Engage3, which helps retailers manage their Price Image through accurate competitive data, data science, and Artificial Intelligence-powered software solutions, today announced that it has closed a $12 million Series C round of financing. This round is led by The March Fund I LP (“The March Fund”), a venture capital fund investing in technology based businesses relevant to the global food sector and capable of radically improving consumer health and environmental sustainability.
Previous investors who joined this round include NewRoad Capital Partners, Pereg Ventures, and Black Diamond Ventures. As part of the financing, Dr. Harold Schmitzand Christopher Lai, founding partners of The March Fund, will join Engage3’s Board of Directors.
The company anticipates doubling year over year revenues in 2019 and plans to use the funding to accelerate product development, expand its staff, and scale up the company’s go-to-market initiatives. Engage3’s customers include eight of the top ten grocery retailers in the U.S.
“We are tremendously excited to partner with The March Fund at this next stage of our growth,” said Engage3 Founder & CEO, Ken Ouimet. “Their mission to accelerate the emergence of Food 3.0 by supporting companies with deep expertise in advanced data analytics, food science, and nutrition is aligned with our current product portfolio. Our vision of optimized pricing for personalized nutrition solutions create a shared win for consumers, retailers and manufacturers,” he added.
Engage3’s recent momentum and achievements include:
Compound annual growth rate of 69% between 2015-2018,
An acceleration in ARR growth to 66% in Q1 2019 from Q4 2018, and
96%+ customer retention rate and 100%+ revenue retention rate.
“We have been familiar with Engage3, the company’s leadership, and their foresight for many years,” said Dr. Harold Schmitz, a founding partner of The March Fund. “They are poised to drive new product and services opportunities for consumer health and environmental sustainability in the global food sector. The momentum behind their pricing solutions in the marketplace, their success in helping retailers simultaneously improve their Price Image and their profitability, and their vision to revolutionize retail pricing is especially compelling,” he added.
About The March Fund
The March Fund I LP is an early-late stage venture capital fund investing in companies developing new technologies in nutrition, biotechnology, and data analytics that have the potential to scale and transform the global food sector with respect to consumer health and environmental sustainability. The March Fund refers to this sector transformation as Food 3.0.
Engage3 was founded by the creators of KhiMetrics (acquired by SAP), who are credited with inventing the retail price optimization space. Engage3’s leadership team is composed of former KhiMetrics, SAP, Revionics, dunnhumby, KSS Retail, and IBM/DemandTec executives.
Engage3’s Price Image Management Suite™ helps retailers understand and manage their Price Image and align it with their sales and profitability objectives using predictive modeling. The suite includes Competitive Intelligence Management (CIM) – an AI-assisted, attribute-based, and data science-driven solution that provides accurate, granular competitive data (30 billion product pricing records collected annually in the U.S. and Canada) and like-item-linking visibility. CIM helps retailers reverse-engineer their competitors’ pricing and assortment strategies across channels, markets, and items. Also included in the suite is Price Image Optimization (PIO) – a next generation pricing solution that defines the impact of strategic pricing alternatives and unlocks pricing recommendations based on a retailer’s objectives for Price Image, sales, and profitability.
Engage3, which helps retailers manage their Price Image through accurate competitive data, data science, and Artificial Intelligence-powered software solutions, today announced that it has been positioned as a leader by industry research firm IDC, in its recent “IDC MarketScape: Worldwide Retail Price Optimization Applications 2019 Vendor Assessment” (Document #US45034619, May 2019) report.
“Engage3 flips the price optimization paradigm on its head — optimizing price image, not prices, to achieve desired outcomes,” said Mark Thomason, co-author of the report and Research Director for Digital Business Models and Monetization at IDC. “With deep pricing–focused artificial intelligence and machine learning assets, Engage3 is focused on using science to maximize business outcomes constrained by shopper perception of pricing through predictive modeling of Price Image,” he added.
Engage3’s strengths as a leader in the market were highlighted in the report, as follows:
AI-enabled omni-channel intelligence platform for high-volume analysis of competitors’ localized price, assortment, and promotion strategies, with ownership of all competitive product data, a productivity and insights accelerator
With deep pricing–focused artificial intelligence and machine learning assets, Engage3 now focused on science to maximize business outcomes constrained by shopper perception of pricing through predictive modeling of price image
Momentum among the top 50 U.S. retailers, leading with competitive intelligence followed by pricing optimization
“We are proud to be recognized by IDC for changing the game and leading retailers and manufacturers into the next frontier in strategic pricing solutions,” said Ken Ouimet, CEO and Founder of Engage3. “It validates our commitment to providing solutions that leverage our advanced AI and machine learning algorithms to help retailers measure, and then manage their Price Image,” he added.
In the report, IDC notes that traditional retail planning, of which life-cycle price optimization is a key part, has run its course. They defined next-generation retail planning as curated merchandise orchestration (CMO). CMO is the central nervous system of enterprise and ecosystem signals that harmonizes its own and adjacent processes from design to deliver. Price is defined as a cornerstone of CMO.
Register to get a copy of the IDC MarketScape excerpt here.
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.
Engage3 won the “Game Changer” Award at the Sacramento Business Journal’s sold-out TechEdge Conference on Wednesday of last week.
Produced this year in partnership with George Foreman Jr.’s IYC Capital, the event was held at the Sheraton Grand in downtown Sacramento. Along with local tech leaders, guests and speakers included Congresswoman Doris Matsui and Sacramento Mayor Darrell Steinberg, and representatives from Amazon Web Services and Samsung. Several panel discussions included how startup funding works, with panel participants from DiverseCity Ventures, Moneta Ventures, UC Berkeley Skydeck Fund and North Bay Angels, and additional panel discussions about the state of medical technology and agriculture technology in California.
For more information on the latest in retail technology, you can watch our interview with Bill Bishop on product attributes and personalization here. TechEdge is presented by the Sacramento Business Journal and George Foreman Jr.’s IYC Capital. You can visit their website 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.
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.
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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.