Professional Documents
Culture Documents
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Total Spends Radio spend Newspaper spend Outdoor spend
Baseline sales Online incr. sales TV incr. sales Daily incr. sales
Online spend TV spend Dailies spend
R
O
I
Marketing
Market Basket Analysis
Market basket analysis is done to evaluate consumers purchasing behaviour and to identify the different
items bought together in the same shopping session. It uses stores transactional data and is leveraged for
creating cross-selling opportunities for furthering sales.
It aids retailers in:
Product placements--Which products should be placed next to each other
Customizing layouts, assortments and pricing, to the local demographic
Affinity promotion--Designing more profitable and effective consumer promotions like couponing based
on associated products
Increase the profit fromsales of complementary products, which do not sell by themselves
Stimulate trials and increase consumer awareness during launch of new products and variants
Handling excess stock by designing offers among associated products
Support, Confidence and Lift are used to identify the combination of products consumers buy together most
often.
CONFIDENCE Product 1 Product 2 Product 3 Product 4 Product 5 Product 6 Product 7 Product8
Product 1 100% 25% 9% 6% 18% 2% 28% 31%
Product 2 42% 100% 7% 8% 22% 6% 29% 22%
Product 3 31% 16% 100% 5% 10% 4% 18% 17%
Product 4 35% 29% 8% 100% 28% 7% 26% 12%
Product 5 47% 35% 8% 12% 100% 3% 37% 24%
Product 6 37% 66% 18% 19% 21% 100% 25% 21%
Product 7 45% 28% 8% 7% 23% 2% 100% 25%
Product 8 57% 24% 9% 3% 17% 2% 29% 100%
Probability that Product 8 is purchased given that Product 1 is bought is 31%
Probability that Product 1 is purchased given that Product 8
is bought is 57%
Increasing sales by creating cross-selling opportunities using MBA
Fraud detection & Loss prevention
Fraud and shrinkage is one of the most common challenges faced by retailers resulting in financial and
consumer trust loss. It can originate with consumers, employees, or external sources. Different types of fraud
include credit-card fault, fraudulent merchandise returns and shrinkage due to shoplifting, embezzlement
and human error.
Predictive modeling helps in identifying unusual patterns of purchase and product movements that can help
detect fraud and shrinkage. It also helps narrow down the categories and sale seasons that are most
sensitive to fraudulent behaviour. The retailer can then take extra precautions to safeguard against loss
among these sensitive categories and shopping periods.
Fraud Multiplier by Industry
Store
Operations
0 5
1.9
2.0
2.0
2.2
2.3
2.3
2.3
2.6
2.8
2.9
3.1
3.3
3.4
2.3
0 1 1 2 2 3 3 4 4 5 5
Housingwares/Home Furniture
Automotive/Motor Vechile and Parts
Telecommunications or data service
Flowers/Gifts/Jewelry
Sporting Goods
Computer/Electronics/Software
Books/CDs/Videos/DVDs/Music
Textiles/Apparel/Clothing
Drug/Health & Beauty
Office Supplies
General Merchandise Stores
Hardware/Home Improvement
Toys/Hobbies
Total
Fraud Multiplier
Category Sales Reporting & Analysis
Constant tracking of sales and regular reporting helps the sales force analyse category sales so that they can
have an action plan before the next sales cycle starts. Also, it serves as the base for formulating sales
strategies.
