Demand-Driven Pricing

Pricing was a manual process at Piggly Wiggly until recently, when the southern grocer implemented a new pricing program. "Now we have a user-friendly, Internet-based system that allows us to be more strategic about how we price," says Mike Mock, retail pricing manager for the 110-store chain.

An extensive evaluation and vendor validation process led Piggly Wiggly to DemandTec, notes Rich Farrell, director of IT. Leaving its manual system of determining pricing behind, the company is now using strategically calculated consumer demand information to price its products.

The planning phase of this project began in March of 2004, explains Mock. "We invited several other software companies in to make presentations." During the next several months Piggly Wiggly reviewed its findings. The partnership with DemandTec was announced in March of 2005.

Then Piggly Wiggly implemented a five-category pilot study to determine a business case and expected ROI. The pilot phase lasted approximately 90 days. Pleased with the results from the DemandTec product, Piggly Wiggly began a phased rollout of the system in June of 2005. The grocer is rolling out the system in a number of different categories each month and expects to complete the rollout by year-end 2005, according to Mock.

DemandTec's pricing, promotion and markdown optimization software is built on an IBM Consumer Demand Management (CDM) Platform. The applications are designed to allow retailers to strategically plan and execute pricing strategies throughout the product lifecycle based on a quantified understanding of consumer demand.

"In order to continue to profitably grow, we need to be more strategic about how we price and promote across the business," adds John Owens, director of merchandising for Piggly Wiggly. "One of the benefits we are most excited about is how DemandTec will enable us to predictably balance our competitive position with our overall financial performance."

Now that the pricing part of the program is underway, Mock expects the company to move forward with the promotion component. "Our target date is to get promotions started by November," he notes.

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