Driving business strategy with retail analytics
Mitch Prevett
© 2015 The Quantium Group Pty Ltd. In Commercial Confidence
This presentation has been prepared for the Actuaries Institute 2015 Actuaries Summit. The Institute Council wishes it to be understood that opinions put forward herein are not
necessarily those of the Institute and the Council is not responsible for those opinions.
Big data is changing analytics
Simple models and a lot of data trump
more elaborate models on less data
Peter Norvig Director of Research, Google‘‘
Retail is undergoing a transformation
Consumer data will be the biggest differentiator in the
next two to three years. Whoever unlocks the
realms of data and uses it strategically will win
Angela Ahrendts CEO, Burberry‘‘
Data sets provide a paradigm shift in customer insight
100k+ households
All Foxtel and free-to-air metro channels
2.5m+ customersweighted to population
14m weekly transactions
8.1m registered cardholders
7.4m weekly transactions
All data is de-identified and privacy compliant
2m Remote control clicks per day
9.1m Households
22.6m PeopleAustralia
wide
Supermarket lifestyle factorsDNA of buyer
Cat lovers
Baby on board
Indian foodies
Organic aware
Supermarket lifestyle factors
Highest affiliated category
Baby on board
Lowest affiliated category
Supermarket lifestyle factors
Organic aware
Highest affiliated category
Lowest affiliated category
Supermarket lifestyle factorsIndian foodies
Highest affiliated category
Lowest affiliated category
Supermarket lifestyle factors
Cat lovers
Highest affiliated category
Lowest affiliated category
Analytics should always begin with measurement!
ForecastingInventory management MerchandisingPlace
Retail Analytics – The new frontierShopper insights Category and
consumer trendsSegmentationPeople
Market structure RangingProduct lifecycleProduct
Promotional incrementalityElasticity Product haloPrice &
Promo
Challenges in retail analytics
Activating analytics in the business ▪ Building strategies around analytics
▪ Making decisions on analytics
Data and rapid technology development ▪ Digesting all the data
▪ Integrating new technology into analytics (RFID?)
Product need states – Dendrograms
▪ Analysing customer behaviour to identify natural product clusters
▪ Product associations + distance between products = need states
Methodology
Applications
▪ Key decision factors ▪ Optimal store layout ▪ Range rationalisation ▪ New product opportunities ▪ Trend identification
Methodology: Product association based on customer behaviour
Methodology: Identification of need states
More affluent Budget Healthy IndulgenceBudget
Big Tubs Colourful multipacks
Budget multipacks
Budget tubs
Lact
ose
or
suga
r fre
e
Low
fat
Sorb
et Budget multi
Premium multi
Premium tubs
Ice cream
Singles and couplesFamily
Applications: New product opportunities
4 5 6
Premium tubs Indulgence Sorbet
Low fat Budget multipacks Colourful multipacks
1Sales Growth
Efficient Range
+ Other Factors
Sales Growth
Efficient Range
+ Other Factors
Sales Growth
Efficient Range
+ Other Factors
Sales Growth
Efficient Range
+ Other Factors
Sales Growth
Efficient Range
+ Other Factors
Sales Growth
Efficient Range
+ Other Factors4 5 6
2 3
Applications: Store or shelf layoutBefore After
Similar need states should be grouped togetherDoing this alone achieves a significant uplift in sales
through cross selling
Dendrogram: ConclusionStandardised methodology With the customer at heart
Valuable applications Across the business and for different industries
Basis for further analysisNeed states often serve as a first step when starting a deep dive analysis
Price and promotions – Understanding true category incrementality
How do promotional price tactics
drive product and category sales?
