Retail Chain

How to increase net retailer margin by 17% using dynamic pricing strategy?

Scenario

Sandy took over the operations of a accessory retail chain in May 2012. They offer an unique service to allow shoppers to customise the items on sales. With large number of suppliers updating their prices regularly and the operational costs of each store varying considerably, it is not feasible to devise an organisation-wide pricing strategy so it is left at the discretion of each regional manager. Running incentive marketing campaigns are particularly challenging as regional managers need to get their heads round the complex cost structure and analysis, balancing out variability arises from different factors, such as weather and season. Setting pricing manually is time-consuming, distracting regional managers away from their main focus of creating customer value. This led to low ROI on promotional campaigns, in fact, most of the them reduce profits without increasing sales. Furthermore, the arbitrary boundaries created does not correlate with the shopping behaviours of their customers. Consequently, customers started cherry-picking the best prices from nearby locations. More price-sensitive customers stopped buying altogether and less price-sensitive customers started lowering their price perception.

Challenge

1. Work out the shopping pattern of shoppers to determine the likelihood of them across different locations. Use the data to map the different pricing regions and target each region with the right promotions accordingly to maximise the effectiveness of promotions and different pricing strategies in response to competitive pressures.


2. Off load and automate the insights generation to business intelligence systems so decision makers can focus on executing the insights and not waste time collating information and processing them.


3. Price customised items in real-time based on demand and latest pricing from suppliers and competitors to maximise the profit margin of each item and price-value perception of consumers.

Solution

The rewards system is extended to allow shoppers to claim rewards for checking into a store by installing iBeacons in stores. This data is combined with transactional data from loyalty card and credit cards to generate insights on price awareness clusters based on where individual customers tend to shop. Individual clusters become the focal point of different pricing regions. Prices are set and dynamically adjusted according to the pricing of nearby competitors. A bespoke retail promotions monitoring tool is built into the BI system to analyse past revenue figures to optimise the types and frequencies of promotions for maximum profits and customer satisfaction. A business workflow is built into the CRM system to send out personalised promotions to different customers at the right moment e.g. when they are within the proximity of the store. The inventory management system, content management system and enterprise resource planning system are integrated with the production data information from their suppliers to generate real-time analytics, such as the price of individual item.

Benefits

1. Due to dynamic price adjustments, the range of price of products increases without customers realising the multiple price points. The price difference of one product category can as high as 35%. The price is set higher in a less competitive area. The increased profits is used to set drive promotions in more competitive areas where price is set just below the price of competitors. As a result, the incremental profits of one product category rose by £3.3 million and the net retailer margin increase cross all the different product categories rose by 17%.


2. The promotions monitoring tool is able to establish an accurate baseline of sales, making appropriate adjustments to different factors like seasonal variability. It also able to analyse the data to work out the net sales increase increase of promotions by considering the different effects of promotions e.g. reduced sales of similar products due to increased sales of the promotional items and the additional sales of other products as a result of the promotions. This increases the average ROI of each campaign by 60% due to improved promotion planning and more accurate assessment of the effectiveness of promotions.


3. Regional managers are able to spend less time on price adjustments and focus on other areas to increase customer value. This doubles the ratio of positive social media postings to negative social media postings and a roughly 45% increase in the number of positive assessments by secret shoppers.

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Hotel Chain

How employee engagement and empowerment increased profits by 41%?

Scenario

Bob runs a chain of 6 business hotels in the UK and Ireland for over 30 years. In 2007, he saw profits declined by more than 65% following the reduced influx of travellers due to the aftermath of the credit crisis. The situation was made worse by a food allergy incident where the food requirements of one of their guests, Tom, was not communicated across to the restaurants staff. Tom left a negative review on tripadvisor and and tweeted it. This led to an increased number of booking cancellations and the termination of two corporate partnerships. In an attempt to remedy the situation, Bob appointed Mary as a managing director to turn the situation around.

