Our solution
will help you:
To “squeeze” the maximum income from all possible positions and retain sales results

Today, many retail chains of different categories and formats have numerous SKUs, the pricing of which usually complies with uniform rules and markups established for a product category, depending on its role and strategy. At the same time, price transparency and competition make the chains apply competitive pricing to individual SKU baskets.

How to balance the often-fierce competition in front-baskets and KVIs with the ability to set prices for the remaining back-basket and retain, or even increase gross yield? This is one of the key tasks and challenges of retail pricing, the resolution of which is further deepened by the need to localize prices at the tier of individual store clusters.

This issue can be solved by a differentiated approach to pricing at individual SKUs tier, taking into account the localization of price matrices at the store clusters tier. If to analyze the sales and buyers' response to changes in individual SKUs prices within the same category, one can see that even within the same category, different SKUs have different price elasticity, are in different price ranges and segments, and have different potential to increase gross yield.

For example, in the category of…. Price sensitivity can differ by more than 50% from -1.5 to -2.3,, and profitability — by more than25%.

Moreover, numerous categories (over 400 in many chains) do not allow you to quickly differentiate so many SKUs manually. This results in the emergence of so-called forgotten categories. They managed to increase gross yield up to 37% for one retailer in such a "forgotten" category as Toothpaste

How to “squeeze” the maximum income from all possible positions and retain sales results?

With SmartPricing, you can confidently solve this problem due to special functions:

  • Choosing and setting a Pricing Strategy aimed at increasing Gross Yield or Revenue, depending on your targets;
  • Setting a target value: e. g., perhaps you do not need to maximize the gross yield but rather increase it by 5% or 10%;
  • Pricing is based on sales statistics, taking into account seasonality, the sensitivity to price ratio in terms of SKUs, formats, regions, up to clusters of stores. And if your personal marketing is developed — even up to customer segments;
  • Differentiation of pricing rules and restrictions among front-basket, KVI, and back-basket;
  • Building price ladders by price ranges. Differentiation of prices within the range is enhanced through the application of the “profit triangle” principle. This allows getting the most out of the entire category;
  • Scenario modeling of price calculation and selection of the most suitable price matrix for your purposes;
  • Prioritizing revaluations to reduce the operating load on stores when changing prices.

At the same time, you control the solution of all issues. You can set rigid restrictions for price increases, sales decreases, minimum profitability for individual SKUs and the entire category, as well as individual baskets.

Differentiate from competitors where buyers expect it and compete in price

Competition is growing rapidly in most retail sectors, especially by large federal companies that have a price advantage. At the same time, price transparency, customer awareness of prices, and competitors' price aggressiveness are key challenges. This makes many retailers differentiate by the product range through the introduction of private labels (own brands) and ETMs (exclusive trademarks), while for other well-known goods and brands they have to “be within the market”, i. e. to compete in price even with federal players. This often results in the sale of goods below cost to maintain price positioning and perception.

  • Increasing price transparency — the impact of comparative prices on buying
  • Increased consumer price sensitivity
  • Increased competitors' price aggressiveness
  • Consumers demand consistent prices across sales channels
  • Increased competitors' promotional activity
  • Consumer perception that we are not price competitive
  • Unexpected competition
  • Personalized or localized prices
  • Shareholders' requirements to prices as a way to achieve better inventory turnover

The SmartPricing data-driven dynamic pricing solution supports you in your price differentiation and competitive pricing challenges by such features as:

