October 2, 2015

Synergy for Total Site Profitability: Connect Pricing and Planning for Competitive Advantage

Insider, Network Planning, Fuel Pricing

When pricing competition heats up, what do you do? Fuel retailers who see their business in one dimension will feel boxed into a corner. Their only answer is “lower the price.” 

But as fuel volumes and margins are squeezed, convenience retail offers new possibilities for driving profits. Multiple points from forecourt to in-store can influence a customer’s decision to buy from you. Of those 7 Elements, pricing and retail network planning are two specialties that have a lot to say to one another—and almost never do. 

Pricing is very tactical. One of our U.S. clients, for example, sends out about 3.5 million price changes every year. That’s a lot of activity being managed by 14 different pricing teams, 7 days a week, 24 hours a day. The competitive environment demands it. The most effective pricing models include location intelligence.  

Planning a network is very strategic. Location intelligence, assessing “dirt strength,” deciding to buy or build… planners spend a great deal of time modelling “what if” scenarios and making what are essentially long-term bets about capital investments. Those models, of course, depend in part on data generated by the pricing analysts’ performance. 

The models and practices of planners and pricing analysts intersect, but you’d never know it. They tend to exist in parallel universes, working to different rhythms. They each hold down one end of the tactical-to-strategic spectrum, yet in most organizations, they never even meet. 

At a recent Kalibrate User Group meeting, we brought planners and pricing analysts together.  After getting past the first reaction—“What are THEY doing here?”— it was an eye-opener for everyone. The combination of planner and pricing perspective is yielding new points of advantage for companies who know that our industry will never be like it was. The more we get out of our silos and cross-pollinate our perspectives, the more value we uncover. 


KEY CONCEPT: Planning and Pricing Synergy

Kalibrate has identified six areas where planning and pricing systems can be improved by sharing intelligence across these areas that have traditionally been separated by business structures and tools. 

Six Competitive Advantages

  1. Ability to review volume potential vs. actual volume performance to inform the target volume in pricing rules. 
  2. Streamline competitor analysis by identifying the right competitors to survey.
  3. Ability to benchmark key fuel and retail elements (pricing, location, market intelligence, merchandising, facility, operations, brand) vs. trade area to inform strategy.
  4. Detect minimum and maximum volume potential for each location by testing price positions. 
  5. Optimize the relationship between pricing strategy and in-store sales performance through pricing position tests.
  6. Calculate and benchmark the volume efficiency for each site using changes in price position to measure resulting changes in volume.
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