Base price optimization, which has been around for more than 20 years, is often used for promotional price optimization. However, practitioners are routinely disheartened by the diluted impact these tools actually provide. End clients and service providers, with honorable intentions, are learning the hard way that base price and promotional price are functionally disparate entities. Consider the following:
Base price systems focus on category level analyses
Base price optimization systems analyze the impact of every item in a category against all other items in the category, in order to determine the best possible base price for the next period of time – typically 6-12 weeks; sometimes longer.
These systems rotate categories according to predetermined frequencies or cycles. Some systems rotate all categories weekly while others may cycle the categories 6 times a year.
All categories – To analyze all categories/all items the system has to apply high-level averages which often results in questionable output. Consequently, merchant trust erodes quickly and adoption wanes.
Category cycles – Cycling through categories provides strong base prices provided there is expert-level analysts; however, this approach dilutes results since each category is only reviewed twice annually.
Base systems are not designed to accommodate promotional price optimization across hundreds of items each week. To optimize promotional prices, base price systems typically treat the promotion as if it were a new base cost/price. In doing so, promoted items face the same challenges mentioned above. Base price systems are either too cumbersome to optimize hundreds of weekly promotional offers or they use averages, which fail to consider the relevant promotional nuances. In other words, base price optimization is simply not designed to optimize, track, and report on promotional activities.
Optimization solution dedicated to promotional pricing
Willard Bishop and its technology partner, Prognos circumvented these obstacles by creating AD-IN™, an optimization solution designed specifically for promotions. By focusing exclusively on promotional offers, AD-IN™ optimizes performance by identifying the ideal assortment of items within a portfolio of promotional offers. This eliminates the need to analyze every item in the store each week. As a result, AD-IN™ provides rapid answers to hundreds of promotional candidate offers each week. In addition to evaluating and optimizing the promotional candidate pool, AD-IN™ simultaneously considers promotional nuances.
AD-IN™ is a true optimization solution comprised of advanced analytical technologies, supported by expert-level analysts. These analyst review the solution’s output with each retailer to achieve the highest possible ROI from each promoted item. AD-IN™ also provides a platform for continuous improvement through ongoing tracking and reporting of actual promotion effectiveness.