It helps in:
Identifying which categories, products and SKUs are selling the most in the store
Analysing consumer preferences and buying patterns in the store
Evaluating growth potential for product portfolio (categories, brands and SKUs)
Planning and managing store promotions
Evaluating the performance of the store by categories and SKUs on a regular basis
Enabling root-cause analysis in case of sales/profit decline: help identify the epicentre and rectify the
same
-1%
2%
4%
-5%
1%
-1%
8%
-8%
1%
-1%
6%
-5%
10%
18%
22%
50%
Color cosmetics
Skin Care
Personal Care
Hair Care
Current Month
Market Share
YTD Market
Share Change
YOY Market
Share Change
3 month MOM
Market Share Change
55%
0.1%
0.3% 0.4% 1.0%
3.2%
50%
12%
32%
52%
YTD'11 Company1 Company2 Company3 Company4 Company5 YTD'12
Narrowing down on share loss within Hair Care category
52%
4.1%
1.1%
0.3%
8.7%
48%
30%
45%
60%
YTD'11 Brand1 Brand2 Brand3 Brand4 YTD'12
Further narrowing down on the brand(s) causing the share loss
Store
Operations
Workforce Analytics
Sales force, for a retailer is an equally important asset as the product that they sell. A good, experienced
sales force yields higher consumer satisfaction and hence increased sales. It is therefore critical to optimize
the employee recruitment, training and supervising process. Retailers can use analytics to increase
productivity and can help enable an effective and sustainable retail workforce.
The advantages of work force analytics include:
Acquisition of talent- identifying the most effective employee attributes
Skill set mapping- placing employees in the ideal role based on their capabilities
Talent building- recognizing employee training needs in key skills and ensuring all employees meet store
standards
Improve scheduling effectiveness- based on predictions of when and where consumers are most likely to
shop, analytics can help schedule the most-productive employees appropriately
Retention- by understanding the key risk factors that drive attrition, employers can preemptively
mitigate these risks.
Improve safety- detect the underlying causes to workplace accidents and rectify
Store
Operations
Tracking work-force effectiveness & its impact on revenue
Opening of newstores
Site selection is crucial to a retailer and identifying the ideal location to open a new store has to be a
strategic decision.
Integrating census data, which provides population and income data, along with survey data, providing
demographic, psychographic and competitor store data, and financial data will give the retailer a better
understanding on areas with the greatest potential. With this information, a strategic model can be built,
which can help determine the best sites and best strategy for that area.
This process helps retailers identify:
The ideal location for the stores
The type of store format that is needed in a specific instance
Whether to remodel or not
What merchandising approach to adopt
Strategy &
Planning
Identifying the optimum location for a retailer
Tracking Overall Performance
Retailers need to get a birds eye view on changing business conditions and emerging trends, and growth
potential based on the sales and profits earned from their stores and categories. Accordingly they can adjust
plans and forecasts to meet the new challenges and opportunities.
This requires a close monitoring and tracking process of the sales and financial measure of the overall market
and then correlating it with the individual store performance.
It helps retailers:
Analyse market trends and buying patterns in the retail industry and identify the gaps and opportunities
Evaluate and benchmark store performance on key metrics like traffic counts, conversion rate, sales per
square feet and sales per employee
Track sales activity for all outlets by region/sub-region/category
Identify profitable categories in various regions
Monitoring & tracking performance across outlets
Strategy &
Planning
Sales Performance:
Store Clustering
Retailers need to customize their product and service offering to meet the taste and preferences to diverse
cultural and demographic consumer segments. Implementing strategies at an outlet level will be
operationally difficult to manage, while an overall promotional campaign and strategy for all outlets, despite
being operationally more feasible will not be able to meet localized consumer needs. To counter this issue,
retailers need to identify stores that exhibit similar demographics, locational proximity, personal income and
shopping behaviours of local consumers and device a localized approach to run their marketing activities.
Cluster analysis uses loyalty card transaction data and survey data to identify similar stores that form a
cluster based on shopper demographic data and their shopping patterns. The retailer is then able to tailor
specific promotional campaigns, assortment, planogramming, pricing and promotion strategies, store
formats, layouts for servicing each of the identified clusters. This garners the retailer better returns on their
strategies since it is more focused to shopper needs and increases consumer satisfaction due to the
personalized approach.
Store clusters for a leading mass retailer in the US
Strategy &
Planning
Strategy &
Planning
Key Value ItemAnalysis
A few SKUs have a disproportionate impact on consumer price-value perception and can cause consumers to
switch stores when those SKUs are not priced appropriately. These price sensitive items are known as Key
Value Items, or KVIs. A retailer can use this knowledge to have a significant control over the items perceived
price image and thus regulate the stores image by carefully fixing the everyday pricing and the promotional
pricing.
