price optimization - sas · 2017-10-03 · price optimization? goal : make the promotion planning...

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Price OptimizationIoana Crisan , SAS Global Retail


Why is pricing still a topic?


1/3 2/3

Price conscious Delighted


Set the right pricing strategy for each product life cycle?

Create customer-centric

assortments

Plan my business to drive higher profitability

Delighted

What drives your customers’ path to purchase?

Ensure the right levels of inventory

Determine the most relevant offer to drive the customer to purchase


PresenterPresentation NotesApplying analytics to the data will help give a complete view of your business…and your customersAnalytics will help you better understand how to:Create the best assortmentsWhat at the most impactful marketing campaigns, or How to best engage with your customer based on THEIR preferences


SAS® FORUMRUSSIA 2017

0

5

10

15

20

25

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

Pric

e

Time

Regular Price

Clearance

Promotion



Business Challenges:

Increased competition and eroding margins

Analytic strategy needed for regional store pricing and channels.

Optimize pricing efficacy and ROI.

Results:

Increase in customer spend of 3 – 5 %

Increased profitability through optimized prices : 3- 7%

in sales , 2-3 % margin

Shaped demand to drive customer behavior.

Powered by SAS Revenue Optimization and SAS Analytics

How does a leading grocery chain with 2000 stores and 400 + small convenience stores focus on customer while driving sales and margin?

PresenterPresentation NotesSobeys



WHYstart with Regular

Price Optimization?

Goal : make the promotion planning process more efficient

More benefits associated to Regular Price Optimization than Promotion



WHYSAS ?

Focus: Leverage customer data

Sound analytics A solid pricing product

SAS was already present in the IT landscape with solutions for data integration and Customer Intelligence

They felt SAS is partner to work with who will listen to their needs



WHICHPhase 0 : Pilot -Test and learn

Phased deployment of Regular Price Optimization in regions

Phased Deployment of Promotion Planning

Approach did we take?

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Improved execution of assortment strategy

Workload Reduction• automatization• Exception based system • Optimization based on pre-

set, pre-defined business rule

WHATAre The Benefits

3-7 % Revenue increase2-3 % Margin increase3-5% increase in customer spend

PresenterPresentation Notes

Increase in Revenue ( Increased prices on sensitive SKUs; be competitive on image SKUsWorkload ReductionException based system Optimization based on pre-set, pre-defined business rules

Zone specific pricing & rapid response to market changesIncrease in MarginIncreased prices on SKUs with low sensitivity.


How do we get all the benefits?

Optimize profitability at category level and include cross-effects increased prices on sensitive SKUs be competitive on image SKUs

Clear Strategy

Zone specific pricing; What-if on revenue and profit before in store execution

Localization

Price ComplianceTrust

+

+

+

-

-

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PresenterPresentation NotesOptimize profitability at category level (includes cross-effects)Zone specific pricing; what-if on revenue/profit before commitmentImproved execution of assortment strategyAbility to convert assortment strategy into pricing actionPrice Compliance


Communication

Accurate

Process Reviews Training

KEY TO SUCCESS

Complete

Change Management

Data



Our digital transformationto power the analytics economy

Continue the roll out of promotion optimization and move pricing to

PresenterPresentation NotesSAS Viya represents are digital transformation to power the analytics economy.. And to help you to experience your new possible.

SAS delivers capabilities that allow organizations to easily access, explore, transform, analyze, and govern their data and to allow different users to collaborate and share the insights based upon it. Instead of providing these capabilities as separate, distinct tools, SAS capabilities are designed around a complete, integrated foundation that we refer to as the SAS platform. The SAS platform is what ensures that organizations can harness their unique combination of data, analytics, and collaboration to deliver trusted insights as efficiently as possible at scale.

Throughout our 40 year history, the SAS platform has had to change to ensure that organizations can adapt with changes in business and technology. With more recent trends in business in technology, however, there has been a need for the SAS platform to undergo a more evolutionary transformation. We announced this transformation of our platform in 2016 and called it SAS Viya.

Rather than a new platform, SAS Viya is an extension to the SAS platform. It is designed to help customers adapt to new and future technology and business demands while allowing them to continue to achieve innovation-based disruption based on trusted results delivered efficiently and at scale. We do this by delivering significant changes to the design, structure, and delivery of our foundation.



Business Challenges:

Analytics to understand promotional effects

Reduce workload

Integrate with replenishment systems

Results:

Increased profitability through optimized prices

Shaped demand to drive customer behavior

Reduce promotional process complexity

Powered by SAS Revenue Optimization and SAS Analytics

How does a leading pharmacy chain with 1,300 stores and 20 distribution centers and 120,000 products position promotional items to increase sales? How effective are promotions across its channels?

PresenterPresentation NotesSobeys



WHY Holistic solution to resolve all business challenges Solid retail analytics Scalable architecture

SAS ?

HI-LO retailer experiencing significant out of stocks ,Extremely complex promotion planning process

PresenterPresentation Notes.


A collaborative planning environment for Buyers , Marketing and Vendors

the system provides an estimate of the inventory required for :Franchised dealers/stores to support the promotions Stores - order quantities Vendors

Integrated

visibility to promotional effectivenessAnalytics

insight into the sales and margin performance on promoted products. Efficiently run scenario analysis to find the best promoted price

What If

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+

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How Start with Promotion Optimization implementation

• Data Integration• Promotion Planning Process

Review Did we do it ?

