Pricing Strategies and Promotion Best Practices

By: Todd P. Michaud, President & CEO, Revionics, Inc.

Over the next couple of weeks, Revionics will be announcing RAPS Replenishment, a fully comprehensive inventory management, forecasting and order optimization system.   We intend on demonstrating this system to prospective customers at the annual NRF show in New York on January 11th and 12th.   General Availability (GA) for customers will be April 1, 2010.  The completion of this module will be a significant accomplishment for our development team.

Why is Revionics focusing on Replenishment?

As many of you know, we have 100+ retail customers already.   Many of them are increasingly focused on finding new ways to free up working capital tied up in non-value adding inventory while simultaneously reducing out of stock situations, especially those out of stock situations tied to promotional activities.   With our integrated forecasting system, Revionics is uniquely qualified to help retailers address both issues.

The RAPS Replenishment system has three primary components:

• Inventory Management: This module maintains store level perpetual inventory.   It offers a fully integrated receiving system capable of tracking in-bound shipments from the warehouse or from DSD vendors.   The system will also integrate with Point-of-Sale (POS) systems or back office systems to monitor sales on either a trickle feed or periodic basis.   The system also supports physical inventory counting as well as computer directed cycle counting.

• Forecasting & Optimization: This module generates optimal order quantities based on integrated forecasting, inventory balances and a real-time understanding of order status.

• Order Management: This module provides capabilities to produce Computer Generated Orders (CGO) or Computer Assisted Orders (CAO) where the user can review and modify order quantity before submission.   The system will also support manual order entry through customer defined order templates.  The system can consolidate or parse orders to separate vendors.   It tracks order status, and manages changes to orders.

The system will offer some very exciting functionality such as:

• Allocation from Distribution Centers-this will allow retailers to plan and distribute orders to store locations based on that store’s capabilities to actually sell the product.

• Vendor Order Optimization-this will allow retailers to “buy in” on expiring promotions, or in advance of price increases.   It will support bracket purchasing, always trading off how much inventory is needed when compared to the financial incentives to buy and hold more inventory at store level.

Each of the above modules can be deployed as a complete suite or can be integrated with other modules that retailers may already have installed.   The system can be deployed with Revionics’ price, promotion, and markdown optimization modules or as a standalone system.

RAPS replenishment is designed to be highly scalable, serving retailers of all sizes and lines of trade.   It will be deployed for customers in a Software-as-a-Service (SaaS) fashion where Revionics manages the hardware and software infrastructure for clients.

What are the benefits of RAPS Replenishment?

• Reduce Store Level Inventory by 20-30%
• Reduce Lost Sales due to Out of Stock
• Reduce Shrink and Spoils
• Improve Stock Rotation

I am very excited about this module because it is a huge complement to our existing Full Life Cycle Pricing capabilities.   Our role in helping our customers is expanding beyond defining the right price, promotion or markdown for our customers.   We are now leveraging our best in class integrated forecasting engine to do even more good within our retail clients by helping them to better manage how much inventory they need on hand to satisfy consumer demand.

Revionics is uniquely qualified to help retailers with replenishment because our system can accurately do what others simply cannot do.   We can account for demand influencing factors such as:

• price, promotion, markdown
• Seasonality and holidays
• Inventory Supply and Demand
• Cannibalization and affinity
• Weather and other events

In this unique economy, for retailers, it is all about serving the consumer.   Right price, right promotion and right product!   Our technology can make a huge difference in optimizing retailer profitability while improving customer satisfaction along with shopper loyalty.

If you have any questions or are interested in further information, please feel free to contact me at tmichaud@revionics.com.   I also would like to personally welcome you to stop by our booth at the NRF Show (Booth #1971) in New York City to say hello on either January 11th or 12th.  For more information, please visit our website at www.revionics.com.

PS – Watch this space for some further updates on new innovations from Revionics.   I will blog about our new Vendor Collaboration Portal (RAPS Collaborate) in the coming weeks.

By: Christie Frazier-Coleman, VP Consulting, Revionics, Inc.

According to Antony Karabus, President and CEO of Karabus Management these five strategies for retailers are important in order to emerge as a strong retailer.

1. Optimize cash and cost management
2. Understand what is relevant and motivates your customer
3. Use science to improve gross margins and inventory productivity
4. Invest in technology correctly and on the right projects
5. Get your supply chain right

There is a lot here to do.  I want to focus on item number two.  This strategy is rapidly gaining attention as a key initiative for 2010.  How are you planning to accomplish that?

How do you determine what is relevant and what motivates customers?

Your data is rich in insights into these questions.  Have you spent the time and resources to mine that data and discover what makes your customers tick?  This is equity that you own.  Use it.

Determining your Key Value Item list is a critical place to start.  It sets the stage for your pricing, promotional, and merchandising strategy.  Here are a few tips.

