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Delivering on the Promise of Customer-Centricity and Personalization

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Presentation from Retail’s BIG Show, January 15-17, 2017. NIKKI BAIRD, Industry Analyst, RSR Research
GRAEME MCVIE, VP and GM, Precima
CHUCK SAMPLE, VP, Insight and Analytics, US Foods, Inc.

Published in: Retail
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Delivering on the Promise of Customer-Centricity and Personalization

  1. 1. Retail’sBIGShow2017|#nrf17Retail’sBIGShow2017|#nrf17 Delivering on the Promise of Customer- Centricity and Personalization CHUCK SAMPLE, VP, Insight and Analytics, US Foods, Inc. GRAEME MCVIE, VP and GM, Precima NIKKI BAIRD, Industry Analyst, RSR Research
  2. 2. Retail’sBIGShow2017|#nrf17Retail’sBIGShow2017|#nrf17 Delivering on the Promise of Customer-Centricity and Personalization
  3. 3. Delivering on the Promise of Customer-Centricity and Personalization NRF Exhibitor Insights – January 16th, 2017
  4. 4. Today’s presenters Graeme McVie VP & GM Precima gmcvie@precima.com 4 CONFIDENTIAL Chuck Sample VP, Insights and Analytics US Foods Chuck.Sample@usfoods.com Need a photo of Nikki Nikki Baird Managing Partner RSR Research nbaird@rsrresearch.com
  5. 5. Today’s discussion topics Do retailers need to be customer-centric and personalized? How did US Foods successfully deliver on the promise of customer-centricity and personalization? Where is retail heading with customer-centricity and personalization, how will retailers get there and how fast will they arrive? Retail Research Case Study Panel Discussion 01 02 03 5 CONFIDENTIAL
  6. 6. Do retailers even need to be customer-centric and personalized? 01 6 CONFIDENTIAL
  7. 7. www.rsrresearch.com © 2016 Retail Systems Research. All Rights Reserved. Retailers Can’t Win On Price Forever: Is Personalization The Answer? Nikki Baird Managing Partner, RSR Research January 16, 2017
  8. 8. www.rsrresearch.com © 2016 Retail Systems Research. All Rights Reserved. 8 The Big Issues In Pricing Today • Since 2012, RSR has expressed concerns over retailers’ over-promotion and race to the bottom on price • Even as late as Holiday 2015, retailers expressed belief that these practices were effective • But post-Holiday 2015, that perspective changed – drastically. • Bottom line: the finish line to the race to the bottom is not a finish line, it’s a cliff. • So how did we get here? And how do we get out of it?
  9. 9. www.rsrresearch.com © 2016 Retail Systems Research. All Rights Reserved. 9 Pricing Strategies Are Not Effective 47% 32% 40% 45% 29% 23% 27% 40% Driving top line results Driving bottom line results Driving revenue from our best customer segments Building loyalty with our customers How Effective Are Your Pricing Strategies In The Following Situations ("Very Effective")? 2015 2016
  10. 10. www.rsrresearch.com © 2016 Retail Systems Research. All Rights Reserved. 10 Not Meeting Our Objectives 5% 36% 29% 28% 46% 39% 30% 38% 49% 23% 27% 28% 33% 33% 34% 34% 43% 46% Price is not our primary driver To create a strong price perception in the market To stave off competitive pressures To create excitement for our brand To convey our value proposition To drive demand To build market share To improve merchandise sell-through To maximize gross margin Top Three Objectives Of Your Company Pricing Strategy 2016 2015
  11. 11. www.rsrresearch.com © 2016 Retail Systems Research. All Rights Reserved. 11 Business Challenges Overview • While the business challenges of pricing remain relatively unchanged, there is a new smell of fear among retail respondents • Retailers report having significantly increased the number of promotions they execute • They report starting earlier and earlier for the holiday promotion cycle • And they report taking bigger and bigger mass discounts • Winners in particular seem to sense the need for change 50%Increased price sensitivity of consumers 48%Increased pricing aggressiveness of competitors 45%Increased impact of price transparency & comparative shopping
  12. 12. www.rsrresearch.com © 2016 Retail Systems Research. All Rights Reserved. 12 Breaking The Chain... How To Wean Consumers Off Promotions
  13. 13. www.rsrresearch.com © 2016 Retail Systems Research. All Rights Reserved. 13 Personalization’s Surge 23% 32% 24% 35% 28% 17% 36% 29% 44% 33% 18% 28% 28% 29% 30% 31% 31% 32% 35% 37% Provide a more seamless cross-channel experience Create a better value proposition for our customers Gain margin advantage through dynamic pricing Create a more price competitive image for our customers Increase market share for key categories or products Provide more localized/personalized offerings to customers Create more profitable promotions Better matching of demand and product supply Improve margins Improve top-line sales Top Three Opportunities For Pricing To Contribute To Your Companies Business Strategy 2016 2015
