When The Price is Right

Companies currently use sophisticated tools and applications to for their supply chains, but when it comes to the demand chain, specifically with promotions planning and sales and marketing activities, companies have a myriad of tools at their disposal, alas, the ever popular spreadsheet is employed on most occasions which is inflexible and static. And because sales and marketing processes are not automated there also exists a disconnect between planning processes for the supply chain and the demand chain.

"Companies should remember that price is predictive of demand," says Kosin Huang, Yankee Group. "Use it as a lever. If you decrease prices -- whether it's through incentives, rebates or promotions -- that has an overall affect of demand."

By integrating the management of promotions with demand planning, companies can take control of their supply and demand chain, says Huang. "Companies that leverage emerging solutions in this area can also better understand how they are shaping demand to achieve specific business objectives such as margin targets, market share targets, or revenue targets," says Huang. The following case studies are working examples of how companies are trying to better understand demand through cutting-edge pricing tools.

SAFEWAY
Safeway Inc. is a Fortune 50 company that operates 1,815 stores in the United States and Canada, and had sales of $35.6 billion in 2003. DemandTec software is expected to support Safeway's sales and marketing objectives and goals by enabling the company to determine and plan pricing and promotions based on the needs and wants of Safeway customers. "Safeway has a well defined strategy to accelerate sales growth and enhance the shopping experience for our customers," says Brian Cornell, executive vice president and chief marketing officer, Safeway.  "In this context, the careful management of prices and promotions is important both for our customers and for the company." Safeway is utilizing DemandTec Price and DemandTec Promotion, all built on the DemandTec CDM Platform. These applications enable retailers to strategically plan and execute optimal pricing strategies throughout the product lifecycle.

GEORGIA-PACIFIC
Georgia-Pacific is one of the world's leading manufacturers and marketers of tissue, packaging, paper, building products and related chemicals with 2004 annual sales of $20 billion. Georgia-Pacific is deploying the Vendavo solution to help improve its pricing strategy with enhanced market insight, decision-making capabilities and customer responsiveness. The solution will be initially rolled out to over 400 users. Vendavo will recommend pricing guidelines based on sophisticated pricing and market analysis, and will help facilitate consistent policies. This input will enable sales users and management to more effectively negotiate and evaluate contracts, by modeling deal and customer profitability in real-time, comparing different deal scenarios and benchmarking scenarios against relevant comparison groups of business with integrated analytics.

MAHOU SAN MIGUEL
As a leading national brewer with an internationally recognized brand, Mahou San Miguel is undergoing change in its distribution model, with increasing volumes moving away from hospitality channels into retailing channels. Manugistics' Trade Funds Optimization solution provides key analytical and simulation functions to determine optimal promotional activities per retailer and geographic market, including workflow capability to automate key interactions between trade funds management group and key account managers. The company now retains effective data capture and interchange across different functions involved in trade funds management with anticipated product sales lift of 2 percent to 8 percent.

ALBERTSONS
Albertsons depends on Khimetrics' retail revenue management (RRM) solution to help develop and execute strategy relative to promotions and pricing for its 2,300 supermarkets and drugstores nationwide. Albertsons said the use of Retail Revenue Management (RRM) tools will be part of its strategic goal of growing sales and maximizing return on capital investment to enhance shareholder value. "Management of our retail revenues is a critical element as we proceed in a highly competitive marketplace," says Bob Dunst, executive vice president and chief technology officer of Albertsons. "We take advantage of the best available technologies as we consistently evaluate and refine the backstage tools that support our growth strategies. RRM gives us increased capability to manage our pricing and improve our business performance across multiple categories while we simultaneously focus on dedication to providing the ultimate shopping atmosphere and making life easier for our customers."