Challenge

Mary realised there is nothing she could do to reverse the effects of the credit crisis. To increase profits, she will need to:

1. Decrease the operation costs of the hotel.


2. Look for alternative revenue streams.


3. Increased the loyalty and takings from remaining customers.

Solution

Mary commissioned for a system to be built that acts as a command centre for her to monitor all the different aspects of the business. This enabled her to optimise the different operations of the hotel. With the reports generated from the analytics made available by the new command centre, she reduced the expenditure of costs centres and converted some of them into revenue generation centres. The new system also serves as a shared communication channel between all the different business units. She recognised that the hotel staff are their internal customers - they are the ones working operationally. An idea suggestion system was put in place for them to feedback the “aha” moments they experienced to the management team so as to improve the running efficiency of the hotel. She knew simply rewarding customers for their purchases is not sufficient to win their loyalty. She invested in a system to extend the loyalty scheme offered so as to encourage certain actions e.g. customers are awarded points for referring people to the hotel and engaging with them. Additionally, she used this extended capability of the system to achieve her cost-savings strategic goals e.g. awarding points for customers for reusing their towels and opting to change their bed linens every other day.

Benefits

• More than 300 ideas was received from its staff in the first year. 73 of them were implemented, leading to a 41% increase in up-sell and cross-sell sales and 27% costs reduction. Some of the notable ones include: switching over to light-saving bulbs, training front desk staff to inform the guests the opening times of the restaurant and ask them whether they want to make a booking when they check-in.


• One suggestion to improve the reputation of the hotel is to become a “zero food waste hero” by collaborating with PlanZHeroes to donate excess food surplus, unwanted bed linens and old furnitures to community projects and charities. The initiative leads to a tripling of positive social media posts.


• By embracing the sustainability trend, encouraging and rewarding hotel guests to support the hotel’s goals to reduce environmental waste, the water cost of the hotels was reduced by 37%.


• The extended loyalty system and the improved communication between different teams enhanced the customer experience of their guests. This improved its net promoter score by 12 points and nearly doubled the number of repeated sales.


• As a result of a campaign to increase the sales from other revenue streams, the takings from non-hotel bookings, such as restaurant and conference rooms bookings, increased by more than 50%.

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Restaurant

How technology enabled a restaurant to stand out from its competitors?

Scenario

Alex took over his family restaurant 7 years ago. The restaurant was set up by his dad over 30 years ago and it well-established in the local area. They had a loyal customer base built mainly by word of mouth. However, in the last couple of years, there has been a slow decline sales over time as their customers who are mainly people over 55, were retiring to the country. During this period, other chains had relocated to the area and managed to attract a lot of the younger customers. Alex hired a number of digital agencies to create and establish their online business. However, he cannot afford to use them continuously so he got his niece who was helping out at the restaurant to take charge of promoting his restaurant online.

Challenge

Alex has limited marketing budget compared to larger restaurant chains. The cost of acquiring new customers from digital marketing e.g. facebook and google ads exceeds the revenue generated from new customers. He struggles to attract younger customers to his restaurant.

Solution

• Customer interviews were carried out in the restaurant to work out the profile of the ideal customer and map their decision making process. The results revealed publishing recipes is an excellent cost-effective way to win the trust of its customers and sharing recipes gives a purpose for its users to interact with each other online. Hence, Alex commissioned for its Google+ page to be re-designed as a recipe sharing site for its local community.


• A new customer engagement strategy was set up to generate regular, authentic content for use on other platforms and drive engagement on its Google+ page. As the favourite pastime of the customers living in the area is cooking, its page became the most trusted site for recipes in the local community with more than 2000 members and over 500 recipes posted.

Benefits

• Its Google+ site became a free marketing channel for the restaurant


• Staff turnover rate were halved as everyone wants to work and be part of a famous restaurant


• Profits skyrocketed and during busy season, people need to book at least a week in advance to get a table.

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Luxury Brand

How a luxury brand doubled their customer's lifetime value?

Scenario

Mark is the newly appointed director of luxury menswear.com, which is a market leader in luxury menswear. He launched a new email marketing campaign using the existing contacts database to re-engage with past customers. He achieved moderate success so he followed up with sending out personalised promotional offers to the ones who haven't responded. One day, he was called to the boardroom to deal with a PR crisis. A widow returned a suit she bought for her husband after she lost him tragically in an accident on the day of their 10th anniversary - it was a surprise gift for him to celebrate the occasion. She told her story, not once but twice to customer support and yet she was sent email, letter asking her to purchase the same suit she returned. She shared her experience on facebook, her friends tweeted it, and it caught fire.

Challenge

The board decided that this incident was a result of not having a shared communication between different departments of the change and a change of internal policy and an unification of all the company systems was necessary to improve the collaboration and communication between different sections of the company.