  14. 14. www.rsrresearch.com © 2016 Retail Systems Research. All Rights Reserved. 14 Personalized Prices – How To Get There? 22% 50% 6% 11% 6% 22% 38% 41% 45% 45% 52% 52% We are collecting data from new channels and using them to make better pricing decisions. It will become important to deliver personalized prices to shoppers in the next three years. My company currently targets our promotions at an appropriate level of granularity. We have effective policies in place to manage different prices and promotions across channels and touch points. We have processes in place to manage promotional planning across organizations within our company We have the ability to quickly respond to competitors' price changes. Percent of Respondents Who Agree Retail Winners Laggards
  15. 15. www.rsrresearch.com © 2016 Retail Systems Research. All Rights Reserved. 15 Watch Out For... 33% 39% 44% 22% 33% 22% 15% 19% 31% 38% 42% 46% Lack of coordination with marketing Our channel organizational structure makes it difficult to coordinate pricing strategies Not enough IT resources available The possibility of negative customer reaction to changes in our pricing strategy Resistance to change from merchandising Lack of clean price, competitor, and purchase data Top Three Organizational Inhibitors: Selected Performance Differences Retail Winners Laggards
  16. 16. www.rsrresearch.com © 2016 Retail Systems Research. All Rights Reserved. 16 Operational Challenges Reflect Strategic Barriers 14% 45% 27% 23% 45% 41% 45% 27% 32% 17% 23% 23% 30% 30% 33% 47% 47% 50% Keeping up with promotional deals made between buyers and manufacturers Minimizing markdown spend Making sure that stores change prices accurately and timely Coordinating with marketing on promotions and offers Managing promotions across channels Measuring the impact of executed pricing decisions Maintaining visibility into promotional profitability Forecasting the impact of potential pricing decisions Keeping up with competitors' prices Operational Challenges Around Setting Prices Retail Winners Laggards
  17. 17. www.rsrresearch.com © 2016 Retail Systems Research. All Rights Reserved. 17 What The Future Holds 11% 12% 14% 15% 16% 16% 16% 16% 17% 18% 18% 21% 24% 11% 11% 15% 13% 14% 10% 10% 11% 14% 11% 12% 13% 7% 10% 11% 11% 15% 12% 11% 10% 11% 12% 11% 7% 9% 12% Rules-based pricing engine Integrated end-to-end price lifecycle management Promotions optimization Product movement data warehouse Inventory management – availability as a price driver Digital channel price management tools Markdown optimization Promotions planning, forecasting, management Markdown planning, forecasting, management Digital channel promotions/offers management tools Regular price planning, forecasting, management Regular price optimization Competitive price intelligence Planned Technology Investments Deployed, looking for change Evaluating / Budgeted Planned, no budget
  18. 18. www.rsrresearch.com © 2016 Retail Systems Research. All Rights Reserved. 18 Some Hard Questions • Can you win a race to the bottom on price? (Answer: Unless you’re Walmart, no) • Is it easy or hard for a competitor to track personalized prices? (Answer: hard) • Do you have the ability to plan & optimize personalized prices? • Do you have the ability to execute & track personalized prices? • Can you take personalized prices to BOTH digital channels AND stores? • Can you maintain a personalized price strategy if you over-buy? (Answer: no)
  19. 19. How did US Foods successfully deliver on the promise of customer- centricity and personalization? 02 19 CONFIDENTIAL
  20. 20. Powered by CookBook Vision
  21. 21. • 2nd largest foodservice distribution company in the U.S. • 300K customers; 120K independent & regional operators • $26+ billion in revenue • ~60 distribution centers solely in the U.S. • 23K+ employees, 3K+ sales people • Post-recession IR growth estimated at 4% • Margin pressured industry • Went public last year: USFD 21 Who is US Foods?
  22. 22. 22 CookBook is the Engine Behind our Customer-Centric Vision We put the customer at the center of everything we do CookBook powers customer-centric, actionable insights through prescriptive analytics These insights allow us to deepen customer relationships and provide the most relevant solutions to help grow their business.
