Pricing Strategies and Promotion Best Practices

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

“Another bad UPC from a vendor!  Why are we still using pen and paper to manage vendor deals?” This is a real quote from a retailer I was working with last year on a promotion planning project.  This retailer was depending on vendor’s hand-written information. The UPCs entered on deal sheets were frequently in error. “There must be a better way!”

Yes there is a better way and help is on the way. Revionics is on schedule to release RAPS Collaborate in April this year.  This vendor collaboration portal is a common platform for retailers and their vendors to exchange information, plan deals, and execute reporting.

Vendors submit a deal thru the retailer’s branded portal—by either electronic data feed or via manual entry.  RAPS Collaborate is integrated with the retailer’s item master, so all UPCs entered by vendor are validated against the item master.  Exceptions are flagged to prevent errors at the point of entry.

And that’s just the beginning.  Vendor deals that are submitted can be reviewed by the retailer for approval, or rejection with comments. There is a full audit trail, so no more after-the-fact debates about miscommunications with the vendor.

It is easy to set up new vendors or update vendor information in the Vendor Management screens.  This includes setting up vendor user accounts and security.  Once the vendor logs in, they can view the retailer’s master promotion plan.  It is very easy to submit a deal by specifying begin and end date, UPC, incentive information, order information, terms, and special instructions.  The full range of incentives is included such as bill back, scan down, lump sum, off invoice, and layered deals.  Finally, the vendor can submit the deal, which creates an email alert to the retailer.

Next time the retailer access the portal, they see an alert indicating there is a vendor deal to review. Clicking on the alert brings up the vendor’s deal information.  The retailer can approve or reject the deal, which creates an email alert to the vendor.

RAPS Collaborate is fully integrated with Revionics’ solution suite, including RAPS Promotion, and RAPS Replenishment.  With this new module, items on deal are clearly documented and can be easily added to a promotion event such as a circular. The incentive is accounted for in recommending items and offers—including long term price reductions such as TPRs.  Reports display the impact of the incentives on the category.   RAPS Replenishment is aware of incentives and will recommend forward buys.

Vendor privileges can be managed so that vendors are limited to only their categories and stores. They can be given access to the forecast of their items, or in the case of trusted vendors, the store-level forecast for all the items in the category.

Both the retailer and the vendor can see total trade funds by week, quarter, year, and year-to-date.

There are additional features for managing item master data. For example, the vendor can upload nutritional information and item attributes. The vendor can even propose a new item for the item catalog, which the retailer can approve or reject.

As you can see, Revionics is offering a compelling solution that will improve the way retailers communicate with their vendors.  Sharing information in a more timely, accurate fashion will introduce new efficiencies and create clear advantages for participants.  For more information, please email info@revionics.com, or reach out to your account manager for a demonstration.

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

Frank Badillo a Senior Economist for Retail Forward in his November 6, 2009 Washington Post article stated:

“Don’t expect shoppers to abandon their hard-earned lessons in frugality even if the economy starts picking up.  Households remain focused on shopping for needs, and this kind of cautious shopping behavior will restrain sales improvements.”

So as 2010 begins what are the best practices in pricing that remain constant in their ability to generate solid returns?

1. Track trends in customer and competitive behavior and react to trends not single events.

2. Engaging in forward planning that utilizes forecasting tools for accurate assessment of demand shifts over time.

3. Set goals at the highest and lowest levels.  (Every member of the organization should know and understand their part.)

4. Evaluate opportunities with store clustering, customer segmenting, and predictable competitive behaviors.

5. Assign a role and goal for base, promotional, TPR, and even markdown prices and margins.  A plan for total margin mix, sales, and units needs to be known not an accident.

6. Constantly measure the strategies for execution excellence and constantly measure goals against well executed strategies.

7. Learn to understand the principles of elasticity, cannibalization, affinities, and optimization.

8. Utilize private label as a way to maintain margin speed and provide value.  Set proper gaps based on price points that are palatable to your customer.

9. Choose the right competitors to measure against.  Who do your customers shop?  Choose the right items and frequency for competitor price shops.

10. Manage fewer Key Value Items-assess which are the most likely will cause defection if not priced right.

These are just a few that our retail partners are using.  If any of you have best practices  you want to share  please do so.