  • Pricing differentiation based on sales statistics, taking into account seasonality, the sensitivity to price ratio in terms of SKUs, formats, regions, up to clusters and even buyer segments;
  • Calculation of the optimal price point for highly competitive goods, for which the monitoring of prices of several competitors with different priorities is available;
  • Price range setting: minimum and maximum prices and price ranges;
  • Creating a first-price basket of SKUs and tough KVIs, as well as front-basket and back-basket;
  • Building SKUs baskets focused on micro-segments. For example, FRESH baskets or HEALTHY LIFESTYLE baskets, as well as separate rules and pricing restrictions set therefor;
  • Automatic determining of brand goals for private labels and maintaining the price gap between private labels and the brand;
  • Forming the price-lines to eliminate the price choice barrier to offer the range at one price;
  • Creating and managing vertical price lines to maintain an optimal price step for one product with different key characteristics (weight, concentration, quantity in a package), taking into account demand and price sensitivity for individual SKUs in the line;
  • Choosing different pricing strategies for new products: skimming or penetrating to differentiate from competitors;
  • Finally, optimization of a differentiated pricing matrix, taking into account the choice and task of the Pricing Strategy aimed at increasing Gross Yield or Revenue.
To scale and automatically support multiple pricing formats/regions/clusters and models

The formation of different price matrices for different regions and formats is an obvious pricing task since different formats provide for different value propositions. Regions and cities differ in purchasing behavior and demand for the same goods.

However, nowadays, Category Managers and Pricing Departments have to downgrade to the level of separate store groups and clusters. There may be several stores of the same format in one city, but they are located on various sites with different levels of customer income and a competitive environment. You should not lose gross yield where there is no tough competitive environment; at the same time, price adjustments are required to maintain relative price positioning with buyers where competition is high.

It sounds simple, but if you multiply the number of clusters by the number of SKUs in the range matrix, the complexity of solving this issue increases exponentially.

In the course of one of the SmartPricing introduction projects, the customer formed over 30 store clusters with an average active range matrix of 15,000 SKUs, which set the scale of the pricing task at 450,000 price units.

The SmartPricing data-driven dynamic pricing solution has been originally developed with the retail company structure in mind and supports three main pricing tiers: format/geographic area (locality)/store cluster.

Store FormatSupermarket
Region/City New York
Region/City Moscow
Store Cluster 1 Midtown
Store Cluster 2 Downtown
Store Cluster 3 Newton (Boston Area)

ЭIt means that all sales statistics are marked up following this structure to localize the calculation of the price sensitivity ratio and reduce calculation errors. When reevaluating, you can set all parameters and restrictions, complying with the hierarchy at each tier. Thus, you can set the parameters and restrictions at the default format level, and they will apply to all regions and clusters. Respectively, you can set your specific parameters and restrictions for the selected region and cluster, calculating a localized price matrix for this particular store cluster.

To promote as efficiently as possible, and automate the search for the best products, discounts, and promotion time frames

According to Nielsen's research, the share of sales in promotions in the top 20 FMCG categories exceeds 60%. In some categories, e. g., Coffee or Washing Powders, the share of promotions reaches 80%. In such conditions, the price of the correct pricing decision in the promotion is certainly even higher than the regular product price. Why do chains need promotions at all?

The SmartPricing data-driven dynamic pricing solution has been originally developed with the retail company structure in mind and supports three main pricing tiers: format/geographic area (locality)/store cluster.

If to summarize all we hear on the promotion topic, there are two main incentives:

With SmartPricing, you can confidently solve this problem due to special functions:

  • getting additional gross yield due to the demand elasticity, i. e. by reducing the price, we increase the sales volume and, thereby, cover the discount losses;
  • following the actions of stronger competitors when fighting for the customer, e. g., when your competitor makes promotion for every second product in a category, and you repeat after it just because you are afraid of losing customer traffic.

If the first case is more or less clear, the second case raises a lot of questions. However, the main thing relevant in both cases is how decisions are taken.

According to Nielsen's research, about 60% of all promotional activities do not pay off. This is due to the fact that many chains simply do not know how to work with data, and most decisions are taken “intuitively”.

The chains possess receipt data, customer data of loyalty cards, and historical data of promotions. All these data, combined with modern computing resources, allow propelling promotions to new heights, to get away from the “intuitive” decision-making model and apply a data-driven approach allowing one to get more than 10% of additional gross yield from promotion improvement.

Apparently, promotion planning and forecasting today is 90% a mathematical problem that cannot be solved with standard analytical tools, since, on the one hand, there are many factors to be taken into account and a large amount of data, as well as, on the other hand, there are limited time resources of a Category Manager that do not allow making a lot of manual calculations since weekly promotions do not leave time for deep analytics. Promotion improvement solutions require a more prompt transactional operational approach.

