Project Name : Customer Centricity in Retail

Guide: Prof.Ms. Smithu Malhotra

Course: PG in Sales and Marketing

Name: Narasinga Rao

Registration N0: 105969

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Jubilant Bhartia Group
The Jubilant Group embarked on a journey to create leadership in its chosen
areas of business over two decades ago. The Group has a strong presence in
Pharma , life sciences and healthcare sector through its flagship company
Jubilant Organosys and has the fastest growing Dominos pizza chain in India
through Jubilant FoodWorks. The group is a leading Indian private sector
player in oil and gas exploration and production business through Jubilant
Energy. Through a clutch of independent Companies the group has a
significant presence in Retail segment including Hypermarkets and
Automobiles. The Group also offers a wide range of marketing and technical
services for international companies in the area of aviation, oil & gas services
and power and infrastructure services.

Jubilant identified the increased globalization of Indian economy and its first alignment with international economic
trends, adapted these changes and spread its wings to the outer world and moved away from being industry oriented
to sharing knowledge. Headquartered in India the group has built strong business in North America with significant
investments over the last decade. Through it various entities the group is engaged in business in over 60 countries
across the world.

The four core segments of Jubilant Group are:

Pharmaceutical, life sciences and specialty chemicals

Jubilant Organosys is an integrated pharmaceuticals and Life Sciences
Company. . It is the largest Custom Research and Manufacturing Services
player and one of the leading drug discovery and development solution
provider from India It is well positioned as an outsourcing partner for the
global pharma and life sciences companies.

Oil and gas exploration and production

Jubilant Energy is one of the leading companies in private sector engaged in
Oil & Gas exploration and production (E&P) in India and overseas. It has
collaborations with leading global companies and currently operates 12
blocks – 8 in India, 3 in Yemen and 1 in Australia.

Jubilant Food Works & Retail

Jubilant FoodWorks Limited holds the Master Franchisee Rights for the
Domino’s Pizza, for India, Nepal, Sri Lanka and Bangladesh. The company
has been listed on the Indian Bourses recently and is the fastest growing
dominos pizza country in the world with 300 stores in India.

The brand, Domino’s Pizza, was founded in the US in 1960 by Thomas and
James Monaghan. Since then, it has grown into a global network of 9000
pizza stores in more than 60 countries around the world.

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The Jubilant Retail is present in four Formats in retail: hypermarkets (Total) and supermarkets.

Jubilant Retail is a Bangalore-based retail chain running state-of-the-art hypermarkets and malls. Its hypermarket,
Total, which is designed on the lines of international shopping malls, is a single-point food store. This primarily
consists of food items and includes packaged foods, processed items, groceries, vegetable/fruits, bakery products,
confectioneries, savouries, along with a range of beverages. It also stocks non-food items like apparel, sports goods,
bed and linen, furniture, to name a few.

Jubilant Motorworks
The Group through Jubilant Motors Pvt. Ltd. is engaged in sales and
servicing of Audi Cars through state of art showrooms in Bangalore and
Chennai. Audi has been well recognised globally as a manufacturer of high-
quality and innovative luxury cars, it is one of the world’s leading premium
brands which is among the most admired car brands across the world. Audi
has a presence in over 110 countries and it set up shop in India in 2004.

Services
Jubilant Enpro, through its alliances with international companies, provides
business, marketing and technical support related to Oil & Gas services,
Power & Infrastructure services, and Aviation related services
(sales/maintenance of aircrafts & helicopters).

A shared vision and a common set of values bind all diverse businesses of
the Jubilant Group. So far, Jubilant has created a strong global presence in
the pharmaceutical and life sciences sector and in the other areas the group
is moving ahead steadfastly gaining remarkable experience and growth. Over
the years Jubilant has successfully established itself as a partner of choice in
an ever-changing environment that presents both opportunities and
challenges for its various businesses. The focus on servicing customers and building partnerships to create value has
generated significant stakeholder return and aptly reflects the group’s promise of Caring, Sharing and Growing.

Board of Directors:
Mr. Shyam Bhartia, Chairman & Managing Director
Mr. Hari S Bhartia, Co- Chairman & Managing Director

Jubilant Group rolls out Total format

21 Jul 2007

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Jubilant Group, which started off with its Monday2Sunday food & grocery retail chains, has now opened its first mall

christened Total in Bangalore. The company also announced the re-branding of its Bangalore-based value retail

chain Jumbo Saver as Total. The anchor at the mall is also named as Total, and it is one of Bangalore's largest

hypermarkets, spread across 1.2 lakh square feet.

“Jubilant Group is targeting a revenue of Rs 8,200 crore in this fiscal. The new launches, re-branding exercise –

everything is aimed at that target.

The sprawling mall, spread over 200,000 square feet, offers everything a family needs. There are over 800 fashion

and lifestyle products to choose from, including apparel, footwear and accessories, besides a complete range of

consumer durables, toys and sports equipments, coffee shops, fruits and vegetables, fish and meat, groceries, home

lines, bakery, hypermarket and restaurants. The three-storeyed mall will soon have a pub and a food court.

Asked about renaming Jumbo Saver as Total, Spokesman informed: “Only the name has changed to Total; the stores

will continue to offer an assortment of brands at great prices, without the quality cuts. Like always, it has fashion,

cosmetics, perfumes, time wear, eyewear, footwear, consumer durables, toys and sports equipments, bakery products,

fruits and vegetables, fresh fish and meat, food and beverages, groceries, home appliances and furniture." The Total

hypermarket has allocated an area of 1,200 square feet for apparels alone.

