Are you able to think strategically about your categories?

Are you able to think strategically about your categories?
August 10, 2010 Revionics

One common characteristic we have found with many retailers that we have worked over the last six years is that category managers spend far too much of their valuable time on price maintenance.   Strategy often takes a backseat to other priorities such as shifting costs and competition.  In many instances where the category managers have pricing analysts to assist, the majority of their time is spent on price oversight and approval as well as negotiating promotional events with vendors and still not strategic.

Price Management Can Be Overwelming

When you consider the tasks and processes involved in price management, a single vendor cost change may trigger tens to hundreds of price changes within a category. Line pricing rules, size parity, zone pricing, private label shielding and other category rules must be followed in order to maintain role hierarchy and intent for the affected category. Without automation, a simple cost changes prove to be a very time consuming challenge.

Over the last ten years many retailers have looked to life cycle price management and optimization vendors to automate these price management processes.  This technology has been embraced by several leading retailers and help to further cost justification of price optimization. Through use of a price optimization system, these retailers have found that their category managers can shift their focus to work more closely with their vendors. Time spent previously managing tactical tasks can now be dedicated to strategic pricing practices. Additional time saving benefits can be gained when implementing vendor collaboration software.

Crawl, Walk, Run Approach

When we work with a retailer evaluating price optimization, we almost always recommend a “crawl, walk, run” approach when evaluating life cycle price optimization solutions.  Just because the system can optimize pricing does not mean it has to Day One. Start easy with automation.  Once users become more comfortable with the system functions and navigation, then try optimization for few categories and monitor the benefits. When confident of the systems benefits, the pricing team can decide to roll out price optimization across all categories, or go even further and investigate promotional and clearance or markdown optimization.

While the sizzle of an optimization solution is the science, there is a great deal of value provided by automating pricing tasks.  Ask yourself this question the next time you are dealing with price management functions “Is there something that I can be doing to better my category performance and make my pricing activities be more strategic?”