INDUSTRY TIPS: Taking a Next-Generation Approach to Category Reviews - RetailWire

Over at RetailWire, DemandTec sponsors a business tip and retail strategy feature, and recently provided some tips for retailers about approaching category reviews. Category reviews are an essential part of business planning, and in fact require different techniques and analyses to improve business performance.

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Taking a Next-Generation Approach to Category Reviews

Category reviews are a critical component of retail business planning and yet many companies are making critical decisions about assortment, price, and promotion based on one-size-fits-all customer strategies and outdated analytic models. In today's climate, competitive techniques must include assortment analytics, basket analysis, and customer segmentation to uncover new insights and ways to improve business performance ... and deliver the desired shopping experience.

As businesses become more complex, retailers are being driven to make decisions not just for a category or for a store, but also for specific customer segments. Application of consumer-demand intelligence can be invaluable in making those decisions.

By applying econometric models to data, retailers can gain insight regarding consumer behavior as it applies to products. Going one step further and applying those models to specific customer segments, deep, rich insight can be gained into how to drive growth with the customers who matter the most.

Applying Demand Science
In its newly released eBook, The nextGEN in Category Review for Retailers, DemandTec breaks out three areas where category reviews can see dramatic improvement through the application of customer-demand intelligence:

Assortment decisions:
Retailers can see substantive gains by using econometric models to determine which items should be stocked based on the customers who shop at that store, the competitive environment, and a quantified understanding of whether each item truly provides variety and adds incremental sales.

Pricing decisions:
Rather than basing pricing on cost-plus strategies or merely reacting to competitors' pricing, retailers can apply econometric models and optimization techniques to:

* Define each category's role based on its importance to customers, customer segments, and business in general;
* Ensure competitive pricing on image-list items without unnecessary margin loss;
* Develop forecasts for pricing actions for categories that are underperforming or losing share;
* Determine the ideal price gap between private label and national brands.

Promotion decisions:
By taking into account cannibalization, halo effects, and cross-elasticity effects of regular retail and markdown programs, retailers can quickly determine:

* The best discounted price for any item or promoted item group;
* The best type of temporary price reduction, such as buy-one-get-one, percent off, and multiple discounts;
* The best use of merchandising support, such as ads and displays, to maximize the incremental lift and total store impact of every promotion;
* How to reach certain customer segments through promotional levers.

SOURCE: RetailWire