Level one of Total mall is devoted to fashion and lifestyle brands like Reebok, Planet Fashion, Pepe, Peter England,

Spykar and Kaanz. In addition, there are also McDonald’s, Café Coffee Day and Citi Deli. First and second levels are

the retail playground for Total hypermarket, offering fashion and lifestyle apparels and accessories, food and

groceries, home lines, furniture, beverages, and the like. The third floor will soon have a food court and a pub – likely

to be operational by August 15.

The company has tied up with a Hyderabad-based food court Ohris, which will be opening its outlet in Total’s top

floor. The Jubilant Group also holds the credit for bringing the Dubai-based sandwich bar Citi Deli into the country.

It is learnt that the company is bullish about the southern market. “Right now, the focus is on South India. First, we

will open malls in other parts of Karnataka and will slowly move on to other states,” Malpani informed, though

without disclosing the number of malls or targeted locations.

Top of Form

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 Bottom of Form

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Customer Centricity in Hyper Market Format

EIGHT KEY STEPS TOWARD

CUSTOMER-CENTRIC MANAGEMENT
1. Define your customer segments
2. Create store clusters
3. Define your target-customer segments
4. Align your product category strategy
5. Optimize your range
6. Optimize your pricing strategy
7. Improve the effectiveness of your promotional
Business/direct marketing
8. Implement a change-management process

The challenges faced by today’s Modern Retailer in India are to retain the profitable customer and add
new customer to the existing portfolio.

I have identified few areas as Retailer to understand and try to study, analyze in dept these areas and
implement the business process in my organization.

Customer centricity Management to prolocate in all departments.

To provide brief view of the Structure of Modern Retailer:

The Buying and Merchandising Team, the Supply chain team and the Operations/ Selling Team in Stores.

2. Creation of Store Cluster:

In the year 2006 October the First Hyper Market was opened for its customers. The stores location
selection is in Mysore road area. To be precise demographically the stores catchment area has a large
population of lower middle class, the economic conditions of the people in this area are mostly laborers
working in small Industries, working for Traders, self employed in petty stores, or auto rickshaw/ taxi/ truck
drivers.

Inference: This Store selection was done without Market Survey, future in thought. This store is a great
challenge even today.

The next is to create clusters of stores to make them easier to manage according to their individual
needs and special characteristics. The criteria on which decisions are based should no longer be the
region, store size or position, but each store's customer-segment profile. And
These can differ considerably. We distinguished between Economy, standard and premium stores. In an
area where the customers were most interested in buying at discount prices, more space was devoted to
the entry-level price range and the retailer's own brands. However, at locations with an above-average
percentage of consumers with higher incomes who like to buy higher quality food, the proportion of
premium products was significantly increased, Particularly in categories such as Life Style and fresh
foods. Of course, varying the range of products offered according to store clusters involves more
organizational work:

Instead of forming cluster of stores within a radius of 5-8kms within the range of 1st Hypermarket , the
management took detour and opened its second Hyper Market in Madivala area. Which is beyond the
cluster area, and the same was repeated for other three stores.

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Demographic Segmentation Variables
Segmentation variables are basically factors which help the organization to determine the target group. In
demographic segmentation, variables mainly consist of demographic factors such as age, ethnicity,
occupation etc. Below we have given a list of demographic segmentation variables which are commonly
used to divide the market into smaller segments.
• Age
• Gender
• Family size
• Family life cycle
• Income
• Occupation
• Education
• Ethnicity
• Nationality
• Religion
• Social standards
Based on these variables, we have decided which group would they cater to.

Each dept is assigned specific roles and Responsibilities in Customer Centric Project.

Buying and Merchandising: Alignment of product, Category Strategy, Optimization of Range,

Optimization of pricing Strategy, Effectiveness of promotional activities, Study of customer loyalty
programs and measure of customer satisfaction levels

Operations: Customer Base, Target Customer segment, Clustering of Categories in stores

(Hypermarkets) these areas come under Stores Operations.

Supply Chain: Warehousing, Replenishment of Stocks, Servicing the internal Customer

Human Resources: Availability of trained manpower.
Customer Segment( base) of Total, Category Cluster at Stores, Target-Customer Segment, Alignment of
Category strategy, Optimization of Range of Products in major categories, Optimization of Pricing
strategy, effectiveness of Promotional business activities, Customer retention programs - loyalty
programs,HR initiative/ process in training employees towards customer Service and measure of
profitability of customer to business.

The procedure I have followed is defining the process for customer centricity and, how it has been
implemented in my company and if not implemented recommend for implementation of the process.

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The business is segregated into 16 Categories; each is treated as SBU headed by Sr. Category Manager.

Mar-10
Category Sales Margin
SLNO Sales Contribution Margin Contribution Margin %
1 Apparels AP 268.00 10% 92.04 18% 34.34%
2 Apparels - FA AF 27.00 1% 7.20 1% 26.67%
3 Bakers Factory BI 33.00 1% 15.95 3% 48.33%
4 Beverages BV 140.00 5% 17.68 3% 12.63%
5 Consumer Durables CD 270.00 10% 28.86 6% 10.69%
6 Dairy & Frozen DF 30.00 1% 4.96 1% 16.52%
7 Fresh & Vegetables FV 125.00 4% 29.26 6% 23.40%
8 Staples GR 700.00 25% 60.27 12% 8.61%
9 Home Needs HN 500.00 18% 148.21 28% 29.64%
10 Liquor & Tobacco LI 105.00 4% 11.44 2% 10.90%
11 Non-Food NF 260.00 9% 41.29 8% 15.88%
12 Meat Mart NV 58.00 2% 11.81 2% 20.37%
13 Processed Foods PF 165.00 6% 28.09 5% 17.02%
14 Foot Wears FW 28.00 1% 11.31 2% 40.39%
15 Fresh Kitchen FK 28.00 1% 10.53 2% 37.59%
J 45.0 4.1
16 Jeweler W 0 2% 1 1% 9.13%
17 Total 2,782 100% 523 100% 18.80%

