Our solution will help you
Maximize revenue and maintain
sales performance by optimizing
all potential positions.

Diverse categories and formats in today's retail landscape involve managing numerous SKUs with pricing often governed by uniform rules and markups for each product category, dictated by its role and strategy. However, the competitive nature of the market necessitates applying competitive pricing strategies to individual SKU baskets.

Balancing the intense competition in front-baskets and Key Value Items (KVIs) while effectively pricing the remaining back-basket to retain or increase gross yield is a critical challenge in retail pricing. This challenge is further compounded by the need to localize prices at the level of individual store clusters.

Addressing this complex issue requires a differentiated approach to pricing at the individual SKU tier, considering the localization of price matrices at the store clusters tier. By analyzing sales and buyer responses to changes in individual SKU prices within the same category, it becomes evident that different SKUs exhibit varying price elasticity, fall within different price ranges and segments, and possess distinct potentials for increasing gross yield.

In a given category, for example, price sensitivity can vary by more than 50%, ranging from -1.5 to -2.3, and profitability can differ by over 25%.

Manual differentiation of numerous SKUs in many chains, often exceeding 400 categories, proves challenging. This challenge leads to emergence of so called "forgotten categories." Remarkably, addressing these overlooked categories has shown substantial success, with a 37% increase in gross yield achieved for one retailer in a previously neglected category, such as Toothpaste.

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

With SmartPricing, you gain powerful tools to effectively address and optimize your pricing strategy:

  • Choose a pricing strategy aligned with your goals, focusing on increasing Gross Yield or Revenue, depending on your targets;
  • Set specific target values, allowing flexibility in your approach, whether it's maximizing gross yield or achieving a targeted percentage increase;
  • Utilize sales statistics for data-driven pricing, considering seasonality, price sensitivity across various factors such as SKUs, formats, regions, and even store clusters. Integration with personal marketing allows alignment with customer segments;
  • Implement distinct pricing rules and restrictions for front-basket, Key Value Items (KVI), and back-basket, ensuring tailored strategies for each categor;
  • Build price ladders within specific price ranges, enhancing differentiation using the "profit triangle" principle. This maximizes the overall category potential;
  • Use scenario modeling for precise price calculation, enabling the selection of the most suitable price matrix tailored to your specific objectives;
  • Prioritize revaluations strategically to minimize the operational impact on stores when implementing price changes.

With SmartPricing, you will retain control over every aspect of the solution, set rigid restrictions for parameters such as price increases, sales decreases, minimum profitability for individual SKUs, entire categories, and specific baskets. This control level will ensures a customized and well-managed pricing strategy tailored to your business objectives.

Differentiate from competitors where buyers expect it and compete in price

Competition in retail is growing fast, especially because of big federal companies with pricing advantages. Key challenges include price transparency, consumer awareness and aggressive pricing from rivals. This pushes retailers to differentiate their products, like introducing private labels and exclusive trademarks. But for other well-known brands, staying competitive means competing on price, even against federal players. This often leads to selling goods below cost to maintain pricing perception.

Price transparency impacted by:

  • Comparative prices on buying;
  • Heightened consumer price sensitivity;
  • Escalating competitors' price aggressiveness;
  • Consumer demand for price consistency across sales channels;
  • Rising competitors' promotional activity;
  • Perception of price competitiveness among consumers;
  • Emergence of unexpected competition;
  • Implementation of personalized or localized pricing strategies;
  • Alignment with shareholders' objectives: using prices to enhance inventory turnover.

