The retail industry is undergoing a massive
transformation that is being driven by higher expectations from consumers and a
changing landscape for retailers and manufacturers. Engage3 is flipping the
price optimization paradigm on its head — optimizing Price Image to achieve
retailers’ desired outcomes.
Price Image Management Suite™ is an end-to-end
Software-as-a-Service platform that integrates Engage3’s Competitive
Intelligence Management and Engage3’s Price Image Optimization solutions.
Competitive Intelligence Management (CIM) provides comprehensive competitive pricing visibility, product linking, and reverse-engineering of competitors’ zoning strategies. It solves the problem that the first version of price optimization solutions missed – the foundation of accurate and timely competitive information to feed its optimization engines. First generation price optimization solutions oftentimes result in pricing decisions that are based on inaccurate and incomplete competitive data. CIM solves this problem and helps retailers outperform their competition on speed, accuracy, coverage, and frequency.
“We use predictive models that are especially valuable in forecasting sales, because Price Image allows a retailer to see how its customers will respond to different pricing strategies. This visibility translates into higher profit margins and happier customers.”
Ken Ouimet, Engage3 CEO and Founder
Price Image Optimization (PIO) helps retailers
formulate their pricing strategy by measuring Price Image and enabling the strategic
tradeoff between their Price Image and their desired margins. Unlike a price
Index, Price Image measures the customer’s value perception relative to competing
retailers. While first generation price optimization solutions are based
primarily on pricing rules, price indices, and profit objectives, Engage3 has
developed proprietary behavioral models that measure consumers’ perception of retailers’
pricing and predict the impact of price changes on that image.
“It’s proven difficult for retailers to craft
a holistic strategy for pricing,” said Ken Ouimet, Engage3 Founder and CEO. “The
calculation of a retailer’s Price Image in the market will be disruptive in
strategic pricing. We use predictive
models that are especially valuable in forecasting sales, because Price Image allows
a retailer to see how its customers will respond to different pricing
strategies. This visibility translates into higher profit margins and happier
customers,” he added.
Also part of the Price Image Management Suite™ launch is Engage3’s new branding, which will be rolled out in phases over the next several weeks.
When DMG Foods opened in March of last year, it appeared that the Salvation Army was taking a big risk in an unknown field. In such a competitive industry, how would DMG Foods survive where many non-profit grocery stores had failed? The answer is in the name: DMG stands for “Doing the Most Good,” the driving motto behind the Salvation Army.
DMG in Baltimore
The store’s location in a Baltimore, MD food desert is no coincidence, though instead of taking advantage of a lack of competition, Maj. Gene Hogg had a different plan. In an interview with the New York Times, he stated that the idea came down to him after three days of prayer. “God said I needed to open a grocery store,” he said, and so he set out to make it a reality. What spurred this decision was his previous experience caring for the food needs of the neighborhood.
During the 2015 riots in Baltimore, many stores and businesses were destroyed beyond repair. Major Hogg and his team of Salvation Army volunteers distributed food to people in need. Of the 200 businesses that were gone, a large portion were food stores, further limiting an already struggling community in their grocery options.
However, DMG Foods is a much more stable operation than its roots imply. The store has all the sections that a traditional grocery store does, including produce, a deli counter, a butcher shop, and a bakery. The prices, as noted by analysts, are lower than even the price-cutting supermarkets in Maryland. Because many of the store’s customers use their food-assistance dollars at the store, DMG Foods strives to give them as much value as possible. As a nonprofit, it is less concerned with margins and more concerned with the wellbeing of the neighborhood. Any profit made goes to the larger Salvation Army organization, where it is then used for charitable services like recovery centers, hospitals, and housing programs. The Baltimore store gives priority to Catherine’s Cottage, a home for people rescued from human trafficking that is based in Maryland. DMG Foods is also partnered with local Baltimore organizations, including food banks that provide prepared meals for the store.
The success of this grocery store can be attributed to the reputation of its parent organization. The Salvation Army is a far-reaching name, and has existed for over a hundred years. Providing quality groceries to a community in need falls directly in its vision of “Doing the Most Good,” and this is evident in every corner of the store. Customers using SNAP (formerly food stamps) and WIC (a food program for women, infants, and children) are incentivized to shop at the store with changing promotions. For example, DMG Foods in its first few months offered a 10-pound bag of frozen chicken for customers using their SNAP benefits.
Competitive Price, Welcoming Store
One price comparison done by WYPR, the local public radio station in Baltimore, shopped 14 essential grocery items at three local stores. These items included canned tuna, potatoes, and olive oil, among other kitchen staples. The result was that DMG Foods came out to be much lower than other stores in the area: “In the end, the total at DMG Foods came out to $38.04, about two dollars cheaper than Giant and $12 cheaper than Safeway.”
The reporter who conducted this price comparison, Dominique Maria Bonessi, also interviewed various shoppers that were in the store to get their perspective on the nonprofit’s groceries. One shopper’s words reinforce the store’s mission to make a difference:
“Yeah. I think now people got more choices,” says Brooks. “So if they see this right next to the MacDonald’s, a lot of people instead of going to get those Happy Meals and those nuggets, they be coming over here to grab chicken.”