The “Promotion” module in SmartPricing is a solution allowing a retailer to answer three main questions based on his data:

  • - What to promote?
  • - What discount or TPR to give in the promotion?
  • - How long will the product be promoted?
The system independently analyzes the promotion history, takes into account cross-elasticity, and calculates the best depth and length of the discount, helping the retailer to make deliberate and effective pricing decisions.

With SmartPricing you can solve the following issues:

To create different KVI baskets and automatically select the most efficient set of indicator goods

A while ago, one of the steps to increase the pricing efficiency was the product range segmentation by price baskets, e. g. Front Basket, i. e. FPG (first price goods), KVI (know value items, i. e. indicator goods), and Back Basket, i. e. the rest of the range. This approach distinguished a part of the product range, which task was to form a price image (Front Basket), and a part of the range to earn the margin (Back Basket). Then key competitors were selected and monitored with the further setting of prices. As a result, with this approach, the list of KVIs increases, prices decrease, and therefore the profitability of the entire range matrix reduces.

This approach no longer meets today's challenges. Firstly, the frequency required to revise the KVI has increased. Secondly, KVI today must take into account the sales channel/location, and the sales point format. The list of competitors, in turn, is determined not for the chain as a whole but based on specific product categories.Such changes are driven by the development of specialty stores, and companies have to compete with many.

SmartPricing with dedicated KVI Basket Management and competitive pricing functions will help you increase the flexibility and efficiency of your KVI-based competitive pricing.With SmartPricing you can:

  • Improve your KVI list and emphasize SKUs that can really affect the category penetration index, check length, and income;
  • Create different KVI baskets by combining SKUs from different categories. This allows supporting and forming the price index and maintaining the overall price perception for different micro-segments of buyers, e. g., those who care about their health, or “families with small children”, or “beer fans”;
  • Set your strategies and unique parameters and restrictions for each KVI basket, including in terms of the format/region/store cluster;
  • Launch calculations and revaluation across the entire basket, and not for each category separately;
  • Re-evaluate KVI baskets automatically by the event of changes in competitors' prices, following the monitoring or changes in purchase prices;
  • Assess and manage the Price Index both in general for the format and/or region of the cluster, and a separate basket, e. g., FRESH basket, or Social basket;
  • Re-evaluate the goods that are KVIs and are included in different baskets, taking into account the priorities of changing price tags, to ensure that the price tags for priority baskets will be changed first.
To improve the process consistency, automate all routine and standard tasks in order to focus on strategic objectives

Pricing in a modern retail company is not just about calculating prices according to the rules set. If we analyze typical processes and tasks in a retail company, we can distinguish the following groups of processes that are interrelated, but at the same time are specific in their way. Any retail company in some way builds and implements the following retail pricing business processes:

  • Defining a pricing strategy and price positioning;
  • Dynamic regular pricing;
  • KVI-based competitive pricing;
  • Promotion and Seasonal Pricing;
  • New products and private label pricing.

The SmartPricing data-driven dynamic pricing solution can help you manage the complexity and dynamics of pricing processes and support your retail chain scalability and localization by:

  • Choosing and setting a Pricing Strategy aimed at increasing Gross Yield or Revenue, depending on your targets;
  • Setting a target value: e. g., perhaps you do not need to maximize the gross yield but rather increase it by 5% or 10%;
  • Retaining price perception through optimization of the KVI list and KVI basket management;
  • New products and private label pricing, including maintaining a price gap set for private labels and brands;
  • Improving and calculating SKUs recommendations in the promotion, and determining the best discount depth and length;
  • Package calculation and revaluation of several categories at the same time;
  • Setting automatic calculations and revaluation schedules;
  • Automatic prioritization of revaluations and price tag changes at the store level;
  • Management of events and automatic calculations for events, e. g., in case of purchase prices changes or competitors' prices changes following the monitoring.
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