Key Value Item Analysis blends behavioral data (sales, household penetration, purchase frequency) and
attitudinal data (consumer awareness of product, accurate price recall, price differential across similar
retailers). The KVIs are identified across categories based on revenue coverage, price sensitivity, sales
volume, and the role and prevalence of the item in the market basket.
By managing true KVIs through aggressive pricing, promotions, wide range availability and correct placement,
retailers will be able to:
Influence consumers overall perception of the store
Drive sales and footfalls
Gain market share
Factors
determining
a KVI
Sales
Volume
Price
Sensitivity
Revenue
coverage
S
a
l e
Price
Role & Presence
in Market Basket
Price differential
across retailers
Business Situation:
The client, a leading retail chain offering various products across categories, wanted to understand its customers to better plan customized
campaigns and promotions with the objective of increasing customer engagement and overall revenues.
The Task:
Identify appropriate customer segments based on various factors such as purchase patterns, promotion response and demographics of the
customers.
Framework:
Customer Personas:
Analytics in Action
Increasing Revenues by better Understanding Customers
Client: A Leading Retail Chain
Define & Build
customer segments
Segment analysis Customer profile
Identified an appropriate
customer base based on the #
of visits and days on books
Built customer segments using
clustering algorithms after
treating the outliers
Analyzed the segments and
identified the customer
personas in each segment
Got a detailed profile of
customer in a segment to
target for promotion
Who?
What?
When?
70% sales
from FMCG &
Staples
Early morning
Weekend
Early Morning
Weekend Shoppers
Large family
High visits
60% sales
from FMCG &
Staples.
Multi-
category
shopping
Afternoon to
Evening
High sales, large
family shoppers
Salaried
staples
shoppers
70% sales
from Staples
Shops in rice,
oil, pulses and
flour
Morning to
Afternoon
1
st
10 days
Salaried, Health
conscious,
staples shoppers
Salaried
Large family
50% sales-
staples, 30%-
FMCG.
Multi-
category
shopping
Morning to
Afternoon
Weekend 1
st
10 days
Salaried, large family,
weekend shoppers
Low visits
Low sales and
high margin
45% sales
from Apparels
Shops in
Mens casual
and formal,
ethnic wear
Morning to
Afternoon
Weekend
Weekend, apparel buying
shoppers
Single family
with kids
Health
conscious
70% sales-
FMCG
High
proportion of
baby care and
health SKUs
Morning to
Afternoon
single/small family
shoppers
Discount
seekers
50% sales
from Home
needs.
Shops in
utensils, bed
and luggage
Afternoon to
Evening
Weekend
Discount seekers
70% sales
from Staples
& FMCG
Evening
Evening shoppers
The Result:
Developed relevant Customer personas like discount oriented, large family, weekend specific category shoppers,
impulsive buyers, high end buyers, etc
Customer personas helped the business to appropriately target customers based on the day, time, affinity and category
of purchase with appropriate promotional offers, leading to incremental revenues
Identify an
appropriate
Customer Base
Small to
Medium size
families
Large families
shops mostly
in FMCG and
Staples
Business Situation:
The client, a B2B US-based retailer with presence in North America, Australia, Europe and Middle East noticed a significant increase in % Bad
Debt for new prospect acquisitions; from 5.1% of total prospect sales in 2007 to 8.8% in 2011. Business wanted to manage this without
compromising on lost sales.
The Task:
Design, develop and implement a robust predictive strategy that will help in quantifying the forward-looking risk at a Prospect-level. This will
be a quantifiable and reliable benchmark for the business to leverage and decision whether to extend credit, go for credit card pre-payment,
or completely avoid a particular prospect.
Analytical Framework:
Developed a Risk or Q-Score using firmographics and transaction information on prospects acquired between 2007 2011. Upon
implementation, each Prospect had a risk score between 1 and 10; with 1 being the most risky prospects; and 10 being the least risky
Prospects.