Sean Brooks, a customer interviewed by WYPR
Education and Development
For this Baltimore neighborhood, DMG Foods is providing a stable food supply and education to use it effectively. By partnering with the Maryland Food Bank, DMG Foods is able to offer ready-to-eat meals as well as instructional cooking classes. These classes are geared towards healthy eating, with a larger focus on nutrition over cooking skills.
One added benefit of having a nonprofit grocery store in the neighborhood is that it also provides jobs and training for the community. DMG Foods has established a program that mimics that of the Salvation Army thrift stores, wherein job seekers can work to build up the skill set needed to succeed in a larger grocery store.
Providing for a Community
There are separate loyalty programs for regular shoppers and those on food assistance programs, but the cards look identical. The store recognized that food stamps carry a strong stigma, especially in larger cities like Baltimore, and set out to make every shopper feel welcome while grocery shopping. In an interview with NPR, Maj. Gene Hogg explained the store’s mission more clearly:
“Our business is not really selling food,” he says. “What we’re in the business of doing is helping and loving people. And the qualifications to shop here is to walk in the door.”
Major Gene Hogg, Central Maryland Commander for the Salvation Army
DMG Foods is open to the public, but most of its customer base is from the surrounding neighborhood. Many residents would previously have to travel a fair distance to buy groceries or settle for corner stores with limited produce. The Salvation Army-branded grocery store has become a community hub in many ways, making it easier for local residents to access healthy food at reasonable prices.
The Future of Nonprofit Grocery
Though the Salvation Army intended DMG Foods to start a larger chain serving food deserts in America, it is currently limited to its single store in Baltimore. The store recently celebrated its anniversary, which may lead the Salvation Army to start expanding to other areas.
In the meantime, chains like Lidl are opening more locations and increasing access to fresh foods. The retailer recently announced that it will build 7 new stores in Maryland, including 2 stores in Baltimore County. Their recent partnership with Boxed.com, which delivers bulk items and now fresh produce, may be the key to healthier eating for many Maryland residents.
DMG Foods operates out of a 7,000-square-foot space, but its influence reaches much farther than the store. While cooperatives have cemented the nonprofit grocery model throughout the U.S., DMG Food’s mission goes beyond sustainability and community. “Doing the Most Good” is an exciting new direction for food stores.
For more information on how grocery stores are setting themselves apart from the competition, you can read our list of America’s most unique supermarkets here. We also visited another retailer to see how they are caring for their customers–through in-store medical clinics. Read our store review here.
This is Part 3 of a video series. Ken Ouimet (CEO of Engage3) and Frank Scorpiniti (CEO of Earth Fare) discuss the benefits of using Price Image as a metric over Price Index and how retailers can use it to their advantage.
Earth Fare’s customers have responded positively to recent price changes made by Earth Fare using advanced analytics that have improved their profits and price image simultaneously. According to Frank, “Compelling value is being noticed by [Earth Fare’s] customers. It’s helped our average units per transaction go up.”
Frank goes on to note the improvements that have happened since reducing their dependence on price index alone. “There were items that were asymmetrical, if you will, that were probably really hurting us,” he said. “They weren’t helping us create margin or profit, they were just hurting our image–and we’ve ironed some of those kinks out,” he added.
Earth Fare opened its 50th store in January, and has increased its expansion efforts in the time since then. The retailer announced plans to double its store count in the next five years, allowing them to continue their pricing success on a larger scale.
To view the first two parts of this video series, you can view Ken and Frank’s discussion on improving profitability here and implementing grocery technology here.
From long-established chains to concept stores, grocery sellers have had to set themselves apart from the competition in order to draw in more customers. For some, the answer is hospitality that goes above and beyond; for others, it may be talking robot animals. American supermarkets in particular have succeeded in establishing a loyal customer base through unconventional means, though their tactics may be surprising. Here is our list of the most unique supermarkets in America:
Though larger retailers are experimenting with automated grocery in urban areas, rural markets are taking their ideas to a new audience. In New Prague, Minnesota, members of Farmhouse Market can access fresh food at any time using their key card. The store is open to the public during regular hours, but members can enter in the middle of the night to make purchases if needed.
Membership costs $99 for the first year and $20 thereafter, and the owner has received national attention for the store’s unique operation. Farmhouse Market offers organic and locally-produced food in an area where large retailers were the only food source. Their website points out that despite rural areas producing most of the food in Minnesota, all that food makes its way to urban centers instead. Since its creation, dozens of interested parties have contacted the owner for advice on opening similar stores where they live.
Originally the site of a train station, this indoor-outdoor market began operating in 1997 as a way of re-purposing the location and creating a community hub in Charleston, West Virginia. The market operates year-round, and serves as both a farmers market and a bustling food hub.
Chocolate shops, coffee stands, and all sections of a grocery store are represented, and the market is home to one of the city’s most popular restaurants. Capitol Market is a space for West Virginia visitors and natives to experience community events throughout the year and see what the city has to offer.
Dekalb Farmers Market
As shown in the video above, residents of Decatur, Georgia are fond of their local grocery store. At 140,000 square feet, the store offers international foods that no other grocer in the area can compete with. It has all the standard departments–produce, meat, bakery, and so on–but also stocks ingredients from all over the world.
