Retail Pricing in a Dynamic Promotional World
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Retailers are stuck in the endless “death by discount” cycle destroying margins. It’s time to put the brakes on ad-hoc promotions and close the gaps. Learn the 5 must-haves to turn underperforming promotions into profit-generating offers.
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Retail Pricing in a Dynamic Promotional World
- 1. Retail Pricing in a Dynamic Promotional World Sponsored By:
- 2. Susan Nichols Publisher Apparel Magazine Moderator: Speaker: Web Seminar Panelists Mark Schwans Senior Director of Solution Marketing Revionics Brian Kilcourse Managing Partner RSR Research Sponsored By:
- 3. About RSR Founded in 2007 to quickly become the leading source of insights for trends in retail technology, and retail in general Mission: To elevate the conversation about retail technology to a strategic level within the retail enterprise. Our differentiators: • Objective Insights into the business challenges and opportunities that retailers are addressing in today’s marketplace, and how Winners win • Pragmatic Advice to both retailers and solution providers • Extensive Retail Industry Experience • A Deep Bed Of Research into retailers' technology investment plans and the business opportunities and challenges that drive those investments. 3
- 4. 4 Optimization In Context Why Is This Such an Important Topic? • Consumers have the power of information in their pockets and purses – the whole World is their assortment • The Retail environment is dominated by aggressive competition Retailers have responded by accelerating promotions to win business; as a result, “low price” is more of a key component of “value” than ever • Organizationally, Retailers have focused on process changes, rather than technology investments • But the pace of online change and the rise of dynamic pricing forces the issue
- 5. The Fundamental Issue The Retail Industry Is At A “Reset Moment” Triggered Consumer Adoption Of Technology In A Way That Changes Society 5
- 6. Where We’ve Been Vs. Where We Are Source: The Discipline of Market Leaders, Michael Treacy & Fred Wiersema (Basic Books, 1997) MASS MARKETS: Commoditization, Convenience, Price Product Leadership “best product” Operational Excellence “best total cost” Customer Intimacy “best total solution” Share Of Customer Share Of Market Product differentiation MARKETS OF ONE: “Relevance”
- 7. How To Be Profitable? 7 Customer Needs Satisfied Customers Reached Maximize the value created by each customer Maximize the value created by each product Share of customer Market share Product-Centric Marketing Customer-Centric Marketing © 2008 Peppers & Rogers Group. www.peppersandrogersgroup.com
- 8. Retailers Want More Profits – In A “Value” Driven World 8 23% 40% 37% 46% 38% 39% 46% 49% To improve merchandise sell- through To drive demand To convey our value proposition To maximize gross margin Primary Pricing Strategy Objectives 2014 2015 Source: RSR Research, June 2015
- 9. Differences Depend On The Value Offered 9 0% 10% 20% 30% 40% 50% 60% 70% To create a strong price perception in the market To improve merchandise sell- through To drive demand To convey value proposition To maximize gross margin FMCG GMA “A good deal” is a key measure of value “In style” is a key measure of value Source: RSR Research, June 2015
- 10. The Number Of Price Changes Has Skyrocketed Again 10 Source: RSR Research, June 2015 36% 39% 21% 5% 21% 34% 42% 3% 41% 35% 21% 3% Increased significantly Somewhat increased Stayed about the same Decreased How HasThe Number Of Price Changes Changed InThe PastThreeYears? 2015 2014 2013 GMA-driven 47% $5B+
- 11. Retailers Have Been Working Towards Improved Margins 11 46% 29% 26% 54% 71% 74% 2015 2014 2013 Changes In Gross MarginYear OverYear Margin improved Margin stayed the same or declined Source: RSR Research, June 2015
- 12. Seasonal & Short Lifecycle Are Better At It 12 50% 46% 27% 24% 18% 41% 54% 68% 71% 76% 9% 0% 5% 6% 6% Fashion/ short lifecycle Seasonal Basic/replenishment Perishables Durable & Hard Goods Effectiveness of Pricing Strategies in Driving Bottom Line Results Very effective Somewhat effective Not effective at all Source: RSR Research, June 2015
- 13. But Those Categories Also Lag When It Comes To Promo Optimization Techs 13 43% 42% 37% 21% 25% 57% 58% 63% 79% 75% Fashion / Short Lifecycle Seasonal Basics / Replenishment Durable / Hard Goods Perishables Value Of Promotion OptimizationTechnologies VeryValuable SomeValue These Retailers tend to rely on experience & intuition… Source: RSR Research, June 2015
- 14. But Those Categories Also Lag When It Comes To Promo Optimization Techs 14 46% 50% 41% 36% 17% 25% 17% 22% 43% 33% 29% 33% 37% 21% 50% Fashion / Short Lifecycle Seasonal Basics / Replenishment Durable / Hard Goods Perishables Status Of Promo OptimizationTechs Using/Satisfied Using/Planning a Change Not Currently Using … less reliance on technology Source: RSR Research, June 2015
- 15. What If…? 15 • You could improve promotion effectiveness, by…? • eliminating wasted promotional spend on the wrong targets? • reducing money left on table with the wrong offers? • Reduce your risk by developing alternative what-if plans? • Generate better results through more localized rules? • Improve compliance through more consistent application of pricing rules? • Improve execution via exception monitoring? • Have better, more granular data available for the next planning cycle?
