Tesco wins insight on the impact of promotions in UK stores using PriceStrat software

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Tesco has implemented software from KSS Retail, a dunnhumby company, to better plan and manage promotions and offers across its UK business.

The supermarket’s UK buyers and category managers are using KSS Retail’s PriceStrat’s science and analytical tools to better plan and understand the impact of potential offers, so they can make smart decisions that strengthen Tesco’s brand and the value delivered to shoppers.

With more than 3,000 store locations in the UK as well as an online presence, Tesco faces the same challenges as many other retailers: increased competition and consumer price sensitivity due to a slow economic recovery. As a result, price and promotion are key areas of focus for the company. Executives in February announced a £200m investment in “sharper pricing” and have promised to end “frivolous promotions” in favour of those more meaningful to customers.

A market leader in price optimisation software, KSS Retail began working with Tesco several years ago through its partnership with dunnhumby. The PriceStrat solution provides merchandising teams with accurate forecasts and gives retailers like Tesco real-time insights on shoppers’ response to different promotional offers. Through “what-if” scenario planning, managers can test various offer mechanics and variables, as well as display and space options, before promotions are executed. Promotions can be tailored by store type and geography to maximise relevance. By implementing PriceStrat, Tesco UK has been able to:

  • Empower its category management and merchandising organisation with tools to accurately predict the impact of different promotion options in advance
  • Provide Tesco buyers with data and visibility they need to collaborate with manufacturers and vendors and model better promotions for their shoppers
  • Identify new promotional opportunities based on price elasticity modelling, and reveal category cross-effects and product cannibalisation
  • Reduce the presence of pricing logic errors in the stores by automating enforcement of advanced pricing rules
  • Improve the company’s customer price image measures both in-store and online by delivering consistently better promotional pricing matched closely to customer behaviour

“It’s clear that retail customers value promotions, but many offers are too complicated and don’t work for shoppers in the right way,” said John Scouler, commercial director at Tesco. “With the forecasting and analytics capabilities available in PriceStrat, we can understand – based on what our customers tell us – where it’s most important to offer promotions or reduce prices. We will continue to rely on PriceStrat to help us provide shoppers with stable, logical and competitive pricing, as well as the most compelling offers possible.”

Tesco has already begun to extend the implementation of PriceStrat to other regions initially in Eastern Europe. In addition, the retailer is collaborating with KSS Retail and dunnhumby on PriceStrat enhancements, including the ability to better predict customer response to promotions across the total store.

“The successful implementation of PriceStrat is just part of the ongoing strong dunnhumby partnership with Tesco,” said Yael Cosset, CEO of KSS Retail. “Delivering the right prices and relevant promotions are fundamental steps to growing enthusiasm about the Tesco brand, and we’ve seen the proof that our customer science enables just that. We’re delighted about the results the company is seeing with PriceStrat technology and look forward to building on these achievements with Tesco and other retailers in the years to come.”