Dekalb Farmers Market has 184 flags hanging throughout the space, firmly establishing itself as an international food giant. Foreign produce, spices, coffee beans, and much more make visiting the market a culinary adventure. The meat department even sells quail, goat, and rabbit, which are difficult to find in U.S. supermarkets. It’s no wonder why the store has over 100,000 visitors every week.
The local grocery store in Berkeley, California got its name from moving into a former bowling alley in 1977. Rather than change the sign, the owners saw it as an opportunity to appeal to the college-town residents. After moving to a converted Safeway building in 1999, the store expanded to fill a 40,000 square foot space with fresh produce and affordable groceries.
Berkeley Bowl opened a second store in 2009, this time in a modern building with plenty of parking. This location carries a larger selection of Asian groceries, and even stocks cookware imported from Japan. Square omelette pans, chopsticks for cooking, tea pots, and sushi-making supplies are all available in-store. However, the biggest draw for Berkeley Bowl is still the overwhelming variety of produce.
Dave’s Fresh Marketplace
What started as a food stand in Warwick, Rhode Island has grown into the state’s largest independent grocery chain. David Cesario’s grocery stores have all the makings of a traditional supermarket, but include an extra dose of hospitality. Shoppers are welcome to a free cup of coffee while they shop, and Dave’s Fresh Marketplace prides itself on customer service and doing things “Old School,” as they put it.
Some stores also have educational food tours, guiding customers through various cuisines and ingredients as they taste their way through the store. These can be anywhere from an hour to two hours, and include the “Gluten-Free Walk, Taste, and Test” tour and the “Learn to Read a Food Label” tour.
Jungle Jim’s International Market is known for its extravagant displays and attractions, making it equal parts grocery store and theme park. The main store, which measures over 300,000 square feet, holds surprises around every corner. The selection of foods from over 70 countries draws customer from all over Ohio to Jungle Jim’s Fairfield location, and makes for a vibrant shopping experience.
Despite some displays like an animatronic lion belting Elvis songs, the store is much more than a collection of gags. Jungle Jim’s also carries one of the largest wine collections in America, and its humble beginnings as a food stand are reflected in the store’s low prices. In 2012, a second location was built in Eastgate, Ohio that resembles a traditional grocery store more closely.
Jungle Jim’s isn’t the only retailer promising a theme park experience in its stores. In Connecticut, Stew Leonard’s also aims to provide quality groceries in a fun environment. Stew Leonard’s runs on two tenets of customer service, etched into a boulder at the entrance of each location. Displays throughout stores have led some, including the New York Times, to call Stew Leonard’s the “Disneyland of Dairy Stores.” During warmer months, visitors can even enjoy an outdoor petting zoo. What makes this retailer unique, though, is its product selection.
Whereas many of the supermarkets on this list offer a wide variety of products, sometimes upwards of 80,000 different items in a single store, Stew Leonard’s only carries 2,200. These products are carefully curated, giving the impression of an old-fashioned neighborhood market. Much like Jungle Jim’s, Stew Leonard’s employs a variety of animatronic animals as well as costumed employees that heighten the family-friendly environment.
Though these supermarkets inspire loyal followings, they still rely on competitive pricing. Stores like Stew Leonard’s have the benefit of managing a small number of items, but this also means that their customers are more sensitive to price changes. Meanwhile, larger markets like Jungle Jim’s require more careful management of competitive shops. Checking prices monthly or even quarterly is not necessary for most of the items in these giant markets.
MinuteClinic by CVS Health is the retailer’s project to provide healthcare services to more Americans. The demand for primary care doctors far outpaces the supply, and walk-in clinics like these help to fill the gap. CVS opened the first clinic in 2000, and it has since expanded to over 1,100 locations in the U.S. These clinics are in a large number of Target and CVS stores, offering customers a convenient and inexpensive resource for primary care.
In 2014, CVS published an article titled “What’s Next for MinuteClinic,” detailing their goals for providing healthcare service to Americans. They estimated that by achieving their target of 1,500 clinics and continuing to expand, “half of all Americans will have a MinuteClinic within 10 miles of home.” In the last five years, their walk-in clinics have grown dramatically and may soon close in on these numbers. We visited a Sacramento-area MinuteClinic to see first-hand how retailers can improve their customers’ health and well-being.
The CVS pharmacy I visited is located in a residential area of Sacramento, about 15 minutes south of Downtown. This particular store seems to have been chosen for a MinuteClinic because of how distant it is from other medical facilities. Other than a nearby pediatric center, the closest hospital is 20 minutes away.
Outside of the store, there were multiple signs advertising the MinuteClinic, but it still looked like a normal CVS Pharmacy. Though the clinic had limited hours, the store itself is open 24 hours a day. When I walked inside, I was greeted by more advertising for healthcare services.
For the MinuteClinic visit, I opted for a walk-in rather than a pre-scheduled appointment to measure how easy or difficult it is to receive in-store care. The MinuteClinic website lets anyone schedule an appointment at a nearby location, which may be in a Target or CVS Pharmacy. In some states, patients can sign up for a video appointment with a healthcare professional for minor issues like stomach aches, colds, coughs, and some women’s health services.
