Per-Store Price Optimization System

 

The Need For the System

  • In the study, entitled "Maximizing Profitability with Optimized Service Parts Pricing," Aberdeen Group highlights the significant revenue and profitability improvements recognized by companies implementing service parts pricing solutions and notes, "Companies employing market adaptive or optimized service parts pricing strategies. There are many ways in which the price of a product can be determined.
  • Competing parts suppliers, customer demands and internal pressures to increase profits are fueling the need for companies to switch from their over-used, cost-plus pricing Cost-plus pricing is a pricing method commonly used by firms. It is used primarily because it is easy to calculate and requires little information. There are several varieties, but the common thread in all of them is that you first calculate the cost of the product, then include an tactics, where service parts prices are derived from a standard percentage mark-up from purchase price, to optimized service parts pricing, where market information and price elasticity help determine optimal selling prices to maximize gross profit.
  • The study reveals that companies implementing price optimization solutions not only increase profit margins, but also improve competitive position, increase market share and ultimately improve customer satisfaction and loyalty. Furthermore, the study found that companies leveraging service parts pricing and planning optimization tools together are among those earning "best-in-class" titles in their industry, outperforming their competition and "seeing results on the top and bottom lines that dwarf those of companies using outdated tools.
  • Although there is a recognized need for price optimization tools (83% of the companies surveyed for the study reported that service parts pricing is extremely important to their company's financial health) and an increasing number of leading-edge companies are reaping the benefits from implementing price optimization solutions, many companies remain behind the curve, still relying on spreadsheets for their service parts pricing, resulting in a loss of gross profit, market share and customer satisfaction.

The System

OptiRetailChain Per-Store Price Optimization Solution is a decision-support system (An US patent 7,379,890 has been received for the Per-Store Price Optimization system) that enables retailers to make the most intelligent and profitable pricing choices.
  • OptiRetailChain uses existing prices, sales and inventory data, and other operating information, along with real-world business rules and constraints.
  • Based on sophisticated mathematical models, OptiRetailChain provides per-store optimal pricing recommendations, and issues revenue and demand forecasts.
  • After adoption of price recommendations, OptiRetailChain sends optimal prices from central computer to Electronic Shelf Labels (ESLs).
  • Using ESL system allows retailer to promptly implement price changes proposed by the Price Optimization software, resulting in significant labor savings and guaranteed pricing accuracy.

The Benefits

  • OptiRetailChain enables retailers to optimize regular and clearance prices from a single integrated solution.
  • Using OptiRetailChain, retailer will be able to make optimal pricing decisions for individual stores, instead of across the chain, eliminating costly and unnecessary markdowns/markups.
  • Using OptiRetailChain, retailers are empowered to take action based upon scientific optimization methods.
  • ESL system guarantees pricing accuracy and promotional information delivery and it will provide a higher trust level to the consumer.