Customer segmentation and pricing optimization

Client Profile
A leading hypermarket chain in Western Europe.

Situation
Our customer was suffering from the highly price competitive environment which is characteristic of European retail markets. The increasing presence of deep-discounters was threatening margins and sales of this "traditional" retailer. To provide each customer a good reason to shop with them, the company needed to sharpen its offerings and increase differentiation. The client's main ambition was to improve its price image and become more competitive against discounters.

Solution
Using customer and transactional data combined with traditional market research, emnos segmented the client's customer base and identified customer types with different degrees of price sensitivity. In addition, key lines for price reduction were identified, in order to target price investments more successfully.

Results
emnos showed through its analysis that only 6% of the product line accounted for 40% of revenue with the most price sensitive customers. Consequently, price reductions were focused on these products. As a result of this strategy, the client was able to reduce its price reduction costs to one fifth of usual. In total, the retailer saved around 50 million Euros, while maintaining its sales performance.