The clinic was in the back of the store next to the pharmacy, and had a small section with chairs that served as a waiting room. For both walk-ins and appointments, patients checked in at a small touchscreen kiosk. Additionally, the kiosk handled out-of-pocket visits costs with a payment card slot. The website says that a patient can pay for healthcare services with cash, but the kiosk only prompted a card payment. Patients using their medical insurance present their information to the healthcare professional.
From the main menu, I had a choice of different services provided by the MinuteClinic. This particular clinic had a large selection of tests and procedures for patients to choose from, including a two-part test for tuberculosis that requires a follow-up visit. Prices for the services were listed on a monitor, changing every 15 seconds to the next section of the “menu.”
Surrounding Store and Advertising
Hand sanitizer, face masks, and tissues were provided alongside medical pamphlets to read while waiting for an appointment. After checking in, I had an estimated 20-minute wait time–there were two patients ahead of me who were already seated in the waiting area.
Because I had some time before my meeting, I explored the rest of the store to see how it differed from other CVS locations. The biggest distinction was in the aisle markers: a section advertising the MinuteClinic hung from the bottom of every overhead sign. This pattern had no exceptions, which led to some amusing combinations–such as the clinic ad attached to the aisle marker for liquor, wine, and drink mixers. Still, the store was thorough in making its commitment to promoting its health services.
I grabbed a few items from the snack and drink aisles, and then made my way back to the MinuteClinic to await my appointment. A few other patients had checked in while I explored the store. The doors to the private rooms had sliders indicating whether the room was occupied, and though I heard some murmurs on the other side, the rooms were mostly soundproof. Soon enough, the healthcare professional called me in to the clinic room.
In the Clinic
I opted for a routine physical to get the most basic service, and I learned that the person providing care was a nurse practitioner. After a blood pressure check and some other tests, we finished the physical and discussed any healthcare concerns.
MinuteClinic employs nurse practitioners who can address any patient needs, diagnose and prescribe medication, order and read laboratory tests, and perform any other service that a primary care doctor could in the same situation. In some states, CVS also has physician assistants in their clinics as well, providing the same level of service. These healthcare professionals are part of CVS’s goal to fill the demand for primary care doctors, and the American Association of Nurse Practitioners estimates that Americans make over 1.06 billion visits to NPs every year.
Though my visit was over quickly, MinuteClinic offers many more services for a relatively low cost. It accepts most medical insurance plans, but patients can also pay the out-of-pocket costs themselves.
I grabbed my basket of items from the waiting area and went to the checkout. By the time I left CVS and the MinuteClinic, the drink I had picked up in the refrigerated section was still cold!
The MinuteClinic experience was quick and easy to follow, and it offers patients in underserved neighborhoods access to affordable healthcare. Because the clinic sits in a CVS or Target store, it is far less intimidating for patients who may fear large hospitals and the costs associated with them.
Though CVS relies on loyalty cards for most of its in-store deals, the MinuteClinic is open to anyone. A customer can walk in, pay for their clinic visit, and walk out without any issue. Additionally, if they are prescribed a medicine by the nurse practitioner or physician assistant, patients can fill that prescription at the CVS or Target pharmacy immediately.
Consumers who visit MinuteClinic may be more willing to shop at Target and CVS Pharmacy in the future, and the clinics are particularly effective at building trust with the retailers. With the current state of healthcare in America, retailers can offer a level of personalization that starts with a consumer’s health and translates it into loyalty and grocery dollars.
For more information on how personalization is changing the retail industry, you can view our conversation with Bill Bishop at the NGA Conference here. This article is part of the Engage3 Visits series, and follows our trips to stores like Joe V’s Smart Shop in Houston and Falling Prices in North Sacramento. To view all the services provided by MinuteClinic, you can visit their website here.
This is Part 2 of a video series. Part 1: Bill Bishop Talks to Ken Ouimet About Price Image and Personalization is here.
Ken Ouimet, CEO and Founder of Engage3, met with Bill Bishop, Chief Architect at Brick Meets Click, at the National Grocers Association (NGA) Show in San Diego. They discussed recent studies on the gut microbiome that will deliver the ultimate 1:1 consumer personalization, the importance of developing a master data management for product attributes, and how retailers should start planning for a future where consumers use product attributes instead of brands to make purchase decisions.
Below is the transcript of their conversation.
Ken: So Bill, when you think about personalization, what does a retailer need – what infrastructure do they need to have in place to be able to do that?
Bill: Probably the key thing a retailer needs to have in place to do the personalization is a rich set of product attributes. Now back in the day, product attributes were limited to color and flavor and a few items like that, but today many products have literally hundreds of attributes. It could be an ingredient attribute, it could be a claim attribute, it could be a health attribute. So there are entire businesses being built today to assemble rich attribution that allows a consumer to be able to make a judgment about a product and decide whether it really fits their need or not.
Ken: Most retailers that we work with, we see that they’re struggling just to maintain the product description.You know you’re talking about hundreds, thousands of attributes. How do you see a retailer managing those?
Bill: Well, the management of the attributes is tricky, and you’re absolutely right. Retailers struggle keeping track of data at a fairly basic level in many cases. But what I think the answer is, is that there will be third-parties who actually will assemble that data and transport it to you in a fashion, as a retailer, where you can put it to good use.