The Result:
Based on validation results; the predictive model was able to significantly separate prospects who paid and who defaulted
Prospects with Q-score = 1, 2, 3 are high risk prospects. These prospects on average have 2.2X default rate as prospects with score = 4 to
10
Recommendations implemented by the business: Review of all orders > $100 for Q-score < 4 and Prepayment for all orders > $200 for Q-
score < 4
Overall Bad debt decreased by 32% in the subsequent year
Analytics in Action
Prospect Acquisitions: Lowering Bad Debt by 32%
Client: A leading US-based Retailer to Small & Medium Enterprises
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
1 2 3 4 5 6 7 8 9 10
%
B
a
d
P
r
o
s
p
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c
t
s
Q-Score
Model
Random
Model Results
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
1 2 3 4 5 6 7 8 9 10
%
B
a
d
P
r
o
s
p
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c
t
s
Q-Score
Model
Random
Validation Results
Defining
Modelling
universe
Risk Tables
Variable
selection and
Model
development
Build Model,
assigning Q-
scores
Prospects segments with limited data and
low bad debts ignored (these segments
were treated separately)
Risk factors calculated for each prospect
variable such as location, transacted value,
organization size by prospect segment, etc
Variables (factors) with high information
value (IV) to risk identified; inter-correlated
factors discarded to include most relevant
factor in the model*
Q-score calculated based on model and
assigned to each prospect
V
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Business Situation :
US-based manufacturer of personalized gift items; with presence across North America, Australia, Europe and Middle East. They have over
3,000 skus on offer; across 8 product platforms and 13 countries. SKUs are supplied from Far East suppliers, with a 3-month lead time. And
almost 60% of Customers purchase gift items for immediate consumption; with the remaining having a deferred shipment date through out
the year. In addition, the manufacturer runs SKU-level promotions through-out the year, which result in SKU-specific demand. Critical to have
accurate sku-level demand forecast so that all orders are met; while maintaining optimal inventories.
The Task :
- Develop a framework and relevant forecasting models for improving the forecast process and accuracy.
- Obtain a robust and accurate SKU-level forecasting for each week over a year.
- Implement the predictive models so that forecasting is improved, inventory levels are optimal and customer satisfaction is improved.
Analytical Framework :
The solution was aimed at simplifying the process and improving the timeliness and accuracy of demand forecast:
1. Simplify and automate some of the current processes that were cumbersome and susceptible to human error.
2. Use statistical analysis to learn from historical trends, project future demand, and create an Early Warning System to predict weekly excess
and stock-outs at SKU level.
3. Improved the existing process of predicting repeat business using cannibalization models and also provided shipment profiles with insights
on patterns of how products shipped out to customers. This helped in placing timely and appropriate Purchase Orders with suppliers.
4. Provided dashboards for measuring forecast accuracy and also performance of shipments.
5. Adhoc analytics to support current forecasting, customer care and marketing decisions e.g. quantifying financial impact of late shipments
The Result :
Better sku-level forecasts and ability to react faster to products becoming hits.
Less obsolete inventory at the end of the year meant freeing up working capital and reducing waste. Lower stock-out rates also meant
better customer satisfaction in addition to revenue. Since repeat customers are their main focus, this factor is critical in preventing
unnecessary attrition.
More scientific approach to forecasting, thereby eliminating any bias in subjective forecasting logic.
Analytics in Action
Improve Demand Forecasts. Sales up by $ 3MM, stock-outs down
Client : A US-based Manufacturer of Customized Gifting Products
Forecast Variance
S
a
l e
s
g
r
o
w
t
h
(
P
Y
)
Over- forecasted
Growing
Under-forecasted
Growing
Under-forecasted
Declining
Over-forecasted
Declining
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-5000
0
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30000
-40000
-30000
-20000
-10000
0
10000
20000
30000
40000
1 4 7 10 13 16 19 22 25 28 31 34 37 40 43
MAPE - 23.47%
2UCL
3UCL
2LCL
3LCL
Variance
235386
359051
198157
211658.2184
196496.3737
0
50000
100000
150000
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250000
300000
350000
400000
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Plan C
FY_2009
YTD_2010
Regression 1
Regression 2
forecast
Further, it was found that key style groups and colors remained consistent year-on-year
And that Customer repurchases on deleted style groups and colors were not significantly impacted the
following year
Recommendations made to rationalize marginal style groups and colors, leading to approximately 30% SKU
reduction and significant cost savings in business complexity and working capital.