1. Define customer segments:

The keystone of the CCR approach is a valid segmentation of customers. Of course, not every customer
has the same needs, shopping habits and purchasing power. We have used statistical methods to form
clearly defined customer segments based on the information we have gained from loyalty cards and the
associated transaction data mentioned in the chart. The quality of these segments is further enhanced by
focus groups and market research to make it easier to understand their general values and requirements.
This generates homogeneous customer segments that reflect the shopping habits and needs of
comparable customers. As a retailer we now understand our target segments a lot better. For example
(45 years old, married South Indian housewife with two grown-up sons, belongs to the "conservative"
target group) tends to buy in bulk, usually accompanied by her husband. Her food basket consists of
20kgs of Sona Masuri rice, 5kgs branded atta pack, 5lit sunflower oil can, 4kgs of all pulses put together,
whole spices, branded condiments the basket value is around Rs. 2200.00 exclusive of other non-food
and fresh. She generally purchases high-quality foods and associates quality with premium brands. Her
dietary regime is balanced, made up
Mostly of good home cooking. She's not one for ready meals; if she has pizza in her freezer, it's only the
for emergencies.
At the other end of the scale there's housewife (35, married, one child average income). She represents
the "price-conscious" customer segment. She sees shopping for food as a chore, and shops where prices
are right. Healthy eating is not her top priority and she has neither the time nor the inclination to cook
much. One of the fundamental components of the CCR approach. This additional information also
enabled us to picture purchasing behavior in competitors' stores and deduces the economic potential of
each customer segment and category.

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 Target Customer Segmentation- Study
example of Food Retailing
SLNO Customer Segment in Food Retail
1 Conservative and brand- conscious
2 Healthy Eating
3 Convenience
4 Traditional Cuisine
5 Families with a Baby
6 Price-Conscious
7 Smart Family Shoppers
8 Bulk Buyers
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Characteristics
Premium/brand-conscious products
Fresh Food/organic/healthy/high-quality enjoyment
Modern/Young
Store Brands/ Dry Grocery/ Fresh Food
Brands and Promotion/Children
price before quality- migrating customers
Brands and Promotions
Traditional/ large families/ more likely older
— value propositions
The third building block of customer-centricity is the creation, effective communication, and delivery of
value propositions that meet the most important unmet/under met needs of each customer segment..
Unfortunately, the expression value proposition can mean very different things to different people.
Indeed the expression seemed to reach its zenith during the dot-com era. Every new start-up had a
winning value proposition that just needed a bit of capital to get started. For Retail a value proposition is
the complete experience that a customer receives from a retailer when it buys its product or service. The
experience is made up of a series of elements. And the experience of each element is compared by the
customer to that of other firms. Some elements are viewed positively and others negatively. Suppose that
a company’s sales associate was very helpful compared to the associates of competitors. Then that is a
positive element. A higher price than competitors would be a negative element. The goal is to create a
value proposition that has far more positives than negatives. This notion of a complete experience is very
different from the typical use of value proposition to reflect a product or service in isolation.

The Layout of the stores and Planogram of the categories plays an important role.

. Align product category strategy: .

This evolution from product-push strategies to customer-pull models requires that all retailers seek
answers to the following questions: “What are my shoppers doing right now in my store? What new
experiences do they seek, and what efficiencies do they hope to gain?” Addressing these questions will
enable retailers both to better understand the “customer mission” and develop a more granular
understanding of the core products and services that frame this mission. In addition, this knowledge will
provide retailers with competitive differentiation and an opportunity to strengthen margins.
Today’s empowered customer expects more value than the in-store environment has delivered in the
past. Consider revamped grocery store concepts in which customers can now bank, drop off dry cleaning,
and/or relax at an in-store café. This one-stop-shop environment reflects proactive retail initiatives that
smart retailers have designed to offer customers the goods and services that they require to successfully
complete their respective — and often differing — shopping missions.
Empowering the Customer

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The retail market is in the midst of a strategy rethinking, as two examples make clear. Procter & Gamble
(P&G) argues that organizations throughout the value chain must better understand evolving patterns of
customer behavior to optimize store operations and boost profitability. P&G has worked with Giant Food
Stores to align Giant’s store operations with the “first moment of truth” — the first encounter a customer
has with a product in the store. This collaborative effort led to an 11% increase in category unit sales and
a 20% increase in revenue.
We as Retailers remain too product focused. Total as a retailer must leverage stores as laboratories for
in-depth behavior patterns analysis — and as new sources for operational best practices.
Innovative organizations also understand that aligning business operations with the customer mission will
benefit the mission of their own shareholders. Cutting-edge retailers have left behind the mind-set of the
status quo; that is, “we have a new product; how can we sell more of it.” These retailers are proactively
deploying solutions designed not only to understand the products and services the customer seeks today
but also to offer customers the support required to accomplish their shopping mission. They understand
that there is no point in launching promotions, or building or renovating stores, without first better
understanding the evolving needs of the customer.
Total as a Modern retailer must realign their traditional data-mining tools and processes to embrace a
data-driven view of the customer — a go-to-market strategy that revolves around customer behavior
analytics. a solution offering that demonstrates the depth of tactical expertise that retailer should seek
when moving to an operational model that is driven by customer behavior.