Ken: Yeah, it’s fascinating. Another interesting research that they’re doing at Davis–do you know Bruce German over there?
Bill: I’ve met him, yes.
Ken: Yeah, he’s doing some fascinating work on the gut microbiome. And they’ve just figured out how to sequence the polysaccharides in the sugars, and where that’s going is that they’ll be able to recommend diets specific to certain bacteria cultures. I think that could really transform–to be able to give consumers the information on what foods to eat to affect their gut bacteria cultures.
Bill: To me, the microbiome is a perfect example of personalization right down to the one-to-one level, because the analysis that can be done today will say exactly what your condition in your gut is and mine, and the recommendations would be highly personalized to your need. A retailer who delivers that kind of recommendation, and we feel the effect–which we’re likely to do with the microbiome–I mean, that’s pretty sticky stuff.
Ken: And there’s a lot of innovation going on with the dried foods right now. And then, what’s important is that you’ve got nutrients, like how much nutrients are stored in there. So giving that consumer that kind of information, I imagine, would be really powerful too, to direct them. Do they want frozen or canned, where are their nutrients going to be best?
Bill: The amount of nutrition is really something more and more people are interested in. So how a particular product is processed, whether it be frozen, canned, or dried. I mean if the retailer and the producer can explain which has the best vitamin and mineral components to it, that’s going to be very important to a growing number of people. And I think retailers can merchandise that very effectively, and maybe draw people back to center store.
Bill: I’m concerned that with all the good things that having product attributes available can do, that companies aren’t moving faster. Why do you think that is?
Ken: It’s a hard problem. First of all we have a huge change in marketing from mass marketing to personalized marketing. Then we need to tie the attributes to something–it has to be meaningful. The way we look at it is using them to create a consideration set of what each consumer will consider when they’re buying a product. Retailers struggle with just managing their product descriptions, and now you drill that down to a hundred attributes for each product–that’s a lot of work to manage. You look at some vendors like Amazon, they push it out to their vendors to manage, but if you’ve got 10,000 vendors that’s a lot to bring on-board to manage those. The other thing we see is master data management for the attributes. Each category is different, and will have a different set of attributes. And we’ll see that each consumer is different in what attributes they value.
Bill: So with the work you’re doing at Engage3 with consideration sets, is that going to help people move forward faster and realizing the full value of these product attributes?
Ken: Yeah, absolutely. The consideration sets are really magical. They allow us to make sure we serve up relevant products, but also they can allow us to use trade funds more effectively.
Bill: How do you develop a consideration set?
Ken: We look at the attributes of the products that the consumer is buying, and that’s a behavioral modeling point. So we use machine learning to cluster those sets of attributes and know what they’re looking for. And then there’s another way we manage it, is through what objectives does the consumer have, and that’s more of a top-down [approach]. Behavior will look at the history of when they set their objectives or maybe they’ve gone to the doctor and they see they’re gluten-free, you don’t want to wait for the history of the product purchases. You can start recommending right away.
Bill: Gotcha, so you’re able to help your clients more quickly implement and get to the value of these attributes, even though it’s a great big complicated job.
Ken: We’re moving in that direction. Today, we’re helping retailers manage their attributes to compare products with their competitors, so the store brands is a real challenge, especially with retailers like Aldi coming in with 90% store brands. How do you compare? You can’t just scan the UPC and know the product. So that’s a really important problem we’re helping them with. So that’s a smaller set of attributes, but where we see this going is to a broader set of attributes.
Bill: Developing this kind of expertise and developing consideration sets I think is going to really set Engage3 apart. I don’t know anyone else that’s doing that kind of work. I’m really pleased to hear you’re doing it.
Ken: Yeah we’ve been very innovative on that front. And we’ve got two patents issued, 20 in the pipeline, because we see those as being key to how retail is going to function in the future.
Bill: One of the things that I believe having good product attributes helps people do is when they know the attributes of products and they see several items with the same attributes growing. It’s an indication of a fundamental factor that’s attractive to consumers in both those products and probably indicative of a broader appeal. Do you see a role that Engage3 can eventually play in helping people sort see where the puck is headed in terms of some of the changing preferences?
Ken: Yeah, we’ve been starting to look at the categories on an attribute-basis, and that’s really fascinating. And so you start to think about understanding trends by attributes across a store. Things like gluten-free or organic or non-GMO, you start to see where there’s trends, and where you’re not allocating enough. When you start comparing to your competitors on those products, you might see that you’re short in some area or too heavy in some other areas.
Bill: So there’s really a number of different reasons why understanding the trends with respect to attribute beyond product sale is competitively valuable for retailers?
Ken: Yeah, absolutely. So they’re starting to look at their assortments on an attribute-basis, I think that’s a really interesting area. The other thing where we see that going is to understand the price–break down the price by attribute so we know, that way we can compare products better. To competitors or even products within the category, what should that gap be in price?
Bill: It’s interesting that you would say something like you just have in terms of gaps and attributes. We try to eat low-sodium products at our household, and the gaps between comparable items and the amount of sodium per consumption is huge. And we’d happily pay a premium, and we certainly like to have our attention drawn to the low-sodium items because that’s what we want. Right now we have to work hard to figure that out on our own. Is there going to be a way in which eventually you think people present their or curate their assortment so that things like low-sodium pop up more quickly and easily for folks like us?