$0.00
$0.55
$1.10
$1.65
$2.20
$0
$250,000
$500,000
$750,000
$1,000,000
2013
Sales Price ($)
Pedigree promotional learningsPedigree Adult Dog food can 700g (Assortment)
Data Source: Total WOW Sales; Target Products: Pedigree 700 gram Assortment
Evidence of promo fatigue
followed by momentum
$1.50 price barrier has significant
uplift
Promotional and category incrementality based on multivariate modelling
Impact of promotion taking into account cannibalisation
Provides deeper insights into the impact of promotions outside of the promotional
week$0
$100,000
$200,000
$300,000
$400,000
Baseline Gondola Observed Impact Forward Buy Net Impact
Observed uplift from promotion
is 6x
After accounting for cannibalisation, promotion only
provides a net uplift
of 3x
Sale
s
Informed calendar slottingWeek ARNOTTS BELVITA COOKIE TIME CRUNCHIE DAIRY MILK FAMILY ASSORTED HOMEBRAND JATZ LATTICE LEMON CRISP MINT SLICE MONTE CARLO PARKER'S RITZ SAKATA SCOTCH FINGER SHAPES TEDDY BEAR TIM TAM TRIPLE WAFER VITA-WEAT WAGON WHEELS WATER CRACKER WOW SELECT7-Jan $11,907 $38,454 $194 $6,014 $34,538 $222,919 $33,660 $5,107 $11,83014-Jan $5,184 $312,215 $27,896 $170,510 $36,262 -$15,065 $11,89221-Jan -$5,948 $8,652 $4,963 $56,258 $17,757 $26,736 $25,529 -$48,317 $157,272 $5,700 $10,53928-Jan $13,766 $15,888 $3,959 $5,683 $383,101 $10,115 $221 $18,177 $25,375 -$226,467 $152,402 $25,716 $17,255 $13,9644-Feb -$2,125 $5,189 $28,542 $2,216 $79,532 -$214,597 $5,253 $141,034 $17,533 $29,60911-Feb $2,036 $18,555 $30,820 $395,817 $4,015 $72,794 $53,299 $28,31718-Feb $2,856 $1,845 $5,176 -$344 $6,803 $4,151 $49,245 $9,593 $210,034 $4,070 -$19,733 $247,366 $17,704 $5,762 $5,32025-Feb $3,411 $2,459 $6,522 $5,433 $6,318 $181,215 $7,412 $7,110 -$105,331 $5,037 -$26,230 $18,295 $6,539 $5,4074-Mar $13,439 $16,231 $11,438 -$100,928 $6,13111-Mar -$14,608 $11,786 -$187 $17,433 $34,484 -$21,104 $128,774 $17,020 $9,943 $11,96618-Mar -$1,946 $9,172 $9,438 -$882,725 $21,005 $164,047 $6,690 $9,04225-Mar $13,315 $13,494 -$2,624 $17,041 -$22,200 $210,368 -$22,580 $6,357 $20,0551-Apr $12,635 $10,080 $9,631 $148,347 $2,003 $22,3318-Apr $276,233 $46,908 $7,565 $465,911 $10,074 -$21,027 $49,490 $20,76015-Apr $144,316 $14,347 -$47,494 -$14,214 $19,564 $241,595 $58,758 $29,12322-Apr $4,846 $14,805 $12,508 $85,167 $14,753 $53,234 $21,097 $12,589 -$8,116 $18,498 $12,105 $29,72129-Apr $29,202 $31,230 $9,944 $5,963 $31,661 $10,304 $10,046 $74,323 $21,8586-May $29,297 $42,297 $6,029 $19,008 $6,852 $12,121 $126,179 $158,549 $67,652 $10,180 -$10,462 $23,81113-May $1,916 $292,080 $15,745 $20,685 $5,864 -$31,240 $21,494 -$19,831 $101,423 $22,999 $14,893 $6,533 $24,54720-May $6,473 $6,556 $21,250 -$12,116 $37,071 $15,733 -$26,879 $11,23427-May $54,202 $89,281 $11,6863-Jun -$3,249 $4,365 $6,395 $3,590 $653,828 $202,490 $5,134 -$25,993 $15,944 $14,412 $11,576 $14,24710-Jun $4,647 $1,238,048 $8,416 $5,506 $25,605 $85,279 $8,297 -$94,929 -$36,031 $4,250 $156,761 $19,775 -$2,900 $11,487 $5,29817-Jun $21,540 $7,055 $8,920 $23,714 $4,899 $43,702 $17,993 $4,014 -$24,960 $5,04524-Jun $7,106 $8,957 $5,904 $5,010 $3,379 $9,081
$1,238,048 +172% uplift
Add text here
10 – Jun – 2013 Brand: Supercoat Beef 250g Display: Front Gondola Brochure: Mechanic: Price point Discount: 45%
$882,725 -89% uplift
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18 – Mar – 2013 Brand: Pedigree Beef 500g Display: Fixture Brochure: Mechanic: Multibuy Discount: 10%
The value each promotion adds to the category
can be assessed, allowing for transparent
and informed decision making
Price and promotions: conclusionUnderstand the drivers of incremental sales No double counting
Determine iconic promotions – Brochure and GondolaTrade off to determine the greatest ROI
Slot the entire promotional calendar Use data driven promotional guidelines to slot and quantify the uplift from strategies
Big data is about big stories
Questions?
