More and more sales are moving from physical shops to online stores. A trend that was already on the rise, the COVID-19 pandemic has accelerated the digitalisation process. Now, many retailers need to create clear online retail strategies that also address the issue of price transparency In this webinar, we will share our methodology for designing sustainable price and promotion strategies and provide some tangible actions to help you assess your current strategy.

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Today’s webinar is the third in a series from IM_ Retail
CHANGE
THE GAME
Webinar 6
9 June
GROWTH
STRATEGY
Webinar 5
2 June – 11:00
RETAIL
CONSUMER
Webinar 4
26 May – 15:00
ONLINE
PRICING
Webinar 3
19 May – 11:00
Webinar 1
21 April
GROW
TOPLINE
Webinar 2
28 April
ENSURE
LIQUIDITY
Reach out for the opportunity to deep dive into a 1:1 session

3. Price and promotion plays have a direct impact on your profits
Note: Simplified retail P&L breakdown with thin margins 5
5% PRICE
REDUCTION
- 50%
2,000 2,000
7,000 7,000
1,000Profit
Before
10,000
After
500
COGS
SG&A
9,500
Without any increase in volume,
your profit will drop by
2,000 2,000
7,000
8,400
1,000
1,000
COGS
Profit
SG&A
Before
10,000
After
11,400
2,000 2,000
7,000 7,000
1,000 1,500
Before
COGS
After
Profit
SG&A
10,000
10,500
5% PRICE
REDUCTION
0%
With a 20% increase in volume,
your change in profit will be
5% PRICE
INCREASE
+ 50%
Without any increase in volume,
your profit will increase by

4. 6Implement Consulting Group: Retail price and promotion framework, 2020
Profitability
Sales growth
Coherentprice and promotion strategy
Distinct strategic choices that cascade the commercial strategy
and guide everything related to pricing and promotion.
Capabilities
Do we have the right “people, organisation, competences, culture, leadership, systems, tools,
processes, governance and performance management” to succeed with our operation?
Customer
trust and loyalty
Price/value
perception
Contribution
margin targets
Competitive
price (re)actions
Customers’
willingness to pay
Commercial
strategy
Influencers
IMPLEMENT RETAIL PRICE
AND PROMOTION FRAMEWORK
Strategic objectives
PRODUCT
SEGMENTATION
PRICING
INTELLIGENCE
PROMOTIONAL
EFFECTIVENESS
C
C
C
C

5. 8
• Objectives
• Driver analysis
• Product roles
• Dynamic segmentation
• Performance clusters
• Key value items
PRODUCT
SEGMENTATION
A dynamic productsegmentationis built on
strong categorymanagement and
segments productson strategic and tactical
roles.

6. 9
Productroles and the drivers
of performance
…
• Based on the objectives in the
commercialstrategy, we should
break down the financial key
performanceindicators into their
underlying strategic, tactical and
external drivers.
• Understanding how our price and
promotionplays influence and are
influenced by the underlying drivers
is key to monitoring performance
and segmenting products into roles.
Establishing clear objectives for what we are trying to optimise and analysing
the underlying drivers – let’s monitor performance and define product roles
Contribution
margin
Strategic drivers
Tactical drivers
Price/promo plays
External drivers
Financial drivers
Realised
price
X
Revenue
–
Cost
=
Volume
Price
psychology
Competitive
price
Organic
Price
perception
Promo
expectations Marketing
Conversion TrafficXDiscountsNormal price –
Promotions

7. 10
Key value item
analysis
Promotional
effect analysis
Conversion and
contribution
analysis
A dynamic product segmentation should assign strategic and tactical roles to every item
in the assortment based on the ability to influence performance drivers
Promouplift
1.
Low
3.
Promo
0.
No
2.
Base
Total traffic
Conversion
B. D.
A. C.
Contribution margin
Importance
KVI
Price sensitivity
Performanceclusters
and key value items
…
• Based on the underlying drivers of
our strategic objectives,we can
segmentproducts into distinct
clusters using advanced data
analytics and the organisational
intelligence.
• Core segments can be based on
traffic and promotional uplift,
conversionand contribution margin
or any other relevant set of relevant
indictors that influence your
objective.

8. 12
• Core segmentation
• Key value items
• Fundamental
price plays
• Irrational consumers
• Pricing psychology
PRICING
INTELLIGENCE
Intelligent pricing requires a dynamic
productsegmentationand a choice
not to match competitors on every item.

9. 13
Combining the performance clusters and key value segmentation in a core segmentation
enables us to activate the right products in different price and promotion plays
Key value
item analysis
Key value
items
Key value items
Price and assortment perception drivers
Competitive
matching
Promotional
effect
analysis
Promo-
reactive
traffic
Traffic
drivers
Volume
drivers
Key traffic
drivers
Key
category
drivers
High/low
pricing
High-
base
traffic
Category
destroyers
Conversion
drivers
Margin
drivers
Key
margin
drivers
Everyday low
pricing
No or low
traffic
Destructive
category
filler
Potential
conversion
drivers
Potential
margin
drivers
Margin
drivers
Psychological
pricing
Conversion
and contribution
analysis
Low conv.
+
Low margin
High conv.
+
Low margin
Low conv.
+
High margin
High conv.
+
High margin
PLAYSSEGMENTATIONPERFORMANCE CLUSTERS
Core segmentation,key value
items and price plays
…
• All segments can be assigned
(automated) price and promotion
plays
• Key value items drive price and
assortmentperception,so they must
be priced very competitively,
perhaps even at negative margins
• Non-key value items can be devoted
less price attention and follow other
price and promotionplays Conversion
B. D.
A. C.
Contribution margin
Promouplift
1.
Low
3.
Promo
0.
No
2.
Base
Total traffic
Importance
KVI
Price sensitivity