Ken: Yeah, I’m starting to see retailers put signage up identifying the gluten-free products or the low-sodium products, but as you said earlier there can a hundred or thousand attributes for a product. I think it’s perfect of an area for a digital environment or to have a digital assistant that’s just guiding you by what you want, but reading through those labels is a lot of work and it’s too much work for most consumers.
Bill: Private label. Do you think these trends support more focus on private label? Will private label be more attractive as a result the emphasis on attributes and things like that?
Ken: It absolutely is. There’s an article recently in the Harvard Business Review where they were talking about consumers buy bundles of attributes as opposed to a brand. If you look at online, we’re seeing consumers search more by attributes. And probably the more that attributes–that data’s available and clean, we’ll see more of a focus on attributes than brands.
Bill: Love the idea that consumers are buying bundles of attributes. Now if I was in the brand business I think I’d get a little self-conscious.
Ken: I suspect where that’s going is it’s going to be competing on attributes much more than price. So I think we’re going to see attributes come up to the level of price in being a lever to move the sale. And the key is going to be knowing what attributes resonate with what consumer.
Bill: To reinforce your point, I will pay a pretty good price for dark chocolate to take advantage of the flavonoid effect and improve blood circulation. I’m not asking for, you know, a discount on that, I want the benefit.
Ken: I think we’re going to see more and more of that behavior, and that’s the exciting part about personalization. And it allows a manufacturer to capture more value when the consumer values hit, and they have the flexibility to price low to get people to try the product.
Ken: Well Bill, it’s been great talking to you and I always enjoy, over the last 25 years, getting together with you and your passion for pricing and your curiosity, and you’re always learning.
Bill: Well right back at you, you’ve had some amazing accomplishments and you’re clearly on the edge some additional major steps forward. You’ve got to be proud of that and your current company.
Ken: Well thanks, Bill, I look forward to seeing you again soon.
Bill: It’ll be my pleasure to get together with you whenever we can.
== End of Video
This is Part 2 of a video series. Part 1: Bill Bishop Talks to Ken Ouimet About Price Image and Personalization is here. For more videos like this, subscribe to the Engage3 newsletter, Pricing Trends. Subscribe here.
Top 5 Things to Look for in a Competitive Pricing Platform
Managing the pricing data collected during competitive shops is no easy task. With private labels, rapidly changing online prices, and multiple sources of in-store audits, retail data has become increasingly difficult to translate into market visibility. A competitive pricing platform helps to automate the data collection, apply advanced analytics, and garner insights and value.
The right platform can free up time and resources to invest in other areas and substantially improve market visibility. Here are the top 5 features to look for in a pricing solution:
1. Correlating Online and In-store Pricing
In today’s world of e-commerce, more and more retailers are taking an omni-channel approach to selling. A technology-enabled competitive pricing platform needs to take advantage of advanced web crawling algorithms to acquire this competitive data and correlate it against the data captured by auditors in physical store checks. This enables a more efficient and cost-effective approach to acquiring competitive pricing data.
These web crawls can gather data from dozens of popular online stores to compile the most accurate pricing data. With the right platform, a retailer’s online and in-store pricing data are easy to access and work together to inform their omni-channel strategy.
2. Customized KVI Lists Based on Statistical Analysis
Historically, cost and timeliness have made it difficult to acquire quality competitive data. Given the dynamic nature of the retail environment, static KVI lists are not responsive enough to the realities of where to focus competitive pricing efforts across various geographies and store-specific categories. The retailer needs a pricing platform that allows them to shift from static KVI lists to ones that are easily customized by banner or even by specific store. Rather than taking a blanket approach, the critical decisions of where, what and when to comp shop should be based on strategic statistical analysis.
By monitoring how often products change prices at a competitor, a retailer can adjust their price check frequency to areas that require more visibility. For example, if a retailer is doing weekly checks on a KVI and then find that their competitors’ prices only change every few months, they can adapt their competitive shop in response. The resources spent monitoring a slow-moving item like hot sauce at six competitors every week can be allocated to a more price-sensitive area like eggs or dairy products.
3. Product Attributes
With the rise of private labels, competitive pricing platforms must be able to compare product attributes. In traditional competitive shop programs, as many as 40% of items go unaccounted for because there is no UPC match. To solve this problem, competitive pricing platforms must be able to utilize visual data capture technology and advanced character recognition to compare product attributes. This allows product linking to occur not just by UPC, but also by key attributes and statement of ingredient similarities, for example, gluten-free and organic. This creates a more accurate picture of a competitor’s private label pricing strategy and their total value proposition.
A recent article by Digiday shows that retailers are rapidly expanding their private label selections. Some retailers now offer dozens of different private labels, and manually matching these products takes considerable time and effort. Automation and product attributes allow retailers quickly get relevant pricing data on competing items.
4. Quality Assurance Workflow
A competitive pricing platform must also have a strong quality assurance workflow. With today’s mobile app-enabled technology, automated processes can greatly reduce manual errors and ensure that only quality data is being captured at shelf edge. Additionally, such apps can compare shelf data against historical records, flagging any SKU pricing that seems historically unreasonable.
