Predicting the customer response from promotions and advertising continues to be a major headache for most retailers, making promotions much less effective than they should be. The increasing diversity of promotions be they BOGO's, price discounts, coupons, meal deals, loyalty points, staggered or tiered discounts, blind offers etc., makes the task of the Category/ Manager/ Buyer in predicting sales/profits much more difficult. Add to that the growing use of targeted offers through email, loyalty schemes, kiosks and even...Click to read.
AMP2 is all about helping retailers manage centrally, execute locally. In other words manage the complexities under the covers of the system, but manage it centrally without losing the detail needed to ensure optimum store operation. For the mature chain retailers this is taken as business as usual, but is that the reality of many of the systems and processes that are in use? We doubt it!
In this section we want to examine in some detail those critical issues that if not addressed properly can mean garbage in garbage out - often misleading users to think analysis and actions are being handled properly and fully when they are not.
Let’s take an example - out-of-stocks.
Prices changes and promotions are a major cause of out-of-stocks. Why is it that most replenishment systems in use by retailers today don’t forecast them?
Because forecasting tools in those systems are predominately linear forecasting tools and that class of mathematics cannot track the affect of a price change or the step function change in demand you get with a promotion. Only non linear tools can do that, so 90%+ of top 1,000 retailers in the world are missing major opportunities to get significant improvements in reduced out-of-stocks.
By using new tools like AMP2’s smart forecasting, your current systems can be revitalized by injecting a smart demand forecast into their calculations. No heart surgery just a huge improvement in results - not only reduced out-of-stocks but reduced safety stocks; because the volatility is reduced, safety stock levels don’t need to be so high.
The retail software marketplace today has some innovative marketing of products in the price optimization arena and if you listen to the sales spin they all do the same thing. WRONG!! In fact very few products exist today that can or even claim to do price / promotion optimization and yes AMP2 is one of those. If you look under the covers of that small band of products you will find a multitude of different methods, some good, some bad, and some that fall into our theme of garbage in garbage out.
For example; some players use static demand models to compute forecasts and optimizations while others use Dynamic Demand Models and that one fact alone brings an enormous difference in the quality of optimization that you can expect.
The market needs to understand these factors and we will use this section to explore those subjects in great detail, but if you want to learn more now, just ask us and we’ll come clean about these hidden secrets which have huge impact on what you can achieve.
(Incidentally, AMP2 uses dynamic demand models which give us dramatically more insight into what happens with promotions and prices over the future time horizon, hence the name dynamic.)
Today retailers have great focus on their buying and selling decisions because in the final analysis every retailer’s survival depends upon getting those decisions more right than wrong. Given that, it is strange that most retailers have such a silo approach to all the decisions that formulate the go-to-market offer that the customer sees in the stores week after week.
Try asking yourself these questions about your promotion decision making:
All of these can be answered if the impact of adverts and promotions are tested against everyday prices, and considering the positive impact a promotion can have on specific items sales and the fall off in sales of related items, it’s surprising some promotions make any money at all.
AMP2 is designed to provide these answers, predict accurately the most likely outcomes and let you simulate different scenarios. Why work in the dark when you can have the light of AMP2?