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The Win-Win Approach to Retail Price Optimization Product Strategy

An orderly roadmap process that invests for the long-term and aligns with customer priorities while also anticipating retailers’ needs is what sets leading optimization vendors apart

After more than two decades in the retail price, promotion, and markdown arena, I am delighted to say that the market has come a long way.  There used to be a significant element of education and evangelism required just to help retailers understand why these science-based capabilities are so important and to spell out the powerful ROI they deliver in a relatively short period of time. Today, in an already volatile retail market shaken to its core by the pandemic, retailers overwhelmingly recognize that AI price optimization is the way to go. A recent research study of leading retailers[i] confirmed this: 60% of retailers say they are focused on putting AI-powered pricing in place, and a full 70% say they are willing to take humans out of key processes and rely on AI-powered automation and dynamic pricing.

60% of retailers say they are focused on putting AI-powered pricing in place

When a retailer is looking for the right long-term price lifecycle optimization solution, whether they are a first-time user or are seeking to replace an existing system with a more robust option, they want a long-term partnership that will enable them to overcome retail challenges today and into the foreseeable future. This means seeking a partner who is proven in the market, structured for long-term stability, and with a clear, customer-aligned product strategy.

70% say they are willing to take humans out of key processes

This is the strategic balance that sets a leading optimization solutions vendor apart from the myriad market options: an orderly roadmap process that invests for the long-term and aligns in a disciplined way with identified customer priorities while also anticipating retailers’ needs and skating to where the puck will be. I’d like to take a little time to update you on our approach to ensuring we keep to the win-win model of product strategy.

Fierce Focus on Defined Priorities

It’s with this strategic approach in mind that we have built out and aligned our teams at DemandTec.  Since joining a year ago, I’ve worked with our leadership team to enhance and strengthen our product management, development, science, and customer success teams. We’ve revamped roadmap processes to invest consistently in innovation, with a strong commitment from all levels of the organization, from our front-line customer-facing teams to the board of directors. Our team’s priorities are to continue to deliver powerful, high-impact capabilities across the full pricing lifecycle, from every price optimization to deal management, promotion, and markdown. We’ve set up regular strategic business reviews with our customers worldwide to stay close to their business needs and remain aligned with their top imperatives as retail leaders.

We’ve set up regular strategic business reviews with our customers worldwide to stay close to their business needs and remain aligned with their top imperatives as retail leaders.

DemandTec also engages regularly with retail organizations and industry analysts to keep a finger on retail’s pulse and anticipate areas of emerging trends and requirements. And of course, we systematically track enhancement requests from customers, whether through the Customer Advisory Board or in day-to-day customer interactions, to ensure that tactical, pragmatic requests receive their share of attention too.

The end result is a very clear focus on well-defined priorities, including the ability to communicate those priorities and expectations to our customers.

In today’s hyper-competitive and high-velocity landscape, the “brains” behind the price have needed to adapt even quicker to stay ahead of retailers’ needs.

Combining Focus and Agility within Defined Strategic Principles

While DemandTec is absolutely committed to our focused priorities and predictable processes, we’re also realists – unexpected events happen, priorities change, new technologies emerge, new customer needs arise. That’s why it’s so important to have agile organizational teams and development processes. Yes, we live and breathe agile R&D practices and tools. Yes, we continually adjust priorities based on real-world developments.

But certain strategic principles guide us in all that we do to keep us on track with our strategic vision.

1. Keep the Full Pricing Lifecycle Perspective

As I’ve alluded to, we view our product suites holistically against the backdrop of the entire pricing lifecycle, from the moment promotional offers and incentives are negotiated with a vendor, to hitting the physical or digital shelf, until its eventual end-of-life clearance. We’re very aware that retailers have become tired of the complexity and expense of managing a host of best-in-breed vendors and increasingly seek a single partner whom they can engage for a multi-year strategic relationship. This approach serves retailers well as they seek to address full lifecycle price optimization, whether they choose to adopt module by module or jump in with the path fully charted. With one partner, business negotiations, contracting, and procurement are streamlined, communications are clear and consistent, accountability is much easier to achieve, and both parties are able to focus effectively on good relationship-building.

2. Meet the Needs of All Types of Retailers

A related aspect of this holistic view is aligning to serve the needs of all types of retailers. For example, grocery retailers whose assortment consists of a variety of longer-life products with a steady flow of new item introductions and delisted products are in significant contrast to apparel retailers, whose assortments turn in a matter of weeks and where everyday pricing is quickly replaced with a markdown plan.

3. Support Increasing Business Velocity and Agility

Next, we continue to evolve our product to meet retailers’ growing demand for business and pricing agility. With shopper, competitor, and market landscapes all evolving at dizzying speeds, retailers must utilize tools that leverage science to detect real-time changes in shopper price sensitivities or competitive behaviors and make pricing recommendations that meet shoppers’ expectations on the items they care most about while safely recovering margin elsewhere in the assortment to sustain a profitable business. The COVID-19 era has upended even relatively stable aspects of retail – for example, Key Value Items (KVIs), which for most grocers had remained predictable enough to require only occasional consulting engagements to rebalance and re-optimize KVIs, now are changing almost weekly. Fortunately, our KVI science had already been productized so that retailers can easily prioritize and implement price recommendations for the items that shoppers are most price-sensitive about in the current market conditions.

4. Strategically Refresh the Technology

Finally, DemandTec remains committed to refreshing our technology stack to give our customers proven, robust capabilities in sync with current market demands and conditions. For example, we recently migrated our cloud infrastructure to Microsoft Azure to gain the scalability, global reach, and resiliency that meet our customers’ needs today and support DemandTec’s continuing growth. Leveraging cloud-native capabilities in our product enhancements will provide DemandTec the ability to future-proof our solutions with ease, as technologies advance at a rapid pace.  

5. Science is the Glue

Retail has changed in the past 20 years more than ever before. The technologies and solutions in the early 2000s were cutting edge and have served retailers well. However, in today’s hyper-competitive and high-velocity landscape, the “brains” behind the price have needed to adapt even quicker to stay ahead of retailers’ needs. It is becoming more difficult to try and solve 2020 retail challenges with the complexity and limitations of early 2000s science and 15+ years of cumulative code piled up. Simplified modeling and optimization frameworks are key to being able to sustain the performance and speed necessary for the amount of data, but also to advance solutions to solve the problems of tomorrow. We are invested heavily in the advancement of our science, positioning us to take advantage of new AI and ML technologies, as well as stay one step ahead of our customers with ease. 

For many retailers, the purported Chinese curse, “May you live in interesting times,” may strike a little too close to home right now. It is interesting times indeed in retail, and no matter what the future brings, we know that the pace of change will not let up. With an agile and flexible product approach anchored by over-arching guiding principles, DemandTec is fiercely committed to helping drive our retailers’ long-term success. 


[i] “Smart Pricing Strategies for the Post-COVID World,” Tim Denman, Editor-in-Chief, RIS News, June 2020.