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Price Optimization Delivering automated price decisions daily for grocery retailers

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Your Challenges

Pricing is a core strategic and operative component affecting

a retailer's profitability. Modern price decision-making processes

are characterized by leveraging immense data volumes while

considering multiple influential factors. For grocery retailers,

being able to implement strategic pricing techniques is key to

sustainable growth.

Grocery retailers must quickly respond to market pressures. Competition is continually driving increasingly frequent aggressive price and promotion activities, to which grocers respond with expanded new channels and more localized assortments. However, this increased complexity makes it harder to handle prices right and often results in category managers focusing only on key value items.

Grocery retailers need price recommendations at a granular level (per SKU, per store and per day) with a strategic approach that sets them apart from competition and ultimately helps them increase revenue and profit.

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Execution gapInability to harmonize inventory management goals, such as stock levels, with pricing decisions

ScalabilityInability to scale into highly individualized environments, with specific assortments, promotions and sales channels

Strategic goalsPrices not aligned with an overall pricing strategy, supporting strategic KPIs such as profitability and revenue goals

Market pressureCompetitor prices as an influencing factor for price setting

ComplexityIncreasing variety of factors, including category-specifics, omnichannel competition, cannibalization or cross-effects

Challenges for grocery retailers in changing market dynamics

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Our Solution forPrice Optimization

Blue Yonder Price Optimization is a predictive

application that delivers retailers optimized pricing

decisions for every product, while improving

revenue and profits by more than 5%.

Ready for automation and scale, the solution measures the relationship between price changes and customer demand, allowing a retailer’s cost drivers and business strategies to be incorporated.

The solution considers competitors’ prices and other factors, such as weather or inventory levels, to rapidly react to changes in the market and adjusts prices automatically, for each product and store. Price Optimization serves a retailer’s greater pricing strategy, providing a measurable impact and return on investment in a short period of time.

Optimized pricing decisions

Automated process

Self-adjusting approach

Strategic KPI alignment

Benefits

15%Increase in revenue

Improvement in profit

5%

Reduction in stock levels

20%

Up to

How Does PriceOptimization Work?

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System integration• Ready-to-use software as a service

• Central management of security and maintenance

• Automatic rollout of new features and improvements

• Easy integration into existing ERP and/or pricing systems via standard API

Price Optimization

Daily calculation of optimized prices • Full analysis of historical and current data that considers strategic goals,

pricing policy, current pricing rules, sales history and external factors, such as competitive prices

• Determination and integration of individual price-demand elasticities

• Continuous optimization and testing using KPI-driven cost functions

Increase profits

Define strategic

goals

Optimize stock levelsIncrease revenues

Decision delivery• Automated delivery of price decisions per SKU and store on a daily basis

• Continual self-adjustment via regular data updates

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Why is the Blue YonderApproach Different?

Important differentiators of our Price Optimization

solution are the level of granularity supporting

the price recommendation and the automatic

adjustment of prices to support your strategic KPIs.

Manual approach

Drawbacks• Price test on- and offline• Manual, cost-intensive process• Ad hoc price changes• Typically limited to a small

subset of SKUs

Decide on price

Measure impact

Weekly cycle

Financial planning

4 3

Demand prediction

Try again 5 2

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Traditional approaches implement general market beliefs about price rules and customer behavior. Blue Yonder delivers daily recommendations for thousands of products based on an accurate measurement of price-demand relations. Our solution systematically explores optimal prices, evaluates contextual factors and considers product-relevant factors, such as product life cycle.

Directly serving a pricing strategy, recommendations are optimized using predefined strategic KPIs. Price Optimization results are verified via rigorous testing as opposed to unfounded hypotheses, delivering the best pricing decisions to a retailer on a daily basis.

Blue Yonder automated approach

Advantages• Higher accuracy with the

measurement of price elasticity

• Greater efficiency through an automated data-based process

• Continuous price optimization• Scalable to all SKUs and stores

Choose strategic KPIs

Monitor outcome

Daily cycle

Self- adjustment

Measure price-demand

elasticities

Automated price decisions

1

2

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5

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Solution Brief

A leading European grocery retailer boosts

profits and revenues with optimized prices

Challenge• Local competition• Category managers concentrating on a small subset of items• Dealing with fresh and non-food assortments, local assortments

and package sizes• Frequent price changes

Solution • Daily price optimization covering pricing for more than 10,000

SKUs in different locations• Price optimization is based on corporate strategy, balancing

profitability and revenue goals• Category managers focusing on SKU/store price combinations

and simplifying pricing rules

Results• Increased profits and revenues by 2–6%

• KPI-driven price optimization at SKU and store level

• Price delivery to all stores on a daily basis

2–6% Increase in revenue

and profit

Region Europe

Vertical Grocery

Solution Price Optimization

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Value Delivered

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Retail domain expertise• Broad sector expertise for multichannel retailers

KPI strategic alignment• Prices set to achieve predefined strategic business

objectives by balancing KPIs, such as revenues or profits• Delivery of prices for all product life cycles, from regular

sales to markdown• Alignment of pricing policy and rules with consideration

to competitive strategies

Process benefits• Leverages both internal data (historical and current)

and external data• Machine learning algorithms that detect patterns and

understand the demand-price relationship at the most granular level

Speed to value • Continual price updates on a daily basis• Automation of pricing decisions delivers substantial

improvements in productivity and efficiency• Low maintenance after initial setup, reducing time

spent on price management• Rapid return on investment (within 3 to 6 months)

Seamless integration • Standard API integration with existing internal

ERP systems• Manages the key challenges of integration, storage

and processing in one service

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About Blue Yonder

Blue Yonder is the leading provider of cloud-

based predictive applications for retail. Every day,

we deliver decisions to our customers that boost

revenues, increase margins and enable rapid

responses to changing market dynamics.

Our replenishment and pricing solutions are driven by sophisticated machine learning algorithms developed by one of the largest teams of PhD-level data scientists in retail.

Founded in 2008 in Karlsruhe, Germany, by former CERN scientist Professor Michael Feindt, Blue Yonder now operates in Europe and the United States.

We are backed by leading private equity firm Warburg Pincus and the OTTO Group. In 2014, we established the Data Science Academy to provide businesses with relevant data science know-how for retail.

Blue Yonder has been awarded the Gartner Cool Vendor Award 2015, the Experton Big Data Leader Award 2016 and the BT Retail Week Technology Award, among many others.

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Blue YonderBest decisions, delivered daily

Blue Yonder GmbHOhiostraße 876149 KarlsruheGermany

+49 721 383117 77

Blue Yonder Software Limited19 Eastbourne TerraceLondon, W2 6LGUnited Kingdom

+44 20 3626 0360

Blue Yonder Analytics, Inc.5048 Tennyson Parkway, Suite 250Plano, Texas 75024USA

info@blue-yonder.com blue-yonder.com