  23. 23. 23 No two of our customers are quite the same: commitment to 100% personalization Customer-item level insights are continually updated to account for recent changes in customer behavior Three+ years of past behavior used to determine purchasing, promotion and pricing patterns CookBook is the Engine Behind our Customer-Centric Vision
  24. 24. 24 CookBook Realized My Kitchen CookBook for CatMans Sales Planning Powered by CookBook CookBook for Vendors • Customer-centric category roles • Predictive assortment through demand transfer •Unique price recos maximizing sales & profits •1-to-1 tailored content driving Customer Lifetime Value • Insight Syndication • True Joint Business Planning • Prioritize customers and align resources • Prioritize opportunities by customer CookBook has evolved to further power capabilities across Merchandising & Sales Pricing Powered by CookBook
  25. 25. 25 USF Strategy Pyramid WIN Food Leadership DIFFERENTIATE Easy Customer Experience COMPETE Flawless Fundamentals FOUNDATIONAL GREAT FOOD SELLERS INSPIRING CONTENT/PROG EASIEST TRANSACT ACROSS CHANNELS MOST VALUED BUSINESS SOLUTIONS DELIVER PERFECT ORDERS LEADING FOOD SAFETY RIGHT PRODUCT, RIGHT PRICE OPTIMIZED COST TO SERVE PEOPLE INFRASTRUCTURE PROCESSES ANALYTICS Local and sustainable Great brands Innovative products best everyday cop and produce
  26. 26. 26 CookBook will be embedded in every business function
  27. 27. 27 CookBook creates more value across all stages of the customer lifecycle Current Customer Lost CustomerProspect Prospect Prioritization Prospect Pricing Acquisition Campaign Prospect Product Recos Pricing Onboarding Price Stabilization Loyalty Campaigns Category Pen Campaigns Predict Churn Retention Campaign Win Back Campaign Win Back Loss Acquisition CUSTOMERVALUE Steady State Onboarding
  28. 28. 28 Insights & Analytics Operating Model Business Questions I&A PMO RequestsAssets US Foods Customers & Sales Organization FoodGeniusPMO Answers/Solutions * Partners with Marketing for Primary Research; Also supports Food Genius data transformation requirements CookBook Project Mgmt Strategy Solution Alignment Change Mgmt Central Business Services PIM VIMCIM Data Gov Food Genius (App Development, Food Taxonomy, Menu Stewarding, Market Data) BI Gov Data Strategy (Customer, Product, Vendor) IT partners across multiple I&A Teams to support I&A requirements SC, Replen & Logistics Analytics Corporate Forecasts BI Integration Merch & Sales Analytics HR, Finance, & Rev Mgt Analytics IT Predictive analytics, Segmentation BI & Analytics Team Functional Business Units (Supported by CookBook Steering Committee & Operating Committees) Decision Sciences*
  29. 29. 29 Working Level Program Leadership Executive Leadership Business Leadership • Program level escalation and decision-making team • Enterprise level escalation for major business decisions • Workstream/project/initiat ive-level activities and decisions • Cross-program level escalation and decision- making team Consolidation/Escalation StrategicDirection/Prioritization/Decisions Workstream Teams Workstream Teams CookBook Steering Committee Workstream Teams ICE Enterprise Air Traffic Control EI&A PMO Workstream Teams Workstream Teams CookBook Operating Committees Data Governance BI Governance BI Center of Excellence Insights & Analytics Governance Structure
  30. 30. The analytics IT roadmap can be a cluttered one: Continuously invest in the future 30 1. Cloud-based technology (AWS, Snowflake, Spark) 2. Open source languages (R, Python) 3. Machine learning for limited- structured data 4. Self-serve BI and data visualization 5. Business-led data governance Big Data Landscape 2017
  31. 31. Lessons learned… 1 Have a business model to draw from Have multiple executive stakeholder accountability2 Commit to a true partnership: Analytics & IT3 Brand your work: make it approachable4 Involve the business actively5 Don’t let perfection become the enemy of good6 Invest in change management7 Be efficient in your design8 31
  32. 32. Where is retail heading with customer- centricity and personalization, how will retailers get there and how fast will they arrive? 03 32 CONFIDENTIAL
  33. 33. Takeaways Leading retailers are investing heavily in it Shoppers want it & demand for it is increasing Personalization and customer- centricity matter 33 CONFIDENTIAL 01 Invest in capabilities and people Commit and deploy across the organization It’s possible to deliver on the promise 02 Starts with exec. support & org. commitment Requires change management Needs scalable data and analytical platform It has to be executed right03
  34. 34. Precima helps our clients to satisfy the needs of customers better than the competition to win in the marketplace Understand customer needs on a granular, timely & frequent basis Consistently execute actions that best satisfy customer needs 1 2 34 CONFIDENTIAL
  35. 35. Upcoming… • See Chuck and Nikki at the Precima booth (#3777) after this presentation • RSR Pricing Report: Life Becomes Unmanageable: • https://www.precima.com/research-insights/ whitepapers/pricing- 2016-life-becomes-unmanageable-1 • Precima Primary Market Research on Shoppers: • Pricing: What do shoppers really want? • Promotions: How important is personalization? • FMI Midwinter: January 28-31, 2017 • Precima Sponsored White Paper with POI • Personalized Offers: The Cure for Tired, Ineffective Trade Promos 35 CONFIDENTIAL For more information, visit www.precima.com Eataly (Wine Tasting Room) Tonight 6-8pm please join us for Hors d'Oeuvres and drinks at New York's famous Eataly, the largest Italian marketplace in the world! MONDAY January 16 2017 Networking Reception 6:00 pm - 8:00 pm Eataly New York Flatiron 200 5th Avenue New York, NY 10010
  36. 36. Delivering on the Promise of Customer-Centricity and Personalization NRF Exhibitor Insights – January 16th, 2017

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