True or false? Is it possible to lower prices and make more profit and revenue, even at a lower margin? For many, this seems counter-intuitive, but it is definitely true. We were recently working with a retailer on their detergents category where they had priced an Ajax product at $1.79. We found this product by sorting on price elasticity in the price review screen of RAPS Everyday Price Optimization. The price elasticity of Ajax was greater than 3.0, which represents very strong price sensitivity. Most items have a price elasticity between 0.8 and 1.4. For those unfamiliar with the calculation, price elasticity is simply the percent change in units divided by the percent change in price. So a price elasticity of 3 simply means that if we drop the price by 10%, the units will increase by 30%. The table below compares profit and revenue between the current price of $1.79 and the $1.49 price suggested by Revionics:
By: Jeff Smith, EVP and Founder, Revionics, Inc
For some time, Revionics University has been producing highly attended web seminars pertinent to the retail industry. These seminars have covered a broad range of topics regarding general trends as well as best practices in relation to pricing. With Revionics University expanding, courses targeted directly towards Revionics customers are now available.
By: Jeff Smith, Founder and EVP, Revionics, Inc
Historically, the US has led the adoption of advanced pricing software. With retail price optimization being invented in the United States – particularly in Sacramento as a matter of fact, it makes sense US retailers are more comfortable with the technology since they have been exposed to it much longer. Many of their domestic retail peers have implemented some type of price optimization solution and are reaping the significant rewards of doing so. In other words, optimization is a known and proven commodity in the United States.
By: Christie Frazier-Coleman, VP Strategic Pricing & Consulting, Revionics, Inc
Are you brand blocking your private label or doing the compare and save strategy? With price optimization we tend to encourage a frequent review of base pricing, and in particular, a heavy scrutiny on private label versus national brand price relationships.
How does this impact merchandising decisions? For example, in the past, best practices dictated that private label should be merchandised immediately to the right of the leading national brand. This is typically done during the category review process on a bi-annual or annual basis. Some retailers are now recommending that a private label should follow the national brand with the lowest base retail to set a price gap. Does this force the retailer to change his schematic as often as he changes those relationships or are the old merchandising rules obsolete? Are the old merchandising rules becoming obsolete?
By: Todd P. Michaud, President and CEO, Revionics, Inc.
As we look at the retail market, we see most retailers plagued with either inadequate Retail Demand Intelligence (RDI) and Forecasting tools or on the contrary, some retailers have too many disparate systems that contradict each other. This is even true for those retailers who have selected comprehensive solution portfolios from the largest of software vendors since so many software vendors have merely intellectual property that they have acquired through poorly architected interfaces.
By: Christie Frazier-Coleman, VP Strategic Pricing and Consulting, Revionics Inc
I was listening to the television the other night and heard a Walgreens commercial. Their tag line was “we carry all of the things you need most.” What caught my attention was that they were not typical drug store items -but items that in the past have been considered traditional grocery SKU’s such as soda, milk, cereal, and even ice cream.
Every retail format is in the grocery business. No wonder retailers are bemoaning soft sales and pulling their hair out wondering where it has gone. IRI reported that the drug channel's dollar sales growth outpaced supermarkets, and food, drug and mass merchants combined, in all but two of the 20 Center Store categories they profiled in their latest issue.
By: Todd P. Michaud, President and CEO, Revionics, Inc
Last week, Federal Reserve Bank Chairman Ben Bernanki announced that the US is on the “cusp of recovery.” I couldn’t agree more. As you can see from my previous posting, I have suspected a turn in the economy for the past few months, and have urged retailers to start focusing on the recovery. As a provider of pricing software, Revionics has a front-row seat to how leading companies adjust for different economic conditions. Despite the obvious economic improvements that we are starting to see, it is clear that consumers generally remain very price sensitive.
By: Jeff Smith, Founder and CTO, Revionics, Inc
Times are changing… or maybe it’s more appropriate to say times have already changed. The easy days of having the pricing function be side task in a retail organization are over; price is more important than it has ever been.
The economy seems to have un-expectantly jumped up and slapped retailers in the face, and knocked them back a few steps, a little dose of reality; but they are back fighting even stronger after gathering their wits. Nobody was prepared, nobody saw it coming, nobody wants it to be here, but it is here, so we have to deal with it. Higher unemployment, lower wages, higher medical costs, higher fuel costs; money is tight. Consumers are looking at the price they are paying for products, and you need to be looking at those prices as well; it is very important.
By Todd P. Michaud, President and CEO, Revionics, Inc.
This economy has been tough for most consumers. The average net worth of individuals has decreased by more than 20%, and on average, 401Ks have decreased in value by 30-40%. Unemployment rates are the highest they have been in over 25 years, and gas prices are unpredictable.
The challenging economy caught many retailers off guard. During the holiday season, for example, many retailers had excessive inventory levels left on their store shelves. Private label brands have seen unprecedented growth as a substitute for national brands, and three out of four categories are losing buyers.
By: Jeff Smith, Founder and CTO, Revionics, Inc.
Since its launch, Revionics University has built a strong following from Revionics customers as well as other retailers who have been attending regularly scheduled seminars on industry-relevant topics. Revionics University has a formalized curriculum that touches on a variety of topics, from introductory courses on its products, to general industry topics relevant to pricing analysts, category managers, executives, and anyone involved in the retail industry. It may be perceived that Revionics University only offers courses targeted towards educating its customers in relation to their products, but it is much more than that. Revionics University is a top-notch industry forum that provides a number of courses pertaining to industry trends and best practices related to pricing and category management.