10. 14
Remembering the power of a price increase: you should optimise your margin by
matching price plays to product segments and building margin on non-key value items
Intro Price and promotion plays End of life
FUNDAMENTAL PRICE PLAYS
Competitive matching
High/low
Everyday low
Psychological
Fundamentalprice plays
and price corridors
…
There are four fundamental price plays:
• KVI:competitive following
• Promo items: high/low pricing
• Non promo:everyday low pricing
• Low conversion: psychological
pricing
The (automated) execution of any price
play should be based on at least three
price corridors:
• Category price tiers
• Market price levels
• Unit economic thresholds

11. 16
Options
Compromise Decoy
Startingpoint
Default Endowment
Context
Anchoring Sequencing
Psychology proposes that humans don’t like to do too much rational thinking:
online pricing is a perfect place to exploit this laziness
Psychologicalpricing
…
• Consumers have the feelof a
handful of price points (these are
your value items)
• For all other items, they will assess
cheap/expensive relative to
something else
• Deliberatelyworking with these
relative positions is what
psychologicalpricing is all about

12. 18
PROMOTIONAL
EFFECTIVENESS
An effective promotiondelivers on a
specificsetof targets – driving traffic,
conversionand margin
• Promotions vs
marketing
• Promotion equation
• Promotion types
• Promotion drivers
• Product
segmentation

13. 19
AWARENESS
ENGAGE/TRAFFIC
CONVERSION
FULFILMENT
AWARENESS
TRAFFIC
CONVERSION
BASKET SIZE
Promotional effectiveness is defined by the ability to drive and convert traffic
at the most optimal promotion price
PROMOTIONS MARKETINGVS
• Promotions are traffic builders
used to engagepotential customers
by matching their need with a
productperceived to be priced
correctly
• Promotions are good for converting
doubters who are not sure when
or where to buy
• Promotions are used to show big
discounts to cater for the huge
amount of disloyalcustomers
who are looking for a good bargain
(price hunters)
• SoMe
• TV
• Re-targeting

14. 20
Promotional effectiveness is defined by the ability to drive and convert traffic
at the most optimal promotion price
Revenue
Traffic
Conversion
Basket size
THE EQUATION
• The promotiontype is selected
based on the purpose of the
promotion
• Each promotionmust have a traffic,
conversionor basket size target that
equals a promotionrevenue target
• Each promotionis evaluated against
the promotiontarget and the overall
performance
PROMOTION TYPES
1) Big savings
2) New product introductions
3) Limited editions
1) Browsing behaviour
2) Traffic originated from
3) Left the basket
1) Buy 2 – save xx amount
2) Complementary products/bundle
3) Others bought

15. 21
Promotional effectiveness is defined by the ability to drive and convert traffic
at the most optimal promotion price
Traffic drivers
Low conversion and low contribution margin
Direct sales to alternative products with higher
margin
Volume drivers
High conversion and low contribution margin
Try to sell complementaryproducts to increase
basket size and margin
Key traffic drivers
Low conversion and high contribution margin
Use additional incentives to increase conversion
Key category drivers
High conversion and high contribution margin
Always make sure you have the right timing and that
products are available
PRODUCT SEGMENTATION
• The productsegmentationis the
core foundation for defining which
products must be promoted
• Each driver has its pros and cons,
and the purpose and promotion
drivers are correlated
PROMOTION PLAYS

16. 22Implement Consulting Group: Retail price and promotion framework, 2020
Profitability
Sales growth
Coherentprice and promotion strategy
Distinct strategic choices that cascade the commercial strategy
and guide everything related to pricing and promotion.
Capabilities
Do we have the right “people, organisation, competences, culture, leadership, systems, tools,
processes, governance and performance management” to succeed with our operation?
Customer
trust and loyalty
Price/value
perception
Contribution
margin targets
Competitive
price (re)actions
Customers’
willingness to pay
Commercial
strategy
Influencers
IMPLEMENT RETAIL PRICE
AND PROMOTION FRAMEWORK
Strategic objectives
PRODUCT
SEGMENTATION
PRICING
INTELLIGENCE
PROMOTIONAL
EFFECTIVENESS
C
C
C
C

17. Note: Simplif ied P&L breakdown 23
HOW MIGHT WE
REALISE A 5% PRICE
INCREASE?
• Increase prices on non-key value items
• Use price psychology to influence more
profitable consumer choices
• Plan and execute effective promotions:
To reduce frequency and discount depth
+ 50%
2,000 2,000
7,000 7,000
1,000 1,500
Before
COGS
After
Profit
SG&A
10,000
10,500
Without any increase in volume,
your profit will increase by
5% PRICEINCREASE

18. 24
So what should you be doing tomorrow …?
WHAT WILL A 5%
PRICE IMPROVEMENT
DO TO YOUR PROFITS?
Do the math and test which
products you can increase
without losing too much volume.
1 2 3
ANALYSE HISTORICAL
PROMOTIONAL
PERFORMANCE
What is the promotion uplift –
the overall performance vs
promotion performance?
MAKE TANGIBLE
TARGETS FOR YOUR
COMINGPROMOTIONS
Define your expected overall
target and your promotion share
– and remember to evaluate