To profitably manage the dynamic patterns of change that define today’s market, retailers need solutions
that translate the principle of customer-centricity into tac-tical strategies that can be readily implemented
at the store level.
The company’s vision of the evolving retail universe is one in which the retail enterprise directly aligns
business process flows with the customer mission. Reflecting the call for customer focus to supersede
product-centric go-to-market strategies, We need to place the customer in the center of the retail universe
understand the customer mission and how the customer’s preferred channel (stores, catalogs,) affects
their mission. Their process enhancement tools intertwine traditionally disparate data pools (customer
data, product information, psychographics, geophysical store attributes, etc.) into a more intelligent and
more actionable customer profile. Retail InSight binds together customers and their preferred
channel/point of sale to create the core from which customer-centric go-to-market strategies originate.

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4

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Thus, is to provide Category Manager integrated solutions that address questions such as: How do the
expectations of today’s customer translate into new operational requirements? Which business processes
need to be updated to deliver the experience the customer expects? What are the tools that can both
provide in-sight into the customer’s mission(s) and align store operations with the most prevalent and/or
important missions?
Industry laggards that ignore the urgency of addressing these questions will watch their bottom lines
suffer as their customers increasingly complain (primarily with their pocketbooks) that stores look and feel
the same and that the merchandise and store locations and/or layouts fail to differentiate one retailer from
another.
The Philosophy: Satisfy the Customer’s Mission, and Sales Will Follow
Technology should be enlisted to understand the customer’s point of view. This is a rare attitude —
focused on optimizing product sales from the enterprise’s viewpoint, largely because enterprise data has
been more readily available. For example, a grocer typically thinks, “I have an excess of milk, how do I
get it to move?”From category Manager’s point of view, that question should be both more strategic and
turned on its head: How do I most effectively sell milk to customers who pop into the store to get
essentials on the way home?
.
In the above case, the grocer could sell more milk by dropping the price, but that quick-fix tactic would
give away already thin margins. It may make more sense for the grocery store to remain steady on price,
but make it easy for dart-in-and-out buyers to accomplish their convenience-focused mission in three
minutes by re-configuring the parking lot and using grab-and-go coolers/shelving to create a milk and
bread display at the front of the store. This strategy can potentially draw customers away from a nearby
convenience store where the price of milk is likely to be higher and where no loyalty card points can be
gained. It is worth noting, how-ever, that this does not mean that retailers should abandon the back of the
store as a place for the dairy section (often done as a way to pull customers through the store in hopes of
triggering impulse buys). Instead, it means that retailers should be more creative in product placement
while leveraging their key strengths — this way, they can gain incremental sales by satisfying customer
desires.
The In Sight Suite offers analytics supporting five areas of retail operations:
1. Store performance — The hallmarks of good (and bad) store performance by individual product
category
2. Customer purchasing — How customers’ buying behavior can be used to inform strategic
marketing, merchandising, and promotional activities, thereby increasing customer loyalty
and lifetime value
3. Product promotions — How to make promotions most effective for the retailer while utilizing
promotional funds to their fullest
4. Customer shopping missions — What the missions are of a retailer’s customers by region,
format, store, etc., and how a better understanding of these missions can lead merchandising
activity
5. Customer life cycle — How customer behavior is changing over time, enabling retailers to
understand and measure customer lifetime values, as well as create categories and place

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 products in a way that consumers demand (thereby ensuring that customers keep coming back
for more)

Store Performance In Sight

This enables retailer to improve store and product category revenues by understanding, at a detailed
level, what drives good and bad performance of their stores. Targeted at a variety of departments within a
retail operation — trading, store operations, property, finance, and marketing — the software can help
answer both strategic and operational questions, such as:
• What is a fair benchmark for category and store performance?
• Which stores are underperformers across the entire range and also by individual product
categories?
• Which product categories require immediate attention, in which locales?
• What/where are my best opportunities for refurbishment and expansion?

If the company is planning to open a new store, the category Manager can recommend the categories it
should carry, based on competitor locations, customer demographics, and customer missions.
This proprietary, fine-grained approach has two advantages over the more traditional ways of analyzing
store operations, such as year-over-year growth (or decline) in revenue and operating margin. First,
retailers can start optimizing store performance sooner — they do not have to wait a year to get a
baseline of data before deciding whether the store is doing well. Second, Store Performance In Sight
discerns root causes, enabling retailers to analyze departmental and brand performance, across
stores, for example, as well as understand the impact that store locations and formats have on store
revenue.
Advanced Category In Sight
This module enables retailers to align product categories, range selection, and placement to customer
missions, as well as to enhance the role and value of private label products. Targeted at the trading,
marketing, merchandising, and format departments,
• What are the key products for each customer basket type?
• Which products are best used to drive targeted promotional activity?

• How can I re-cluster or relocate products to increase sales?

• Which products should I stop carrying (bearing in mind often invisible “knock-on” benefits of
maintaining “triggering,” but low-selling, lines?)
• How can I make my private label lines more profitable?

