Price, promotion and assortment are arguably the most important levers for driving growth, improving profitability and attracting customers. Applicable in an expanding store portfolio or in an omnichannel environment, it is essential that the customer is at the center of the decisions associated with these levers. In this article, explore how to put the customer at the center of these decisions and how this translates into profitable growth.

Precio

There are many solutions for price optimization that model cross-elasticities, volumetric factors and various others; However, the most critical factor in increasing customer loyalty is the definition of inputs or elements of known value (KVI). KVIs are the things your most important customers care about every day.

Optimizations will typically be executed based on sales or margin targets with various rules, restrictions and protected items/KVIs. Optimization with price increases and decreases across the entire assortment that impacts demand and associated volume. This dynamic can take volume away from the competition, changing the average selling price and the associated margin mix.

If you don't have the right KVIs, an optimization can easily lead you in the wrong direction. Imagine increasing the price of an item that is important to your most loyal or price-sensitive customers with the intention of shifting sales to an alternative item. Will they switch to the alternate item or switch to an alternate store? Your competitor?

KVIs are critical. At datasapiens we agree with our clients on the KVI generation and update approach. However, typical factors include customer loyalty, price sensitivity, promotion/non-promotion weight, item attractiveness, exclusivity, substitutability, sales weight, etc.

It is difficult to assign the exact impact of KVI prices; however, it is critical to building long-term customer loyalty and sustainable growth.

Promotion

The amount of promotional data produced by retailers can be mind-boggling! This data arises due to the number of dimensions involved:

• Mechanics : Discount price, % discount, Multi-save, Cross-sell, etc.
• Media : brochures, newspapers, television, physical stores, online, etc.
• Duration : Day, Date, Range, Period, etc.
• Location : Generic, Regional, Location Specific.
• Client : Massive, Segmented or Personalized

As a result, evaluation can be complex. datasapiens can take various approaches to promotion evaluation depending on customer requirements and data availability. These can include simple comparison with benchmarks, customer evaluation, A/B testing, and multi-touch attribution.

A popular approach is to understand the impact on the customer before, during and after the promotion to understand the net effect. We classify promotions based on those that are good for customers compared to those that are good for business , resulting in a four-block matrix.

Reducing bad promotions (not suitable for either the customer or the company) can generate significant savings in terms of promotional investment. This savings can be accumulated, reinvested in hello good promotions to improve them further or invest in other areas, for example, base price or personalized media.

Promotion spending in context

• A retailer can have 30% of sales made in promotion.
• Let's assume the average discount is 20%.
• Let's suppose the evil ones promotions represent 20%.
• For a $2 billion retailer , reducing bad promotions by 20% could save 4.8 million dollars a year.
• The savings generated by wasted promotional funds are multiplied by the datasapiens solution.

Assortment

Select the assortment appropriate It is the basis of retail trade. At datasapiens we put the customer at the center of the process and combine their behavior and preferences with business performance. This process is critical to driving profitable growth. Some of the critical metrics and levers are the following:

• Exclusiveness : This fact measures the extent to which an item is the only item in the category in customers' repertoire. The greater the exclusivity, the greater the importance to the customer, since there is no alternative. These items must be protected, as their removal will result in lost sales, reducing overall purchasing repertoire and leakage to competitors.
• Substitutability : This fact measures the degree to which an element can be substituted by another within the category. A high level of substitutability indicates a low level of customer loyalty toward the item or brand; If the item is not available, the customer can easily select an alternative. This presents an opportunity commercial .
• Trade : Items that sell well are not necessarily the best if they are highly substitutable. Let's imagine two second-tier brands with good-selling items that are highly substitutable. Customers are not loyal to either; They will happily switch between them. The buyer can choose the item he wants to keep on the shelf, while suppliers can bid to keep it. This may result in incremental margin aligned with a JBP joint business plan with a supplier, a lower retail price for customers with the same margin, or other options.
• Customer focused – The example above shows how customer metrics can drive business performance. In reality, the focus on the customer is much greater, from product scoring based on customer profile to localization based on customer profile, purchasing mission or regional nuances. The result can be unique assortments per store.
• Business impact : Combining customer centricity with strict business metrics related to sales and margin drives growth.

Impact of customer-centric assortment

• A retailer can implement a significant change to 15% of the assortment each year.
• A significant change will likely result in base sales growth of 3%.
• Let's assume a base margin of 20% and an improvement of +0.3%
• For a 2 billion dollar retailer , a customer-centric assortment generates a additional profit of 2.7 million dollars per year.
• The customer-centric assortment finances the datasapiens solution many times over

Conclusion

Putting the customer at the center of decision-making is key to sustainable growth. This is particularly important around the key levers of Price, Promotion and Assortment. Customer-centric growth adds value, as illustrated in the examples above.

For a $2 billion retailer

• Improved promotional spending could free up 4.8 million dollars annually for reinvestment
• Customer-centric assortment can add 2.7 million dollars year

When this approach is applied in collaboration With suppliers, as described last week, these benefits can be multiplied. Profitable, customer-centric growth comes from enabling retailers to make effective, customer-centric decisions and take action. These solutions are no longer limited to global players; They are available to all retailers. Now .

Get in touch today to learn how datasapiens can underpin your growth.

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Full note link: https://www.datasapiens.co.uk/blog/ppem410aoklol8xnr79k0qqnqwawve