Price Optimization - SAS · 2017-10-03 · Price Optimization? Goal : make the promotion planning...
Transcript of Price Optimization - SAS · 2017-10-03 · Price Optimization? Goal : make the promotion planning...
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Price OptimizationIoana Crisan , SAS Global Retail
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Why is pricing still a topic?
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Price conscious Delighted
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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
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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
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SAS® FORUMRUSSIA 2017
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Pric
e
Time
Regular Price
Clearance
Promotion
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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
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WHYstart with Regular
Price Optimization?
Goal : make the promotion planning process more efficient
More benefits associated to Regular Price Optimization than Promotion
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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
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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.
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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
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Communication
Accurate
Process Reviews Training
KEY TO SUCCESS
Complete
Change Management
Data
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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.
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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
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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.
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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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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
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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
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Buyers use the forecast estimates to negotiatespace in the flyer, negotiate better vendor deals and monitor promo performance
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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 ?
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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.
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• Regular Price Optimization• Inventory Optimization
Future Direction
PresenterPresentation NotesThis photo is cropped to a shape. Follow these steps on slides 28 and 29 to create your own shapes and insert your photo.
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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
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BRAND DESIREOP
EN S
OURC
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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.
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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
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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
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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
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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?
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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
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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
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BETTER ANSWERS, FASTER
40 years experience solving analytical challenges
See clearer & further
Quality of output
Time to value
LeversVery clever maths
Automation IntegrationLearning Interface
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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