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Optimizing Pricing For Millions In Profits
Ron W. | Retail Giant (consultant)
Optimizing Pricing For Millions In Profits
Ron W. | Retail Giant (Consultant)
about this project:
A consultant for a large Australian retailer wanted to show how redirecting wasted marketing efforts (promotional sales) would generate higher profits. Needing an analytical approach, the consultant knew that this was a high-stakes situation- with millions of dollars of potential profits on the line.
Results
By identifying products with or without price-based changes in demand, the retailer was able to terminate redundant promotions, gaining the potential to recover $4.7M+ in missed annual profits.
%
SKU Prices Stabilized
%
Increased Quarterly Revenue
Potential Annual Profit (AUD$)
CHALLENGES
THE CONSULTANT NEEDED A WAY TO IDENTIFY WHICH PROMOTIONAL SALES BENEFITTED THE RETAILER, AND WHICH ONES DID NOT.
By running promotional sales on items that saw no demand in increase, the retailer was losing millions of dollars per year. Unfortunately, however, they did not have the ability to identify which products specifically sold better than others during sales and promotions, leaving them little information for measuring their marketing success.
With over 17,000 SKUs (products), a consultant working on behalf of the retailer knew there were opportunities for more strategic marketing, but needed to put together a presentation of the data in a way that would benefit the retailer.
Without analytical knowledge or data-based skillsets, the consultant needed to find an outside contractor who could identify this information quickly and accurately.
Analyzing potential effect of price change on customer demand
SOLUTION
OWLLYTICS IDENTIFIED THE OPTIMAL PRICING OF PRODUCTS BASED ON CUSTOMER DEMAND, CREATING THE OPPORTUNITY TO RECOVER LOST PROFITS FROM INNEFECTIVE PROMOTIONAL PRICING.
Upon hiring OWLLytics to analyze and categorize over 1.2GB of data, we were able to identify the price elasticity of 17,000+ SKUs based on historical sales demand and put together a presentation for the consultant to present to the retailer’s Executive Board members.
➡ We identified which product SKUs saw an increase in demand when the retailer reduced the price of the items for promotional purposes (via sales, clearances, or other marketing).
➡ Next, a ‘What If’ scenario was calculated to determine the amount of profits that could be gained if the SKUs that were inelastic had remained their original price (instead of the promotional pricing).
➡ We then built a slide deck containing all of these findings for presentation to the retailer.
RESULTS
BY IMPLEMENTING THIS INFORMATION, THE RETAILER WAS ABLE TO INCREASE REVENUES 16% ABOVE THEIR PROJECTIONS DURING THE NEXT TWO QUARTERS, WITH INCREASING RESULTS.
➡ The consultant was able to use the prepared slide deck in a presentation to the retailer’s Executive Board members and show a potential gain of $4.7M AUD in annual profits by adapting the pricing findings.
➡ The Retail chain was able to understand and quickly implement changes to their promotional marketing strategies.
➡ Revenue increased 16% above their sales projections during the following two quarters upon execution of the updated strategies.
➡ The retailer was able to sustain a higher level of growth with the increased quarterly profits.