Advanced Category In Sight is able to answer such questions by leveraging analysis from an affiliated
module, called Shopping Mission. By analyzing at-tributes of each basket (e.g., time of purchase, product
count, total spend, number of promotions, and number of promotions) with point-of-sale (POS) data,
loyalty card information, and customer demographics,

Advanced Category In Sight uses this understanding to offer five main functions:
1. Basket Reward Analyzer — Identifies key products within specific basket types, enabling
Category Manager to prioritize effort and investment for buyers and merchandisers
2. Cross-Category Analyzer — Validates category definitions and themes, helping users decide
on product placement and secondary display
3. Range Deletions Analyzer — Highlights candidates for delisting, retailers to discontinue
products with minimal revenue impact

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 4. Private Label Analyzer — Identifies market opportunities and pricing adjustments to drive
product margin and customer loyalty
5. Products Insights Analyzer — Lists item/SKU level metrics to enable users to analyze product
purchasing and performance

Source: Aberdeen Group, Inc. 260 Franklin Street Boston, Massachusetts 02110-3112 USA

5. Optimize your range Our next aim is to provide a range of products that is as attractive as possible
for the defined target-customer segments. To do this, you must find out which customers
prefer which items, how loyal they are to these products ,and how many buyers are reached by the
individual products. A decision tree showing purchase decisions for each customer segment and product
category. It reveals the logic followed by the customers when they are in the store –right down to their
purchasing patterns at the shelves. This allows conclusions to be drawn for a more customer friendly
product chronology and better merchandising.

CCR in practice: Laundry detergents on the shelves

– before ...

... and after

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Optimizing your range from the customer's perspective: Here is an example from the field of
detergents. The laundry detergent products are arranged according to the traditional industry-dominated
shelf system – by brand and package size. As a result, the arrangement is not governed by how
customers tend to buy. Products that customers feel belong together are arranged separately; the
shelves offer little in the way of orientation.
The photograph on the top right shows how customers would set out a shelf of laundry detergent
products. The new layout reflects how people actually buy: this is why, in this case, products that
customers think of as belonging together are placed next to each other on the shelves. Here we have
copied the customer's first purchase decision and separated liquid detergents from powder detergents.
We have also created vertical brand blocks to improve orientation .

Today, decisions on inclusion and exclusion are still very much based on lists of fast and slow sellers and
the subsidies for advertising provided by manufacturers. However, such data does not give any indication
of how important certain products are to individual customer groups. For example, although a high-
quality skin cream might not be purchased very often, it could nevertheless be an important product for
the "conservative and brand conscious" customer segment. If you want to boost the loyalty of this
customer group in the field of personal hygiene, you need to understand exactly which products
have a positive impact on customer satisfaction, which products can be dispensed with, and whether
there are any product gaps on the shelves.

The essence of store assortment is straightforward. “Assortment planning at a retailer is to find the
optimal set of products to be carried and set the inventory levels of each product
Consumers may be willing to accept a substitute when their favorite product is not available and therefore
the demand for a product depends on the availability of other products.” And, “there is a limited shelf
space assigned to each product category.”
That’s the bare essence of the challenge presented by store assortment optimization . Traditionally,
Retailers have relied primarily on their personal experience and comparing competitors’ assortments in
their efforts to meet this challenge. In a relatively uncompetitive marketplace, this approach may appear
to be adequate, but in markets with stronger competition and for retailers with multiple outlets serving
disparate markets, this “going by the gut” technique is no longer an acceptable approach

OPTIMIZING THE ASSORTMENT MIX

Successful store assortment optimization requires the ability to receive up-to-date information on product
performance across the organization, as well as the ability to analyze sales and profits – both current and
historical – with trends and performance against target. Only then can retailers apply benchmarking to the
assortment for optimal performance ’ POS systems obtain and deliver all the data needed to take the first
step toward improving total business performance, but simply collecting the data is only a start. The data
must be analyzed. Products must be categorized, segmented and identified as stars or dogs (and as
many gradations between those two endpoints as is appropriate), based on:

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1. Percentage Value Share
2 .Percentage Growth
3. Percentage Share
4 .Share of Profit
5.Share of Volume
Establishing these basic benchmarks allows a Category Manager to begin developing insight into his or
her assortment and its performance. It then becomes possible to rank the category change performance
of each and every category based on sales, value, profit, profit margin percentage and sales per item.
Sales achieved can be measured against sales targets for specific time periods.

This, in turn, leads to greater understanding of the sales performance of the entire product range, giving
the product manager knowledge of the contribution of products to category performance, as well as which
elements of the portfolio are generating the most – and the least – revenue. Armed with this
understanding,
the assortment can be adjusted and aligned to actual, rather than perceived, demand.

6. Optimize your pricing strategy

To survive and thrive in the highly competitive retail world, Category Managers must become more
attentive and meticulous with their pricing. More than ever before, the financial success of companies
selling retail goods depends on their price strategy. Consumers demand fair prices in exchange for their
business and are constantly comparison shopping. With the ever-present pressures from shrinking
margins, rising costs, and competition, winning in the retail arena today demands price strategies that
reliably and frequently guide retailers’ decision-making.

Aligning business goals and pricing policy seems commonsense, but too often Category managers lack
the insight and technical ability to plan and price strategically. Instead, retailers too often rely on a basic
“cost plus” strategy to maintain margins, follow their competition, or adopt wholesale-supplied pricing.
Smart retailers know they should set prices in line with their own business objectives instead of simply
reacting to competitors, cost changes, and margin objectives.

Competition is by no means removed from the equation in a modern ,optimization-based price strategy.
But modern price strategies reflect an analytical, big-picture approach. They include a far wider variety of
factors such as pricing gaps, ending number psychology, brand sensitivity, and product movement. These
factors enable retailers to manipulate pricing to
align with their broader strategic business objectives. These options were previously not available in
traditional pricing systems.
When competitors introduce a new product or slash prices, retailers who have developed a strategic-level
pricing regime can respond with a multitude of options. The first and most typical option might be to
respond immediately with similar changes. However, an optimization-based strategy can introduce
additional options for retailers, providing them a deeper understanding of the long-term financial impacts
of reactionary changes.
Optimization environments can suggest alternative actions to make up for those losses caused by fierce
competition.