Solution

A system was built that links all the existing systems together. All the different customer touchpoints is now connected. Everyone in the department has access to a single customer view. What each individual sees is presented and customised to his/her particular role so he/she has access to the information he/she is privileged to. All the quantifiable costs and benefits of different business processes is measured and collated so the management team has visibility on how each business function is doing. The system is gamified and tied to the employee career planning and rewards system so everyone is aligned and motivated to work together towards achieving the strategic goals of the company.

Benefits

• The increased collaboration between different departments created numerous cross-sell and up-sell opportunities, thereby doubling the average customer lifetime value.


• The availability of all the customer information meant that the PR risk of each customer can be evaluated. High PR risk customer are escalated to senior management so appropriate mitigation measures can be taken immediately. As a result, the number of negative press received has been reduced by more than 60%.


• The introduction of game mechanics helped keep the employees motivated - this resulted in a 43% reduction in the employee turnover rate.

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E-commerce

How to run a just-in-time e-commerce business?

Scenario

Jimmy is the operations director of a consumer electronic company that operates in more than 10 different countries. Their sales team were giving overly optimistic forecasts, contributing to a high volatility in demand. This led to a build-up of inventory across its value chain as they started ordering more than what was really needed to ensure adequate supply. Hence, though they were growing steadily, they found it difficult to scale their operations as large amounts of capital were tied up in inventory stock. They struggled to get investors on board as well as the rate of return was too low as - their profit margin was gradually being squeezed by their increasing operational inefficiencies.

Challenge

Due to its aggressive expansion in the last couple of years, the explosion of volume and distribution of data across different touch points has long outstripped the capacity of their existing business intelligence system. On top of that, these systems exist as individual silos that don’t communicate with each other. This limits their ability to plan and forecast.

Solution

All their systems were integrated together using a cloud service as a relay. Data validation rules were set up and their staff were trained to ensure good quality data were entered into the system. The number of touch points monitored were also increased to improve data quality and key metrics. The data were then passed into an analytics engine to be processed and analysed. Actionable insights generated were integrated into their business strategy in areas, such as promotions, supply chain management and customer relationship management. Analytics were also routed to at real-time to the decision makers to help them plan and make informed business decisions.

Benefits

• The accuracy of sales forecasts was improved, thereby reducing the stock level by 40% and warehousing costs by 14%.


• The overall customer experience was enhanced, leading a 5 points increase in their net promoter score.


• Their distribution networks were simplified. The average delivery drop size increased by 50% and reducing the transportation costs by 16%.


• Operational capacity were doubled using the cash freed up from taking less safety stock.


• Alex managed to secure an investment for the company at a much higher valuation to fuel their expansion plans.

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Boutique Shop

How the wrong place became the right place?

Scenario

Jane is an immigrant who came to the UK a few years ago to explore new business opportunities. She found a niche market importing high-quality produce from her own country and decided to set a shop in central London. Due to high business rates in city centre, she could only afford to get a shop in a particularly SECLUDED location. The business was being spread slowly by word of mouth and the location was so secluded that only 5% of the people living in the neighbour knew of its existence.

Challenge

As a small independent business with limited resources, Jane had to grow its business organically with a minimum of investment. The key to any potential growth would be the adoption of various social elements that helped create a conversational online environment. Jane also found it challenging to provide good customer experience for the picky Londoners.

Solution

A digital customer relationship management strategy was developed to transform its community into brand evangelists, thereby allowing her shop to achieve sustainable growth.

The following was carried out:

• The profile of the neighbourhood and its customer journey was mapped out and the personalised content was sent out to its customers at the right moment to maximise conversion rate.


• A responsive website was built to present the company and to highlight the quality of its produce.


• Local residents were encouraged to tweet about the shop.


• A facebook page was set up and customers were encouraged through various rewards scheme to interact with the business as well as other members of the community.


• The customer experience was re-engineered to create customer delight e.g. Jane concentrated on expanding and improving the range of products offered and its staff went on a sales training course to improve their sales and service skills.

Benefits

• The shop thrived and expanded its opening hours.


• Jane acquired a liquor licence and was able to adjust its stock to its customers’ preference through listening and engaging with its online community.


• The sales increased by 400% pushing the outlet considerably above target and the outlet is now a central addition and hub to the area.

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