The SmartPricing dynamic pricing solution offers robust features to address pricing differentiation and competition:

  • Sales-Driven Differentiation: Tailored pricing based on sales data, including seasonality and price sensitivity across SKUs, formats, regions, and buyer segments;
  • Optimal Pricing for Competition: Calculating optimal prices for highly competitive products by monitoring multiple competitors;
  • Flexible Price Range Management: Setting minimum and maximum prices and defining price ranges;
  • Strategic Basket Creation: Creating baskets for key items and strategies for front and back baskets;
  • Micro-Segment Focused Pricing: Tailoring SKU baskets to micro-segments with specific rules;
  • Private Label Management: Automatically setting brand goals for private labels and maintaining price gaps;
  • Streamlined Price Lines: Simplifying pricing with unified price ranges;
  • Vertical Price Line Management: Optimizing price steps for products with different characteristics;
  • Strategic New Product Pricing: Choosing pricing strategies for new products to stand out;
  • Optimized Pricing Matrix: Fine-tuning the pricing matrix to increase Gross Yield or Revenue.
Automate scalable support of various pricing formats, regions, clusters, and models

Creating distinct price matrices for diverse regions and formats is a fundamental pricing task, considering the varying value propositions associated with different formats. Presently, Category Managers and Pricing Departments must navigate down to the granularity of individual store groups and clusters. Even in a single city, stores of the same format may be situated in different locations, each with unique customer income levels and competitive landscapes.

Balancing gross yield preservation in less competitive environments and adjusting prices to maintain relative positioning in highly competitive areas adds complexity. While the concept seems straightforward, the multiplication of clusters by SKUs in the range matrix exponentially increases the complexity of resolving this challenge.

In a recent SmartPricing implementation project, a client established over 30 store clusters, each with an average active range matrix of 15,000 SKUs, resulting in a pricing task encompassing 450,000 price units.

SmartPricing, a data-driven dynamic pricing solution, was initially developed with retail company structures in mind. It effectively supports three primary pricing tiers: format, geographic area (locality), and 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)

This process involves structuring sales statistics to localize price sensitivity ratio calculations and minimize errors. During reevaluation, parameters and restrictions can be set according to the hierarchical tiers. Default format-level settings apply universally for all regions and clusters. Alternatively, specific parameters can be tailored for a chosen region and cluster, facilitating the computation of a localized price matrix for that specific store cluster.

Maximize promotional efficiency and automate the search for optimal products, discounts, and promotion time frames

According to Nielsen's research, promotions contribute over 60% sales in top 20 FMCG categories, and in specific sectors like Coffee or Washing Powders, this figure can go up to 80%. Despite the increased significance, making accurate pricing decisions during promotions is even more crucial than regular product pricing. This raises the question: Why do chains implement promotions?

SmartPricing, a data-driven dynamic pricing solution, was developed with focus on retail company structure. It efficiently supports three primary pricing tiers: format, geographic area (locality), and store cluster.

From summarizing promotions discussion, two primary incentives emerge:

  • Increasing Gross Yield: Leveraging demand elasticity through price reduction to boost sales volume and offset discount losses.;
  • Competitive Response: Monitoring and responding to actions by stronger competitors to maintain customer traffic. For instance, replicating promotions initiated by competitors to prevent losing customers.

In the realm of decision-making, while the first case appears straightforward, the second scenario poses numerous questions. However, the crux of both lies in the decision-making process.

Nielsen's research reveals that approximately 60% of promotional endeavors fail to yield positive returns. This is largely attributed to chains' reliance on intuitive decision-making rather than leveraging available data.

Chains possess valuable data sources including receipt data, customer information from loyalty cards, and historical promotion data. By harnessing these data streams alongside modern computing resources, promotions can be propelled to new heights. Moving away from intuitive decision-making towards a data-driven approach can potentially yield over 10% in additional gross yield from promotional improvements.

Today, promotion planning and forecasting primarily constitute a mathematical problem, accounting for about 90% of the process. Traditional analytical tools fall short due to the multitude of factors and vast datasets involved. Moreover, the limited time resources of Category Managers necessitate a shift towards more prompt, transactional, and operationally oriented solutions. Weekly promotions leave little time for in-depth analytics, demanding solutions that prioritize agility and efficiency.

The "Promotion" module within SmartPricing offers a solution enabling retailers to address three primary questions based on their data:

  • What to Promote?
  • What Discount or TPR to Offer?
  • Duration of Promotion
The system autonomously reviews promotion history, considers cross-elasticity, and computes the optimal depth and duration of discounts. This empowers the retailer to make informed and strategic pricing decisions, enhancing the effectiveness of promotional strategies.