Category pricing policy must vigilantly protect the consumers’ perception that they are choosing the best
place to shop for their families. Consumers who are confused by non-palatable prices tend to shop
elsewhere. Many retailers inadvertently confuse customers by setting prices without a comprehensive
policy, by being reactionary to competition, or pricing strictly on margin goals. Although few customers
may be able to articulate why they feel confused in a given retail environment, research from the
Wharton Business School indicates that consumers typically rely on three reference points when
determining what they think is a fair retail price: 1)how much an item cost in the past; 2) how much
competitors charge for the same item; and 3) their perception of the associated costs of selling an item.

Wharton Professors Z. John Zhang and Jagmohan S.Raju documented an important statistic in a recent
research paper:
A one-percent reduction in fixed costs boosts profits 2.3 percent; a one percent
increase in volume will result in 3.3 percent increase in profits;

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a one-percent reduction in variable costs can produce a 7.8-percent rise
in profit; but a 1-percent improvement in pricing will boost profits by a
whopping 11 percent.
The Wharton research validates what new-era price optimization
strategists have asserted since 2005: pricing is one of last retail frontiers
where significant gains can be immediately realized with proper strategy,
technology, and support.

Essential Components of a Modern Price Strategy

Establishing a formal pricing strategy is a long-term commitment to a set of over-arching business goals
tied to a set of decision-making processes, technology, and actions. These four attributes characterize
today’s most effective pricing strategy:
• Embraces a long-term approach that creates a perception of value in the customers’ minds
• Balances short-term, proactive tactics with long-term margin enhancements in other areas
• Contains well thought-out and imbedded mechanisms for
measurement, evaluation, and course-correction Ultimately delivers
the financial goals.

The Human Element

Dedicated human resources are another essential component, worth discussing. Retailers should
empower individuals to learn, monitor, implement, and adjust the company’s pricing. Empowerment
should be coupled by the appropriate authority and accountability that convey the role’s importance.
Multiple layers of decision makers in multiple departments often blur the purpose and unison of the
strategy. Total responsibility must reside in one department with those goals being visible across the
entire organization. This is a key area that often requires change management activities if responsibilities
are adjusted in any way.
Other employees are also a part of the equation. Communicate the strategy’s importance and purpose
because evolving traditional ways of thinking and implementing a new pricing system must occur on an
organizational level. Internal buy-in and understanding leads to a more consistent, less-ambiguous set of
communications to the public. Although prices themselves represent one important channel of
communication to customers, public-facing employees can also help or hinder this communication.

Measurement and Adaptation

It’s one thing to develop a powerful strategy or deploy a robust optimization system, but many retailers
find execution and measurement equally challenging. To some retailers, price recommendations
generated by their optimization systems make perfect sense on paper, but when several hundred or
several thousand price changes occur every week, they need the reassurance the system is working.

Zone Analysis
The Category managers in Total already practice grouping stores into zones. These groups
were originally set up using a cost-to-serve model driven by geographies, distribution centers, or critical
suppliers. Category Managers today sit on both ends of the spectrum with only one zone or too many to
manage.
Determining an optimal price strategy through zone configuration requires a deep understanding of many
factors, including cost. Cost serves an important purpose, but certainly should not be the only factor. Even
retailers with several outlets in one geographic area do not have identical economic, cultural, and
demographic identities within every store. These differences become evident with basic price elasticity
studies. Such store specific insights can empower a retailer to anticipate and react to factors such as job
growth, housing, and other economic trends that can greatly impact consumer price sensitivity and
competitive activity. For example, the price of a large bag of flour is highly sensitive in a North Indian
family community, where life does not exit without rotis. a way of life versus a community of homes with
no children or parents who often travel and
seldom cook at home. Both of these extremes exist in the same cities and
states across the country. Why rely then on just one factor to set pricing?
Category Groupings
Category Managers in Total apply a general margin goal to categories of like items
when using price management systems. This is largely a function of how earlier pricing was done in
accordance with historically popular rules-based approaches to pricing. Mature category management

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systems, new product innovations, health and wellness attributes, green products, and convenience foods
are creating opportunities with new segments
with in standard categories. Today, it benefits retailers to look inside categories for margin opportunities.
For example, the rise in popularity of specialty teas has put those items in a category of their own,
capable of performing much better than the general category of coffee and tea.
Retailers who lack insight into these buying trends miss opportunities to reshape a price strategy.

Creative Pricing
Creative pricing pushes consumers into action when they consider making a purchase. “Should I buy it
now or later?” is a question that too often is answered, “later.” “Should I buy one or two?” Is often
answered by “one”. For items not promoted through advertising, retailers can build their pricing strategy to
leverage specialized, creative appeals that drive product movement based on the perception of added
value or savings. Successful retailers in every market use tactics like offering better single price points
only if multiple purchases are made, cash discounts for purchasing a “suite of products”, discounts on
other categories for purchases made in-store, and any other strategies to generate larger orders and
take
customers out of the market on key items. Since these prices are built around large purchases, smaller
orders can become more profitable as those offers do not apply. These tactics MUST be supported by:
• Clear, simple communication to both employees and customers.
• A great in-store merchandising program
Such tactics can help convert part-basket customers into full-basket
customers.
Private Label Private label brands and strategies are evolving quickly. Category Managers have learned
that a good private label strategy pays off big dividends in customer loyalty, margin enhancement, and
category control over nationalbrand manufacturers. Retailers should be aware of the emerging best
practices in pricing private label. Supporting private label growth should be top priority in time and
management as it adds profit at a much higher rate than any other category in retail. Establish an ideal
price gap between private label and national brands, recognizing the consumer will evaluate the core
suite of items (by size). Support a value-price perception by adopting both long term and seasonal pricing
practices that capture margin targets. Avoid line pricing organics or “better for you” products with
mainstream items. They offer additional benefits and have competitive items of their own to take into
consideration.
Private label also enables retailers to fill a hole in their product mix with the added benefit of not being
subjected to a direct-price comparison by developing new products of a different size, added features,
unique flavors, or even different packaging. This practice has resulted in multiple tiers of private label
offerings but has some private label items taking on the popularity of a national brand with consumers. By
having a comprehensive data file that can be intelligently and systematically analyzed, retailers can“
reverse engineer” price gaps to identify the right size and package for their new private label initiatives.
Set a competitive price that generates better-than-average margins.
In terms of managing gaps between multiple private label tiers, a consistent and purposeful price strategy
is critical.

