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Price Optimization01
Price Optimization Delivering automated price decisions daily for grocery retailers
02 Price Optimization
Your Challenges
Pricing is a core strategic and operative component affecting
a retailer's profitability. Modern price decision-making processes
are characterized by leveraging immense data volumes while
considering multiple influential factors. For grocery retailers,
being able to implement strategic pricing techniques is key to
sustainable growth.
Grocery retailers must quickly respond to market pressures. Competition is continually driving increasingly frequent aggressive price and promotion activities, to which grocers respond with expanded new channels and more localized assortments. However, this increased complexity makes it harder to handle prices right and often results in category managers focusing only on key value items.
Grocery retailers need price recommendations at a granular level (per SKU, per store and per day) with a strategic approach that sets them apart from competition and ultimately helps them increase revenue and profit.
03Price Optimization
Execution gapInability to harmonize inventory management goals, such as stock levels, with pricing decisions
ScalabilityInability to scale into highly individualized environments, with specific assortments, promotions and sales channels
Strategic goalsPrices not aligned with an overall pricing strategy, supporting strategic KPIs such as profitability and revenue goals
Market pressureCompetitor prices as an influencing factor for price setting
ComplexityIncreasing variety of factors, including category-specifics, omnichannel competition, cannibalization or cross-effects
Challenges for grocery retailers in changing market dynamics
04 Price Optimization
Our Solution forPrice Optimization
Blue Yonder Price Optimization is a predictive
application that delivers retailers optimized pricing
decisions for every product, while improving
revenue and profits by more than 5%.
Ready for automation and scale, the solution measures the relationship between price changes and customer demand, allowing a retailer’s cost drivers and business strategies to be incorporated.
The solution considers competitors’ prices and other factors, such as weather or inventory levels, to rapidly react to changes in the market and adjusts prices automatically, for each product and store. Price Optimization serves a retailer’s greater pricing strategy, providing a measurable impact and return on investment in a short period of time.
Optimized pricing decisions
Automated process
Self-adjusting approach
Strategic KPI alignment
Benefits
15%Increase in revenue
Improvement in profit
5%
Reduction in stock levels
20%
Up to
How Does PriceOptimization Work?
07
System integration• Ready-to-use software as a service
• Central management of security and maintenance
• Automatic rollout of new features and improvements
• Easy integration into existing ERP and/or pricing systems via standard API
Price Optimization
Daily calculation of optimized prices • Full analysis of historical and current data that considers strategic goals,
pricing policy, current pricing rules, sales history and external factors, such as competitive prices
• Determination and integration of individual price-demand elasticities
• Continuous optimization and testing using KPI-driven cost functions
Increase profits
Define strategic
goals
Optimize stock levelsIncrease revenues
Decision delivery• Automated delivery of price decisions per SKU and store on a daily basis
• Continual self-adjustment via regular data updates
Price Optimization08
Why is the Blue YonderApproach Different?
Important differentiators of our Price Optimization
solution are the level of granularity supporting
the price recommendation and the automatic
adjustment of prices to support your strategic KPIs.
Manual approach
Drawbacks• Price test on- and offline• Manual, cost-intensive process• Ad hoc price changes• Typically limited to a small
subset of SKUs
Decide on price
Measure impact
Weekly cycle
Financial planning
4 3
Demand prediction
Try again 5 2
1
09Price Optimization
Traditional approaches implement general market beliefs about price rules and customer behavior. Blue Yonder delivers daily recommendations for thousands of products based on an accurate measurement of price-demand relations. Our solution systematically explores optimal prices, evaluates contextual factors and considers product-relevant factors, such as product life cycle.
Directly serving a pricing strategy, recommendations are optimized using predefined strategic KPIs. Price Optimization results are verified via rigorous testing as opposed to unfounded hypotheses, delivering the best pricing decisions to a retailer on a daily basis.
Blue Yonder automated approach
Advantages• Higher accuracy with the
measurement of price elasticity
• Greater efficiency through an automated data-based process
• Continuous price optimization• Scalable to all SKUs and stores
Choose strategic KPIs
Monitor outcome
Daily cycle
Self- adjustment
Measure price-demand
elasticities
Automated price decisions
1
2
34
5
10 Price Optimization
Solution Brief
A leading European grocery retailer boosts
profits and revenues with optimized prices
Challenge• Local competition• Category managers concentrating on a small subset of items• Dealing with fresh and non-food assortments, local assortments
and package sizes• Frequent price changes
Solution • Daily price optimization covering pricing for more than 10,000
SKUs in different locations• Price optimization is based on corporate strategy, balancing
profitability and revenue goals• Category managers focusing on SKU/store price combinations
and simplifying pricing rules
Results• Increased profits and revenues by 2–6%
• KPI-driven price optimization at SKU and store level
• Price delivery to all stores on a daily basis
2–6% Increase in revenue
and profit
Region Europe
Vertical Grocery
Solution Price Optimization
Price Optimization12
Value Delivered
13Price Optimization
Retail domain expertise• Broad sector expertise for multichannel retailers
KPI strategic alignment• Prices set to achieve predefined strategic business
objectives by balancing KPIs, such as revenues or profits• Delivery of prices for all product life cycles, from regular
sales to markdown• Alignment of pricing policy and rules with consideration
to competitive strategies
Process benefits• Leverages both internal data (historical and current)
and external data• Machine learning algorithms that detect patterns and
understand the demand-price relationship at the most granular level
Speed to value • Continual price updates on a daily basis• Automation of pricing decisions delivers substantial
improvements in productivity and efficiency• Low maintenance after initial setup, reducing time
spent on price management• Rapid return on investment (within 3 to 6 months)
Seamless integration • Standard API integration with existing internal
ERP systems• Manages the key challenges of integration, storage
and processing in one service
Price Optimization14
15Price Optimization
About Blue Yonder
Blue Yonder is the leading provider of cloud-
based predictive applications for retail. Every day,
we deliver decisions to our customers that boost
revenues, increase margins and enable rapid
responses to changing market dynamics.
Our replenishment and pricing solutions are driven by sophisticated machine learning algorithms developed by one of the largest teams of PhD-level data scientists in retail.
Founded in 2008 in Karlsruhe, Germany, by former CERN scientist Professor Michael Feindt, Blue Yonder now operates in Europe and the United States.
We are backed by leading private equity firm Warburg Pincus and the OTTO Group. In 2014, we established the Data Science Academy to provide businesses with relevant data science know-how for retail.
Blue Yonder has been awarded the Gartner Cool Vendor Award 2015, the Experton Big Data Leader Award 2016 and the BT Retail Week Technology Award, among many others.
Price Optimization16
Blue YonderBest decisions, delivered daily
Blue Yonder GmbHOhiostraße 876149 KarlsruheGermany
+49 721 383117 77
Blue Yonder Software Limited19 Eastbourne TerraceLondon, W2 6LGUnited Kingdom
+44 20 3626 0360
Blue Yonder Analytics, Inc.5048 Tennyson Parkway, Suite 250Plano, Texas 75024USA
[email protected] blue-yonder.com