. Confidential ©2015 Revionics, Inc.
 Items exhibit higher price sensitivity online
e-Channel vs. Brick-and-Mortar
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22. Confidential ©2015 Revionics, Inc.
Promotional vs. Base Elasticity
Promotions drive
increased price response
from consumers. We can
observe this behavior in
the demand history by
comparing base price vs.
promotion elasticity
22

23. Confidential ©2015 Revionics, Inc.
Regional Variations in Demand
Pool Recreation Accessories
23

24. Moderator:
Speakers:
Q & A Session
Joe Skorupa
Editorial Director
RIS News
Josh Pollack
Associate Partner
The Parker Avery Group
Jeff Moore
Chief Science Officer
Revionics Sponsored By:

25. 25
RIS News thanks the panel for their participation and
insight and also our sponsor:
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