Reducing the time between data collection and pricing decisions is critical to getting the full value of the competitive shop. When QA takes too long, the data that is collected becomes stale and often inaccurate. Reducing errors makes pricing data more useful, especially when a retailer is competing against e-commerce sites that can make price changes instantly.
5. Precise and Accurate Data
A competitive pricing platform must have the ability to collect precise and accurate pricing data. This allows retailers to target competitive shops, optimize frequency, and specify which items to focus on within regions or individual stores.
Rather than casting a wide net to see what useful data gets brought in, retailers must be able to get a global look at the actions of their competitors while also drilling down to store-specific opportunities. When they have both views, they can see clearly where they are winning and losing.
A competitive pricing platform makes it simple to manage data collected through web crawls and in-store audits. By having prices and advanced analytics connected in a central system, retailers have the ability to review their competitors’ strategies and adjust their own. To learn more about the science driving our analytics, you can request our White Paper here.
Engage3 publishes regular market pricing reports to help retailers and brands enhance their pricing performance through data science and analytics. Register to get more detailed information about this report, or to automatically receive updates on pricing reports in the future here.
Engage3 collected pricing data during the last quarter of 2018 (October 1, 2018 to December 31, 2018) from 46 grocers at 198 store locations. This report shows how a select group of 11 grocers fared in their private label, national brands, and fresh offerings.
In this analysis, the lowest price across regular, promotional or loyalty pricing for each price point was used, and outliers were excluded. The grocers’ average pricing in each category were divided over the market average (and subtracted one). Numbers greater than zero indicate a banner with above-average pricing, while negative numbers indicate a grocer with pricing below the market average. Note: Walmart data was not a part of this data sample.
Engage3’s analysis showed that Lidl, Aldi and H-E-B led in private label, coming in at -32, -26%, and -13% respectively, below the market average in this category for the last quarter ended in 2018.
Kroger led in the national brand category, followed by H-E-B and Target, where the mostly-private-label grocers Lidl, Aldi, and Trader Joe’s were excluded in the analysis.
Mostly-private-label grocers Lidl, Aldi, and Trader Joe’s took the top 3 spots in the Fresh category.
Aldi and Lidl displayed consistent strategy across their assortment, coming in below the market average and occupying one of the top 3 slots in the private and fresh categories.
H-E-B stayed in the top 4 in all 3 lists of private, national, and fresh categories.
Lidl led in lower prices at -32% for its private labels, beating Aldi, H-E-B and Kroger, who came in at -26%, -13% and -8% lower prices, respectively. At the other end of the spectrum, Vons trailed everyone else with the highest price index of +13% for private labels, followed by Publix at +10%.
Kroger and H-E-B Shine in National Brands
Because Trader Joe’s, Lidl, and Aldi carry a very small number of national brands in their stores, they were excluded from the national brands analysis. Kroger led with national brand pricing of -20%, followed by H-E-B and Target. Sprouts came in at +5% for national brands, followed by The Fresh Market at +2%.
Aldi Led the Way in Fresh Pricing
Aldi took home the top spot in lower pricing for Fresh items at -29% for Q4 2018, followed by Trader Joe’s at -22% and Lidl at -21%. Vons ranked fifth at -14%. Safeway and Publix charged the most in the last quarter of 2018, on average for the items in this study, with a +11% and +6% price index, respectively.
Register to get more detailed information about this report and full-resolution images, or to automatically receive updates on pricing reports in the future here.
Ken Ouimet, CEO and Founder of Engage3, sat down with Bill Bishop, Chief Architect at Brick Meets Click, at the National Grocers Association (NGA) Show in San Diego to discuss how retailers can compete with hard discounters like Aldi and Lidl. They exchanged views on the critical role of a store’s price image and offer insights about how personalized offers will replace mass market promotions. From custom e-mails to bots and electronic shelf tags, find out how Ken and Bill are envisioning personalization will look like in retail in the next 5-10 years.
Below is the transcript of their conversation.
Ken: A lot of retailers that I talk to, they’re really struggling with competing with Aldi and other hardline retailers. How can a high-low retailer compete on price image with these aggressive discounters?
Bill: Well, I think the first thing to recognize is that price image occurs in the mind of each individual shopper. So a retailer’s got to start thinking about how to change the impression of their prices a shopper at a time. The one way we’ve seen that work so far, and I’m sure there are others, is to take a look at what items are in the ad, identify the items in the ad that are purchased by a particular household, and to call attention to that. When you do that, you’re likely to have a set of prices that are quite a bit lower than what the discounter’s doing with their everyday low prices.
Ken: That’s smart, that’s a smart approach.
Bill: It’s one that’s proven to work and I know that it depends on having really good quality data to be able to know what prices are moving, which prices are important in a market, and to be able to make the assessment and build up to that kind of household by household change in attitude.
Ken: How do the retailers communicate those kinds of offers to the consumer?
Bill: The way that I’ve seen it work the best right now is knowing very few people get a paper today, and those that do, even fewer read it. So what they’ll do today is to take six to ten to twelve advertised items, put them in an email, and use those as the vehicle to communicate the items the consumer should be looking for when they go to the store and of course those prices are superior. So at the same time that they’re advertising item and price, they ought to be saying, “And check out these prices compared to any other place in town.”