Some time the private label strategy can back fire the assortment and profits. In India we are comfortable
in private label only in soft commodities.

Vendor Management: What is the message you send to your customers when they stand in front of your
shelves? Does the message “shout” about a specific brand? Or does it
shout about your price/value message?

Retailers’ and vendors’

motives are often similar, but not the same. A retailer with a well-reasoned pricing strategy and reliable
data is suddenly in a position to negotiate effectively towards common goals. Retailers who leverage
technology end up being better supported by manufacturers and distributors . The retailer provides
reliable pricing leadership by aligning pricing to longer-term goals and strategies that, by and large,
account for manufacturer best interests. By making item optimization metrics available, retailers can
negotiate meaningfully with vendors and manufacturers. As an example, retailers whose price
optimization systems generate customer demand curves are equipped to talk on-par with manufacturers
or vendors on performance criteria, promotional vehicles, floor placement, item authorization, or cost

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increases. When negotiating with vendors, understanding product demand factors based on different
strategies offers a powerful tool.
Conclusion
The old adage “knowledge is power” is once again proving true in the arena of retail price optimization.
The historic reliance on human knowledge to set pricing is now giving way to tried-and-true price
optimization science. Broader economic and societal pressures and competition from larger, increasingly
sophisticated retailers is forcing retailers of every size to develop and execute strategic, proactive
pricing. Over time ,as the system learns, profit building opportunities will explode.

The effectiveness of promotional

Business
Consumer Perceptions of Promotional Activity

Several models of consumer response to promotions suggest that a current decision on brand and
purchase quantity depends on the expected time until the next price reduction and the expected size of
future reductions. In spite of the importance of expected deal frequency and expected deal price to a
consumer's decision, relatively little empirical work has been reported on those topics. The authors
investigate several aspects of consumer perceptions of deal frequency and deal prices. First, a
conceptual model is presented to describe how consumers develop and use those perceptions. Second,
results of an extensive survey are used to estimate the degree of consumer knowledge about deal
frequency and deal prices. Third, hypotheses about which types of consumers have better knowledge of
promotions are tested. Results from the survey indicate that many consumers are reasonably accurate
about deal frequency and sale price. In addition, recall on deal frequency and sale price is higher for
consumers with larger family sizes and those who read weekly fliers for items on sale, devote a higher
percentage of product class purchases to the brand, and purchase the package size more frequently. It is
lower for older buyers.
CONSUMERS routinely face the decision of what brand to buy and in what quantity. The decision is
complicated by temporary price reductions for various brands and by the fact that the size of the price
reductions varies across deals. Common sense and formal economic analysis (Blattberg et al. 1978)
suggest that a consumer's decision on brand and purchase quantity may depend on the size of the price
reduction and the time until the next price reduction. For example, if a consumer's preferred brand of soft
drink is on deal every other week, stockpiling eight weeks' worth of the brand may not make sense. In
spite of the importance of expected deal frequency and expected deal price to a consumer's decision,
relatively little theoretical or empirical work has been reported on those topics.
Our study has three general objectives. The first is to develop a conceptual model to describe the
interactions between consumers and retailers or manufacturers as retail price promotions are
implemented. The model describes how consumers encode information on deal activities. It also indicates
how retailers or manufacturers influence in-store promotional activity and could use information on
consumer perceptions and purchasing to design future promotions. The model provides a basis for
identifying several key constructs in consumer decision making about deal purchases and suggests
several hypotheses about the relationship between consumer characteristics and perceptions of deal
activity.
The second objective is to conduct an empirical analysis of certain key constructs in the model. In
particular, we want to estimate the degree of consumer knowledge about deal activities. These findings
are expected to improve our understanding of why and how consumers react to price promotions. If many
consumers are aware of the deal frequency for individual brands, consumer response to deals on highly
promoted brands may be very different from their response to deals on brands that are not often
promoted. Manufacturers and retailers could take those reactions into account in designing promotions for
different brands.
The third objective is to test hypotheses about the association between a household's characteristics and
its perceptions of deal activities. We want to determine which consumers have more accurate knowledge
of deal frequency, sale price, and regular price than others. These findings could be used to segment the