5%
5% 5%
5%
11% 10% 8% 6%
11%
11%
11%
10%
10% 11% 11%
12%
26% 25% 26%
28%
30% 30% 31% 30%
0%
20%
40%
60%
80%
100%
2008-09 2009-10 2010-11 2011-12
13%
34%
64%
44%
15%
36%
57%
49%
0% 10% 20% 30% 40% 50% 60% 70%
Reactivation Continued SKUs Reactivation Discontinued SKUs
Customer
Segment1
Customer
Segment2
Customer
Segment3
Customer
Segment4
Business had over 5000 SKUs
across a few unique Product
Platforms. Each platform had
SKUs across many style groups
and colors.
Style groups and colors were
investigated for marginal
contributions to Revenues.
It was found that only a few
key style groups and colors
accounted for over 90% of
revenues
Client : A leading B2B Retailer of Personalized Gift Products
Blue
Gunmetal
Red
Black
Burgundy
Green
Rest
Analytics in Action
Effective SKU Management
MANAGEMENT TEAM
GLOBAL EXPERIENCE.
PROVEN RESULTS.
Roy K. Cherian
CEO
Roy has over 20 years of rich experience in marketing, advertising and media
in organizations like Nestle India, United Breweries, FCB and Feedback
Ventures. He holds an MBA fromIIMAhmedabad.
Anunay Gupta, PhD
COO &Head of Analytics
Anunay has over 15 years of experience, with a significant portion focused
on Analytics in Consumer Finance. In his last assignment at Citigroup, he was
responsible for all Decision Management functions for the US Cards
portfolio of Citigroup, covering approx $150B in assets. Anunay holds an
MBA in Finance fromNYU Stern School of Business.
Kakul Paul
Business Head, CPG & Retail
Kakul has over 8 years of experience within the CPG industry. She was
previously part of the Analytics practice as WNS, leading analytic initiatives
for top Fortune 50 clients globally. She has extensive experience in what
drives Consumer purchase behavior, market mix modeling, pricing &
promotion analytics, etc. Kakul has an MBA fromIIMAhmedabad.
ADVANCED ANALYTICAL SOLUTIONS
MARKETELLIGENT, INC.
80 Broad Street, 5th Floor, New York, NY 10004
1.212.837.7827 (o) 1.208.439.5551 (fax) info@marketelligent.com
CONTACT
www.marketelligent.com
Industry Business Focus Tools and Techniques
Consumer Finance Investment Optimization SAS, SPSS, R, VBA
Credit Cards Revenue Maximization Cluster analysis
Loans and Mortgages Cost and Process Efficiencies Factor analysis
Retail Banking & Insurance Forecasting Structural Equation Modeling
Wealth Management Predictive Modeling Conjoint analysis
Consumer Goods and Retail Risk Management Perceptual maps
CPG & Retail Pricing Optimization Neural Networks
Consumer Durables Customer Segmentation Chaid / CART
Manufacturing and Supply Chain Drivers Analysis Genetic Algorithms
High Tech OEMs Supply Chain Management Support Vector Machines
Automotive Sentiment Analysis
Logistics & Distribution
YOUR PARTNER FOR
DATA ANALYTI CS SERVI CES
Greg Ferdinand
EVP, Business Development
Greg has over 20 years of experience in global marketing, strategic planning,
business development and analytics at Dell, Capital One and AT&T. He has
successfully developed and embedded analytic-driven programs into a
variety of go-to-market, customer and operational functions. Greg holds an
MBA fromNYU Stern School of Business