Project Description
Retailer’s New Approach to Pricing and Markdowns Drives Impressive Results
Client Challenge
The client is a $1B+ multi-channel, multi-banner retailer specializing in plus-size apparel. After working with The Parker Avery Group to define a comprehensive pricing and promotions capabilities roadmap, client leadership asked Parker Avery to perform the detailed design and implement four workstreams:
- Review and update the promotion frequency strategy to improve the customer experience while minimizing negative impacts on business performance
- Define, document, and communicate new regular pricing policies and procedures
- Define, document, and communicate markdown management policies and procedures
- Perform an elasticity study of regular prices for a group of pilot categories (and eventually an entire brand)
Parker Avery Solution
The Parker Avery Group coordinated and led a series of workshops across the four pricing and promotions workstreams. During the workshops, Parker Avery assessed the promotional strategy and outlined recommendations for improvement to align with customer expectations.
The team also collaborated with a cross-functional group of the client’s internal experts to develop new strategies, policies, and procedures that adapted leading practices to the company’s unique business model. The new processes manage pricing throughout the product lifecycle, inclusive of regular, promotional, and markdown pricing.
The team also sourced transaction-level sales data, which was combined with product cost and market basket information to form the basis for optimized price recommendations. This price optimization approach was incorporated into the future-state pricing design to yield improved financial performance.
Results
Parker Avery’s recommendations for markdown management and regular pricing approaches were applied to the business during the project. The optimized pricing method was piloted across 11 key items, yielding a financial benefit of $172K over 11 weeks, representing a 21.3% improvement.
The same method was used to derive prices for an entire brand and is conservatively projected to produce increases of 3.5% in sales and 1.5% in gross margin impacts.
The Parker Avery Group is a leading retail and consumer goods consulting firm that transforms organizations and optimizes operational execution through development of competitive strategies, business process design, deep analytics expertise, change management leadership, and implementation of solutions that enable key capabilities.