Key Value Item lists should not be defined from:
1.    A top mover list in units and/or dollars.
a.    Store can sell a lot of Ramen noodles…….
2.    Items your competitors have chosen to price at low margins
a.    You may not be buying right
3.    Items your competitors promote frequently
a.    They may be wrong
4.    Items only your best customers purchase
a.    You cannot live off of them alone
5.    What your seasoned executives carry around in their heads
a.    They may not be there tomorrow

Key Value Items should exhibit several of these criteria:
1.    Items that exhibit a high penetration rate in the basket
a.    Key in on key times of the month or week
2.    Items that drive traffic into the store
a.    Loyal customers make more trips for what items
b.    Non loyal customers come into your store for which items?
c.    When?
3.    Items that create bigger basket purchases
a.    Key in on important items that require additional products to prepare
4.    Items that exhibit significant demand shifts when the price is changed
a.    Both in units and dollars
5.    Items that are top of mind due to rising costs
a.    These items can come and go as the market dictates

Develop a list for each of these criteria
It is important to note that these lists do not necessarily contain the same items.
If you have only one list you have not done enough homework.

The key to improving your customer relevance starts and ends with what they tell you each and every trip they make into the store.  Someone once said: “We really don’t know what we don’t know.”  Ignorance is not bliss in this competitive world.  Get into your customer’s baskets and find out what you don’t know.

By: Jim Sills Ph.D., CTO, Revionics, Inc

Revionics has pioneered the delivery of price, promotion, and markdown optimization thru the Software-as-a-Service (SaaS) model. This delivery model is much more cost effective than either on-premise or on-demand delivery. Instead of purchasing a software license up front and then paying annual maintenance, SaaS is a subscription-based offering where retailers pay-as-you-go. Revionics assumes all the risk of owning and managing the hardware. All customers are on the same version of the software, so up it is much easier to manage for Revionics—and more cost effective for the retailer. Most importantly, the SaaS model aligns the interests of Revionics with the retailer because is the solution does not deliver value, the retailer is free to cancel their subscription.

SaaS is a game-changing technology trend that is gaining momentum . Today, every major software vendor has a SaaS initiative including Microsft, Oracle, and SAP. This is a triumph of Marc Benioff—the founder and CEO of Salesforce.com. The SaaS model was pioneered by Marc at Salesforce. Recently Marc told his story in his book—Behind the Cloud. This book tells the story of how Marc built Salesforce. He shares his experience and wisdom with the reader. Anyone who works with SaaS technology will benefit from the insights that Marc provides.

I want to encourage retailers to pick up this book. As an incentive, I’ll will give $20.00 to the first retailer who correctly responds by email (marketing@revionics.com) to the questions below.

The pirate flag that flew over Apple in the early days was a symbol encouraging employees to

1. Sink Microsoft
2. Think differently
3. Rebel against the establishment
4. Share songs on the internet

According to Gartner Group, what percentage of Siebel license sales resulted in shelfware?

1. 15%
2. 25%
3. 35%
4. 65%

What company is known for its Machiavellian culture as personified by “We eat our young”?

1. SAP
2. Left Coast Software
3. Saba
4. Oracle

In early 2000, Salesforce.com gave an extravagant party with a theme pulled from this classic author?

1. Sun Tzu
2. Virgil
3. Dante
4. Homer

Who attended the Dreamforce 2004 user conference?

1. George Bush
2. Colin Powell
3. Malcolm Gladwell
4. Howard Schultz

Who was SalesForce’s first customer?

1. Blue Martini
2. iSyndicatel
3. Walmart
4. SunGard

Early enhancements to Salesforce included

1. Adding an API
2. Renaming the Tabs
3. Converting the Technology to ABAP
4. Monitoring customer usage

Which of the following are Salesforce brands

1. Apex
2. Force.com
3. AppExchance
4. IdeaStorm
5. Trust.Salesforce.com

The 1-1-1 model represents

1. Travelers can carry 1 quart-sized, clear, plastic, zip-top bag; 1 bag per passenger placed in screening bin. 1 liquid ounce volume per bottle.
2. Integrated philanthropy 1 percent equity, 1 percent time, 1 percent product.
3. Sales force desired to be #1 in North America, #1 in Europe, and #1 in Asia.

Who stated, “You can’t just give computers to schools—you have to train the teachers.”

1. Julie Trell
2. Alan Hassenfeld
3. Suzanne DiBianca
4. Colin Powell

Employees who have a favorable impression of their company’s philanthropy  are

1. Twice as likely to remain with their employer.
2. Three times as likely to remain with their employer.
3. Four times as likely to remain with their employer.
4. Five times as likely to remain with their employer.

Where did Salesforce locate their first European Headquarters?

1. London
2. Paris
3. Frankfurt
4. Dublin

What was the total amount of funding that Salesforce raised

1. $15 M
2. $35 M
3. $65 M
4. $105 M

Microsoft has a valuation of 4.5 times revenue, what is Salesforce’s valuation

1. 4 times revenue
2. 5 times revenue
3. 6 times revenue
4. 8 times revenue