AS CONSUMERS EVOLVE,RETAIL ANALYTICS

ADVANCE

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TODAY’S PANEL

Jon QuinnVice President,

Marketing Strategy, Safeway

Adam HolykGroup Vice President, Insights and Analytics,

Walgreens

Ravi DharGeorge Rogers Clark Professor

of Management and Marketing, Yale School of Management &

Director, Center for Customer Insights

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COMPLEX DYNAMICS IMPACT RETAIL ANALYTICS

TECHNOLOGY

CHANGING SHOPPERS

RETAILER

ECONOMICS

INTENSIFYING COMPETITION

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RETAILERS ARE PROVIDING SHOPPERS MORE ACCESS

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TECHNOLOGY IS CREATING PRICE TRANSPARENCY

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TECHNOLOGICAL CHERRY PICKING

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SHOPPERS MIGHT KNOW MORE THAN YOU DO

PRICING

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SIMPLE OUTCOMES, COMPLEX ANALYTICS

In which stores?

At What Price?

How much Promo

Support?

Which items to carry?

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THE WINNING ANALYTIC STRATEGY

GET THE RIGHT INSIGHTS ORGANIZE TO WIN EXECUTE WITH GREATER PRECISION

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THE RIGHT SHOPPER INSIGHTS

PERCEPTION OF VALUE DRIVES RESPONSE TO PRICING

Prof. Michael Porter – Competitive Advantage

Buyers will not pay for value that they do not perceive, no matter how real it may be.

REQUIRED INSIGHTS:

• What they do, inside & outside the box

• What they perceive & believe

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INSIGHTS TO BOTH BEHAVIOR AND BELIEFS

of your shoppers are “core”…

25%

….they drive most of your dollars

59%

your share of their All Outlet spend

36%…but they

aren’t very loyal WHAT SHOPPERS

SAID:

Everyday low prices

Fresh produce

Well stocked

Prices well labeled

Grocery selection

Clean store

Fresh meat & seafood

Nearby location

1

2

3

4

5

6

7

8

WHAT SHOPPERS DID:

Fresh produce

Grocery selection

Fresh meat & seafood

Prepared foods

Store brand

One-stop shopping

Well stocked

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THE RIGHT COMPETITIVE INSIGHTS

$0.49 $0.59 $0.65 $0.69 $0.75 $0.79

7%

37%

11%

17%19%

9%

Non Promoted Prices in xAOC

Yoplait 6 ounce

Client 3: $0.75

ACTUAL VS. ASSUMED COMPETITORS

STRATEGY

PRICE POSITIONING

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10%Also Highly

Elastic

8MM

Elasticity Estimates

80MM

Competitive Price Points

EYES ON THE PRIZE, SIZE OF THE PRIZE

25%

“Overpriced” OPPORTUNITY

$900M

DISCUSSION

ASSORTMENT

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Average # of unique UPCs per household purchased in Grocery Channel in a year

WHY ASSORTMENT ISN’T EASY

328 Items selling in Grocery

weekly average Items selling in Drug

weekly average

16,897 4,932

Can’t profitably be all things to all people

Hyper-local assortment impacts supply chain efficiency

Assortment is “slower” than pricing, just as important

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Water

Growing MTA’s: 3,519

Infant Nutrition

Growing MTA’s: 2,414

Frozen Pizza

Growing MTA’s: 659

ALL DEMAND IS LOCAL

Growing: > 2% $ growth; Stable >-2% and < +2%, Declining > -2%Source: Nielsen Scan and Panel Data, Nielsen Analysis

CHANGE IN DOLLARS

DECLINING GROWING STABLE

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• NURTUREReview Slow movers for de-listment

AVG

SALE

S RA

TE

DEVELOPIncrease Items

• RATIONALIZEMake sure you have the best items in distribution

• SQUEEZEDe-list worst performers DI

STRI

BUTI

ON

(# IT

EMS)

FAST

SLO

W

NEGATIVE POSITIVECONSUMER RESPONSE TO ASSORTMENT (INCREMENTALITY)

SIMPLE FRAMEWORKS ENCOURAGE ACTION

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LOCALLY RELEVANT DECISIONS, AT ENTERPRISE SCALESuper- Premium Segment Value Segment

Assortment Response:Total Category

Assortment Response:Total Category

SEGMENT A

SEGMENT B

SEGMENT C

SEGMENT D

6

4

10 SEGMENT_

x000d_ASEGMENT_x000d_B

SEGMENT_x000d_C

SEGMENT_x000d_D

2

43

2

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CURRENT SIZE (553 ITEMS)

OPTIMIZED AT CURRENT SIZE (553 ITEMS)

RE-SIZED UP TO 602 ITEMS

OPTIMIZED AND RE-SIZED UP TO 602 ITEMS

$2,994 $3,128 $3,002 $3,141

RIGHT PRODUCTS, RIGHT PLACES

Source: Nielsen AssortMan, TUS Mass, 52 weeks ending 10/13/12

Laun

dry

Sale

s ($M

M)

Laundry 4.9%0.3%4.5%

DISCUSSION

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TABLE TALK QUESTIONS

What are the industry challenges for analytic strategy and capacity keeping up with the rate of change in the industry, e.g. personalization and dynamic pricing?

As a Manufacturer or a retailer, what would you change about collaboration to address these analytical needs?

With the evolution of smart phones and information access, how do you see your analytical needs changing?

THANK YOU