“While the nation’s focus may be on the next electric car, retail technology will quietly revolutionize the way we shop, buy and are sold to…”
This powerful quote during George Lawrie’s (Forrester) keynote address set the stage for what was an incredible user conference produced by Revionics. Insight 2015 was held October 18-20 in beautiful Barton Creek, Texas, where the pricing and optimization solution provider hosted, entertained and educated nearly 100 retail executives and pricing professionals. Over the course of these three days, many insights were shared — Optimization. Integration. Omnichannel. These items are no longer the current buzzwords, and the offerings showcased at the conference are decidedly nimble, strategic, laser-focused and poised to change the way retailers do business.
The Customer is in the Driver’s Seat
The first and most prevalent theme in this year’s conference was the rise of the customer. Bolstered by advanced technology, our constantly connected society, mobile phones approaching tablet size, as well as increasing ease and awareness of brand differentiation and pricing discrimination, customers are expecting more and trusting less. Coupled with the most economically prosperous generation in history, there is a huge carrot to chase. But this time it’s the retailers turn.
Retailers take heed; there are some key things to know about this customer:
- 23% of customers will check your price against others
- Customers who price check only buy your item 49% of the time
- 70% of customers don’t trust sponsored search engine results
What takes a new iPhone user and turns them into a fanatic? You know the type – iPhone, MacBook, iPod, Apple Watch – everything they need to be fast and consistent, with seamless access to all they buy from Apple. No longer “trial” users, many consumers are enthusiastic brand advocates about Apple’s products and continue to come back in droves. Why? Innovation. Newness. Seamless integration. No checking “compatibility lists,” workarounds, or complexity; the data and tools are available, readily accessible, and actionable when required. In a word: effortless.
Your brand should be much the same: the customer isn’t an adversary to be figured out, instead they are the key to your success. Understand their behavior, leverage the insights, and make their path to finding, loving, and buying your brand as seamless as possible.
Optimization: Innovation Approaches
One of the most exciting areas of this year’s conference was hearing the maturity and widespread success of optimization vehicles. While some systems, such as markdown and pricing optimization, have been in widespread use for years, newer systems like integrated and optimized space planning and, in particular, promotional optimization are poised to deliver incredible levels of value.
Pricing Strategy and Analysis are empirical exercises requiring flawless planning and execution, an understanding of market environmental factors, self-fulfilling prophecy prevention, and art. A thoroughly crafted (and optimized) pricing strategy can help fulfill the needs of the aforementioned price-scrutinizing 23% of consumers, while also driving the most value from the remaining 77% of shoppers who do not research pricing. Further, systems can vastly simplify optimized pricing at the product level, more closely aligning with how customers shop. As Forrester’s George Laurie remarked, “Retailers who price at the category level or above are very vulnerable to competitors who can manage price at a lower level.” Moreover, and perhaps more importantly, Dynamic Pricing is gaining traction, essentially real-time pricing, matching demand and customers across thousands of customer touch points.
Promotional Optimization is a new frontier, providing incredible ROI, new insights, and allowing for decision-making that has predictable and tangible benefits. Integrated calendars show a holistic view of retailer’s promotions, highlight their differential impacts on sales, and allow the selling picture of product to customers to be significantly more complete. The ability to perform product rankings, automatically update promotions based on product availability, inventory constraints and affinity, plus cannibalization analysis are rapidly making promotional optimization a must-have capability.
Markdown Optimization continues to expand on an already robust offering and adds short vs. long lifecycle product differentiation, competitive analysis, simulations and “what-if” capabilities, expansive value measurement, and (perhaps most exciting) a smart decomposition of demand by channel that supports omnichannel (which is exactly as exciting as it sounds to those involved in this space).
Space Optimization was perhaps the most interesting offering in that it was truly a blending of two solution sets. World-class store mapping, 3D modeling and shelf analytics are being blended with price, product and promotional optimization to truly provide a store aligned to the demand signals of customers – and finally brings store-specific layouts to the masses. Systems understand where product is, how that location impacts sales, and can continually optimize store layouts to provide maximum profitability and customer satisfaction.
“Not Optional.” Change Management Matters
During a presentation titled, “Change in the E-Suite: How to Enhance the Value of Your Implementation & Impact Buy-In,” Parker Avery’s own Josh Pollack highlighted how the value of executive support and organizational buy-in is often undervalued and under delivered. As organizations undergo change, especially significant change in the way their business is conducted, associates look to the company’s leadership for guidance, reassurance and confidence. Associates want to know that newness, while scary, will put them and the company in a better place, and this cannot happen without leadership from the very top vocally, tangibly and enthusiastically sponsoring the initiative.
All too often Change Management is “slotted in” around a technology implementation, which typically results in half-hearted attempts and untapped value from the solutions that “promise” so much. A comprehensive Change Management strategy should start with strong sponsorship in the E-Suite and flow throughout the organization, while also providing a healthy environment for questions, reassurance and even dissent. Essentially, the technology implementation should be viewed as one element of the overall change the business is undertaking.
Key recommendations for executives to effectively manage change include:
- Provide consistent status updates from senior leaders
- Leverage focus groups of key impacted associates (who will then be change champions)
- Ensure open forums for questions and answers and avenues for specific questions outside of the public forum
- Create allowances and safety for learning
- Visibly demonstrate and support excitement, buy-in and reassurance
For leaders of organizations undergoing change: You are not optional.
Numbers Tell the Story
The following shows some pretty compelling statistics we gathered throughout the various sessions during Insight 2015.
Add these to the fact that retailers in North America have gone from 3,000 price changes annually to around 33,000 a month – and this is nothing in comparison to Amazon, who changes 3 million prices a day, and will change 30% of its assortment on Black Friday.
Wrapping it up
The next 5 years will see more technological innovation than the last 500 years (and yes – the most exciting innovation may be self-driving electric cars). However, the most novel and advanced product offerings will pale in comparison to the changes that will take place in how customers shop, buy and interact with retailers.
If this year’s experience at Insight 2015 is anything to go by, the technology outlook for retailers couldn’t be better. However, with a myriad of solution sets, business objectives and challenges, in the midst of a dynamically changing world, today’s retailers have many difficult decisions to make: Which systems do they need? What are the priority areas? How soon do they need a new solution? Who else is doing it? What is the real cost benefit?
If you have any questions about the solution sets we saw at Revionics Insight 2015 or any other retail technologies, we would welcome the discussion. Please feel free to reach out to either Josh Pollack: email@example.com.