PresenterPresentation NotesPromotion Optimization started with a process review and change



17 Week Promotion Planning Cycle

01 Week 1Create promotions and start evaluating

promotional support options

04 Week 17Promotion active in stores

02 Week 3Assign Spots in the flyer, forecast , evaluate

promotion performance , adjust plans weekly

03 Week 15Approve and lock the promotion , send the

purchase orders and capture the forecast


Buyers use the forecast estimates to negotiatespace in the flyer, negotiate better vendor deals and monitor promo performance

03

01 Buyers select promoted products and preferred promotional method

02 Forecast demand , estimate promotionsprofitability and recommend promotion prices. Marketing chooses optimal scenario that reach expected customer segment and profitability

How is business using SAS Promotion Optimization ?



WHATAre The Benefits

Structured promotion planning workflow

Effective vendor negotiations

Plan , execute and monitor the results of each promotion

In stock during promotionIncreased margin and revenue

PresenterPresentation NotesWith each promotion, Shoppers Drug Mart feels reassured that sufficient stock is on hand for the promotion start. There is process efficiency derived from a formalized solution that provides structure and a workflow.They have the ability to monitor the decisions made by tracking actuals against forecast. The vendor pricing negotiations are easier when the buyers are armed with forecasts on sales unit lift at varying promoted prices. The lift ultimately affects the bottom line of both the vendor and the retailer. Category Business Managers can analyze the promotion effectiveness based on the selected product and price and also the impact to their product category. Marketing can analyze the promotion effectiveness based on marketing vehicle/format and spot/placement on the format. Better decisions are made with each promotion as Shoppers Drug Mart is able to plan, execute and measure the outcome of the each promotion within a single system.


• Regular Price Optimization• Inventory Optimization

Future Direction

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Business Challenges: Use merchant intuition to drive its pricing strategy and markdown decisions

Automate decision-making process.

Need product life cycle pricing structure.Results:Formed optimal price points to reduce end-of-season stock.

Generated significant additional annual revenue.

Improved inventory productivity and profitability.

Powered by SAS Revenue Optimization

How does leading global sports and footwear retailer drive more effective markdowns to increase sell-through velocity and minimize

the negative impact on margin?

PresenterPresentation Notesadidas



BRAND DESIREOP

EN S

OURC

E

CULT

URE

CREATING THE NEW IS OUR STRATEGY

PresenterPresentation Notes'Creating the New' is working - and therefore here to stay

We had exceptional 2016 results and the outlook for 2017 is very positive (with WE growing 20% to 5.3bn€, NAM growing 24% to 3.5bn€ and China growing 28% to 3.0bn€)

The strategy was created two years ago, we are now in the middle of the executional phase

The focus of our strategy Creating the New remains on significantly elevating brand desirabilityand thus achieving strong improvements in sales and profitability.



Multi language and multi currency solution

Problem : aged inventory

WHYSAS ?

Fact-based solution to optimize markdowns and drive profit

Experienced consulting team that assisted with business process change and deployed the solution in 4 months

PresenterPresentation NotesPhotos have a mask overlay to give the images style consistencyTo change the photo, select the top layer, the mask, and Send to BackSelect the photo and and replace it with your new photoWith the photo still selected, Send to Back. This brings the mask back over the photo.

MARKDOWN JOURNEY

COUNTRIES

CURRENCIES

ARTICLES

EXCEL

WINWHY MDO

DATA MODELLING

SELL THROUGH TARGETS

SELL THROUGH ANALYSISREPLACEMEN

T ARTICLESINVENTORY RELEASE RIGHT PLACE

RIGHT TIME

BALANCE

MORE WITH MDO

EVALUATING MDO



By expanding the number of markdown levelsfrom two (30% and 50%), to four (20%, 30%, 40% and 50%) optimization can choose the most profitable localized price point

03

01 Reduces the tendency to prematurely offer the steepest markdowns and capture lost margin

02 Increases the average unit retail by 2-3% and sell thru velocity

Why does it work?


SAS® FORUMRUSSIA 2017 03/10/2017VBP AT ADIDAS 31

t0 t1 t2Time

Initial stock

Sales NON MDO

Faster sell -through MDO

Faster sell-through MDO

Extra products displayed MDO

Expect to be sold before the end of

t2

PresenterPresentation NotesDue to the fact of faster sell-through, more sales can be achieved if shipments are placed with enough time, while demand grows enough to keep expected end of season sell through constant



How well it works ?

t1

ReleasedCapital+10%

+20 bpp

RESULTS

OTHER KPI’S

Mean Sell-

throughGap

14.5pp

+

+

Based on end of season sell through gap

MARGIN EOS SELL THROUGH

Net Margin

MARGIN PRICE EROSION

MARGIN IN SEASON SELL THROUGH

PresenterPresentation NotesDue to the fact of faster sell-through, more sales can be achieved if shipments are placed with enough time, while demand grows enough to keep expected end of season sell through constant

BETTER ANSWERS, FASTER

40 years experience solving analytical challenges

See clearer & further

Quality of output

Time to value

LeversVery clever maths

Automation IntegrationLearning Interface



PresenterPresentation NotesEmma had a seamless, personalized shopping experience…through every step of the customer journey

The retail was able to capture a sale, drive additional sales and execute a true omnichannel expereince

Price OptimizationSlide Number 2Slide Number 3Slide Number 4„Price is what you pay.Value is what you get“� Warren BuffetSlide Number 6Slide Number 7Slide Number 8Slide Number 9Slide Number 10Slide Number 11Slide Number 12Slide Number 13Slide Number 14 How do we get all the benefits?KEY TO SUCCESSSlide Number 17Slide Number 18Slide Number 19 A collaborative planning environment for Buyers , Marketing and VendorsSlide Number 2117 Week Promotion Planning CycleSlide Number 23Slide Number 24 Future DirectionSlide Number 26Slide Number 27Slide Number 28Slide Number 29Slide Number 30Slide Number 31How well it works ?Slide Number 33Slide Number 34

price optimization - sas · 2017-10-03 · price optimization? goal : make the promotion planning...

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