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market, for mailing coupons, for designing specific promotions, and for improving models of consumer
response to promotions.
The two major constructs of the conceptual model that are examined here are deal frequency and deal
prices. Buyers' perceptions of deal frequency for a specific brand-size have several implications. If most
consumers perceive that a specific brand-size is promoted frequently, they might not feel a need to stock-
pile the brand (i.e., accelerate purchases) when it is promoted, which could account in part for the findings
on stockpiling by Gupta (1988) and on purchase timing by Neslin, Henderson, Quelch (1985).
If promotions for a brand are perceived as occurring frequently, retailers may not be able to use deals to
reduce their inventory holding costs (see Blattberg, Eppen, and Lieberman 1981). Also, a large proportion
of purchases for the brand-size may be made on deal, decreasing the brand's profitability. In addition, if
most consumers perceive that their preferred brands are often on deal, they may be less willing to
respond to deals on less preferred brands.
Conversely, if deals on a particular brand-size are perceived to be infrequent, consumers may buy larger
quantities when it is offered on promotion and retailers could use deals to reduce their inventory costs.
Moreover, consumers may be willing to switch among several brands in the product class if they perceive
that promotions are rare in that product class.
Perceptions of deal prices may also have an important role in consumer decision making. For example, if
most consumers have an accurate perception of the typical deal price for a 2-liter container of Coke, they
may not react favorably to a Coke promotion in which the price discount is less than the regular discount.
Alternatively, if most consumers do not have a perception or have an inaccurate perception of the typical
deal price, consumer reactions to a small discount count could be very different. Information on
consumers' deal price perceptions could help manufacturers and retailers in determining the amount of
discount for a price promotion.
The Role of Consumer Expectations About
Price and Deal Frequency in Prior Studies

One possible role of expectations about future prices in current consumer decisions was described by
Blattberg, Buesing, Peacock, and Sen (BBPS) in 1978. They assumed that a household's objective is to
minimize expected costs over present and future periods. "Thus expectations about future demand and
future prices affect the present period's decisions" (p. 371).

In a 1981 study, Blattberg, Eppen, and Lieberman (BEL) based their expression for the optimal purchase
quantity on the assumption that the next price promotion will not occur before that optimal quantity is
depleted (p. 120). If a consumer expects a deal to occur before the optimal quantity is depleted, the
quantity purchased may be different. A second aspect of the BEL model indicates the importance of price
perceptions. The model (equation 1, p. 119) includes a term, D, to indicate the price reduction. Inclusion
of a term like D implies that a consumer has a perception of the price reduction. If the regular price is not
displayed and the perception of D is inaccurate, consumers may not react as predicted by using the true
value of D in the model.
The important role of deal and nondeal price perceptions is illustrated also in the model of the purchase
quantity decision developed by Neslin, Henderson, and Quelch (NHQ) in 1985 (p. 150). Their model
includes the difference between the current price and the price of the brand in the previous week. Thus,
before using either the NHQ, BEL, or BBPS model, it appears important to conduct an empirical analysis
to determine whether consumers have perceptions of deal prices and to determine the accuracy of those
perceptions. In addition, it appears important to determine consumer perceptions of deal frequency using
the BEL model.
Some researchers have assumed that consumers notice prices and update a reference price each time
they encounter the brand (Friedman 1979; Raman and Bass 1986; Rinne 1981; Winer 1986). Reference
price usually has been computed as some function of past prices (Emery 1970; Rinne 1981).
Consequently, a consumer's reference price could be influenced by how frequently the brand-size is
promoted. Because reference prices are assumed to be based on a consumer's perception of prices
(Monroe 1973), a consumer's perception of deal frequency and deal prices could have a critical role in
determining his or her reference price.
Research also provides evidence of the discounting of discounts by consumers (Gupta and Cooper
1989), implying that consumers have perceptions of the regular price and sale price. In a similar vein,
Blair and Landon (1981) show that the full savings claims made by reference prices in retail
advertisements are not accepted by many consumers. This finding suggests that many consumers have
perceptions of regular prices. It is also supported by related work on the effect of merchant-supplied

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information and deal prices on a consumer's reference price (Berkowitz and Walton 1980; Della Bitta,
Monroe, and McGinnis 1981; Lichtenstein and Bearden 1989).

8. Implement a change-management process

Customer-centric retailing is far more than just a new way of optimizing your range, however. When
properly thought through, it's a holistic management approach involving all company divisions. The
successful implementation of customer-centric retailing requires a systematic change management
process. Processes and controlling systems must be adjusted to the CCR logic. If you want to bring the
daily activities of your employees into line with this way of thinking, you must also integrate customer-
centered objectives into the staff MbO system. Roland Berger's team of retail experts have already
provenmany times that CCR works. And what is probably one of the most successful retail groups in the
world started using CCR years ago to put the focus on the customer.
"We grow by understanding our customers," says Sir Terry Leahy, chief executive of Tesco.
"When they change, we change with them."

Kotter's eight step change model can be summarised as:

1. Increase urgency - inspire people to move, make

objectives real and relevant.
2. Build the guiding team - get the right people in place
with the right emotional commitment, and the right mix
of skills and levels.
3. Get the vision right - get the team to establish a
simple vision and strategy, focus on emotional and
creative aspects necessary to drive service and
efficiency.
4. Communicate for buy-in - Involve as many people as
possible, communicate the essentials, simply, and to
appeal and respond to people's needs. De-clutter
communications - make technology work for you rather
than against.
5. Empower action - Remove obstacles, enable
constructive feedback and lots of support from leaders
- reward and recognise progress and achievements.
6. Create short-term wins - Set aims that are easy to
achieve - in bite-size chunks. Manageable numbers of
initiatives. Finish current stages before starting new
ones.
7. Don't let up - Foster and encourage determination and
persistence - ongoing change - encourage ongoing
progress reporting - highlight achieved and future
milestones.
8. Make change stick - Reinforce the value of successful
change via recruitment, promotion, new change
leaders. Weave change into culture

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