- 17. Susan Nichols Publisher Apparel Magazine Moderator: Speaker: Web Seminar Panelists Mark Schwans Senior Director of Solution Marketing Revionics Brian Kilcourse Managing Partner RSR Research Sponsored By:
- 18. Confidential ©2015 Revionics, Inc. Learning to Live in a Dynamic Promotional World MARK SCHWANS, REVIONICS
- 19. Confidential ©2015 Revionics, Inc. “Results are gained by exploiting opportunities, not by solving problems.” Peter Drucker 19
- 20. Confidential ©2015 Revionics, Inc. 20 Opportunities for Improvement Marketing Merchants Finance Execution Create Annual Plan Create Campaigns Plan & Negotiate Media & Printing Category Level Promotion Planning Negotiate Vendor Deals Plan & Set Promotions Send Promotions Downstream Printing, Signage, Endcaps, etc. Promotions Active Promotion Ends Which vehicles are working best for this promo6on? Should I be using last year’s plans as my star6ng point? I don’t have visibility across my annual plan, campaigns, vehicles & planned promo6ons This is the promo6on we always run, is it really working? Will my customers price match if needed? Is this the best vendor deal? Can I meet the condi6ons? Is my promo6onal forecast accurate? What is the best offer for this promo6on? I have overlapping promo6ons on this product! How can I find if this promo6on is performing well? Should I adjust this promo6on? Are there other metrics beyond sales and profit to gauge success? What was the affect on my other products?
- 21. Confidential ©2015 Revionics, Inc. 21 Reimaging the Outcome What if…. I could start with a offer that resonates? What if…. I knew how each marketing vehicles amplified the promotion? What if…. Those offers are aligned to business strategies & financial metrics What if…. I could adjust ongoing promotions What if…. This was easy! What if…. I could not only forecast, but always be informed as things are changing? What if…. I spent less time manipulating spreadsheets? What if…. I could quickly evaluate the effectiveness of a campaign as individual promotions are evaluated?
- 22. Confidential ©2015 Revionics, Inc. 22 Must Haves for Effective Promotions GOALS Align metrics & financial incentives to promotional action RESPOND Quickly to customers, local conditions, competitors, & selling conditions FORECAST Accuracy of demand, cannibalization, affinity, & financial expectation PLAN Easily understand what drives value and what customers respond to SIMULATE Compare options before executing in Market
- 23. Confidential ©2015 Revionics, Inc. 23 How Can Technology Help?
- 24. Confidential ©2015 Revionics, Inc. 24 Improvement through Forecast Accuracy SHORT SELLING SEASON MASSIVE, UNIFORM DISCOUNTS LOW SKU SALES AT SOME LOCATIONS ONE-‐TIME ITEMS CANNIBALIZE & AFFINITY HIGHLY SEASONAL ITEMS SIGNIFICANT LIFTS ATTRIBUTION • Alignment of product to demand • More confidence in promotion Margin $ Increase 6% Revenue & Units Increase 3%
- 25. Confidential ©2015 Revionics, Inc. 25 In Summary Opportunities for Improvement Must haves for Promotional Success Optimization should reward both Retailers & Consumers
- 26. 26 Thank you for attending this Web seminar! View On-Demand: www.apparelmag.com/web-events For more information, email info@revionics.com