Project Description

Achieving $50 million in annual profit improvements through artificial-intelligence-driven retail warranty price optimization.

The Client

A multi-billion independent tire, wheel, and select automotive accessories retailer, operating over 1,000 stores under different banners across the United States.

AI-Driven Retail Warranty Price Optimization

The Challenge

This retailer utilizes its industry-leading warranty program to stand behind its products and build loyalty with its customer base. Successful execution of this program requires an approach that considers customer perception as much as financial metrics. As such, they recognized an opportunity to optimize their retail warranty pricing to not only drive customer loyalty but also improve bottom-line profit.

The client had decades of transactional information but lacked the deep analytics capabilities to leverage this information to optimize their retail warranty pricing.

The Parker Avery Solution

Over the course of three months, Parker Avery’s analytics team partnered with the client’s analytics and operations teams to optimize their tire warranty pricing across regions, products, and channels.

The engagement utilized Parker Avery’s artificial intelligence (AI) driven demand platform and the firm’s deep retail industry and pricing expertise.

Parker Avery staged, cleansed, and filtered multiple years of transaction-level data, representing several terabytes of information.  The team enhanced the client data with external sources before modeling warranty price elasticity across the company's product segments, geographies, and selling channels. External data sources included Covid-19 and macro-economic variables.

Parker Avery’s team designed and conducted a multi-stage field price test that confirmed the benefits of the price changes, both in terms of financial metrics and customer price perception.

The Result

Using Parker Avery’s advanced analytics and AI-driven demand platform, the team identified a combination of retail warranty price optimization opportunities. The pricing modifications resulted in over 10% increased projected total enterprise profit, representing $50M annually. The client has engaged Parker Avery to continue refining the pricing optimization recommendations and further enhance bottom-line results.

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