Ken: I’m surprised, I didn’t know that email marketing would become that powerful over the newspaper.
Bill: Email marketing is an opt-in strategy that once a consumer trusts and becomes interested in the email, they’re actually running figuratively to the mailbox to open it and see what’s there this week. A lot of fun to watch.
Ken: Do you see the next step in that kind of strategy is to start moving away from mass-market offers and have personalized offers?
Bill: I think you’re going to see fewer and fewer mass market offers because frankly they’re expensive, they appeal under the best of circumstances to maybe 15% of the population or less–any individual mass market offer. And so there’ll probably be fewer of them and more and more will be done individually and as a consequence under the radar, which has some real advantages too.
Ken: Yeah that’d be huge in terms of managing your competitive position. What percentage of consumers with mass market offers, what percentage of consumers do you think change their behavior from the offer, and what percentage did you just give money away to?
Bill: That’s really the $64 question. When you offer a special price, are you changing people’s behavior or are you rewarding the customers? My own feeling is that both are very worthwhile because when you reward your best customers with a good price it’s a retention strategy that’s worth quite a bit to you as well. So I don’t worry nearly as much about it when we’re making those rewards because I think it brings the customers closer to you.
Ken: But what about when the customer doesn’t even see it, aren’t aware that they got a good price? I think of times when I’m in a hurry and I go to the store and I’m buying stuff, and the cashier tells me I just got 25% off something. I wasn’t even aware unless they told me.
Bill: Well, there’s a good opportunity for when the service side of the business comes in. And so if you’re in a hurry, you just pick up the items, and then when you check out the cashier says, “Thank you very much, sir. You saved $2.25 based on the special prices.” At least she’s reinforced the savings going on right there. You may not care even at that point, but the retailer’s taking a shot using the best resource they have to make the point on price reputation.
Ken: When I think of personalization, my belief is that in five to ten years, everything you buy is going to have a personalized offer. And I was just curious what you thought, where do you think personalization is going?
Bill: Personalization, I think, is going to be the big trend that affects grocery retailing over the next five or ten years. Our stores can’t support the mass market proposition, we’ve got out-of-stocks, and we’ve got not enough variety to satisfy customers. So personalized offers, targeted, but we know what people want to buy and we have that product both available and priced appropriately is the way the world is going to go. Now that’ll change the experience of a store, because you probably don’t have to go to the store to take advantage of that, but you’ll need other reasons to go to the store, and there will be other reasons–experience-based.
Ken: What challenges do you see for retailers over the next five years as they move into personalization? What are their biggest challenges?
Bill: Well, the biggest challenge is being able to find a good vehicle for personalization, for delivering that message. I mentioned e-commerce a little while ago, or email as a way to communicate, but one of the things–and I believe we’ve talked about this in the past–there’s probably some degree of discussion between the seller and the buyer as to what’s important and how important it is. I think bots will eventually be a basis for that kind of discussion leading to personalization, [and] they’re not there yet. So the introduction of bots to facilitate will be one thing. I also see that personalization will potentially be delivered right in the aisle on these new digital shelf strips. I mean, they’re going to be amazing, and if we can figure out who you are standing in front of the aisle, we can deliver a personalized price right to you in front of the cookie section or the soft drink section. So, we’re just on the edge and the nice thing about this show is it’s really exposed us to some incredible technology for delivering personalization.
Ken: Do you envision that different consumers will have different prices or it’ll be different discounts with the same shelf price?
Bill: Well, I think what we’re going to see is, today there’s a need to differentiate between the shelf price and the promoted price. And the reason is, the shelf price is on the shelf and the promoted price is when it’s on sale. When we get into a highly personalized world, the shelf isn’t going to be as relevant. So I think it’s going to be a combination of discounts or lower prices. I mean at the end of the day, the retailer wants to price–[to] change your behavior or hold your behavior without spending any more markdown dollars than they need to. And so whether that’s a discount or whether it’s a lower price, I’m not sure.
==End of Video
Part 2 of this video will be posted in the next issue of the Engage3 newsletter, Pricing Trends. Subscribe here.
In response to a recent investigative report about Target offering prices on its mobile app that differed depending on whether the customers were inside or outside the retailer’s physical locations, Suman Bhattacharyya of Digiday digs deeper into how the industry’s biggest retailers are experimenting with pricing.
In the article, Ken Ouimet, CEO of Engage3, discussed the evolution of retail pricing and the challenges involved. Everyday Low Price retailers like Walmart and Target are under pressure by Amazon’s pricing algorithms, which can make price changes millions of times per day. As a result, some retailers have resorted to applying similar algorithms to their online and in-app pricing. Although these pricing algorithms work well on an online platform, brick-and-mortar stores are having more trouble implementing it.
“In the 1970s, most retailers had national pricing,“ said Ouimet. “Today, pricing is much more localized; dynamic pricing lets you segment with time, and it’s not only about dynamic pricing but personalized pricing – the price will be different for every buyer, and the discounts will be different.”
Engage3’s mission is to create a retail ecosystem where consumers, retailers and manufacturers all win. They use data science so Consumers are only offered products they want, when they want it, and at a compelling price; Retailers maximize profits by targeting only high-intent consumers; and Manufacturers only invest in discount coupons that have ROI.