With SmartPricing, you can effectively address various aspects of pricing and promotion management, offering solutions to the following issues:

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

In our pursuit to improved pricing efficiency, we're introducing a dynamic approach with diverse Know Value Item (KVI) baskets and an automated system for intelligent indicator goods selection.

Historically, our strategy involved product range segmentation through price baskets, including the Front Basket (FPG) for first price goods, KVI for indicator goods, and the Back Basket for the remaining range. This segmentation aimed to establish a price image (Front Basket) and optimize margins (Back Basket). Key competitors were carefully chosen and monitored, influencing subsequent price adjustments. However, this method led to a growing list of KVIs, resulting in price decreases and a subsequent decline in overall range matrix profitability.

Recognizing the evolving landscape, we've identified two primary challenges. Firstly, the need for more frequent KVI revisions has become apparent. Secondly, KVIs must now consider variables such as sales channel, location, and sales point format. The selection of key competitors is no longer a broad approach for the entire chain but is tailored to specific product categories. These adjustments are essential as market dynamics transform with the proliferation of specialty stores, demanding companies to compete on multiple fronts.

Introducing SmartPricing, featuring dedicated KVI Basket Management and competitive pricing functions, to elevate the flexibility and efficiency of your KVI-based competitive pricing strategy. With SmartPricing, you can:

  • Enhance your KVI list by emphasizing SKUs that significantly impact category penetration, length, and revenue;
  • Create customized KVI baskets by combining SKUs from various categories, catering to different micro-segments of buyers (e.g., health-conscious individuals, families with small children, beer enthusiasts), thus maintaining overall price perception;
  • Establish unique strategies, parameters, and restrictions for each KVI basket, tailored to specific formats, regions, or store clusters;
  • Streamline calculations and revaluation across entire baskets, rather than each category separately;
  • Automatically re-evaluate KVI baskets in response to changes in competitors' prices or purchase costs;
  • Evaluate and manage the Price Index for the overall format and/or region, as well as specific baskets (e.g., FRESH basket, Social basket);
  • Prioritize price adjustments for KVIs included in multiple baskets, ensuring changes align with basket priorities.
Automate all routine and standard tasks to enhance process consistency, freeing up valuable time to focus on strategic objectives

Pricing transcends mere rule-based calculations in modern retail company. Upon analyzing typical processes and tasks within retail, distinct yet interconnected groups emerge. These processes, while interrelated, exhibit unique characteristics. Every retail company engages in building and implementing the following 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 offers comprehensive support for managing the complexity and dynamics of pricing processes, facilitating scalability and localization within your retail chain by:

  • Choosing and setting a Pricing Strategy tailored to your specific objectives, whether it's increasing Gross Yield or Revenue;
  • Setting target values to align pricing strategies with your desired outcomes, such as a predetermined increase in gross yield by 5% or 10%;
  • Retaining price perception by optimizing the KVI list and managing KVI baskets effectively;
  • Handling New products and private label pricing, including maintaining price gaps between private labels and brands;
  • Enhancing and calculating SKU recommendations for promotions, determining optimal discount depth and duration;
  • Streamlining package calculation and revaluation across multiple categories simultaneously;
  • Implementing automatic calculations and revaluation schedules to ensure timely adjustments;
  • Automatically prioritizing revaluations and price tag changes at the store level based on predefined criteria;
  • Managing events and automating calculations for events such as changes in purchase prices or competitors' prices, enabling proactive responses to market dynamics.
How Can We Help

We specialize on tailoring individual solutions for each company, emphasizing and fortifying your unique competitive advantage and corporate «DNA». We achieve this by seamlessly integrating leading business practices, concepts, and technologies. Our expertise encompasses a range of key areas:

© COPYRIGHT 2018. ALL RIGHTS RESERVED myRetailStrategy Partners.