Retail Revenue Management 2.0: Omnichannel Commerce and Customer Centricity Propel Market to Next Frontier 

FRAMINGHAM, Mass., June 30, 2011 – IDC Retail Insights today announced the availability of a new report, Business Strategy: The RRM 2.0 Manifesto – Omnichannel Price, Promotion and Offer Optimization (Document #GRI228477). With powerful new market structures, business models, and consumer technology forces in play today, there's a clear and present need for a new generation of retail revenue management (RRM) capabilities. In this new report, IDC Retail Insights lays out a roadmap toward and model of RRM 2.0 capabilities and provides keen insight into the promising vendors taking RRM toward such capabilities.

Since 1999, RRM has ably helped product-centric aggregate merchandising maximize the value (revenue, margins, or units) created by products, categories, and events. It can drive market share gains and burnish a brand's image. However, omnichannel commerce and customer-centricity were not on the table in earnest when RRM 1.0 took shape, and localization and personalization were then little more than strategic visions. In today's market, omnichannel commerce is the basis for competition. Consumers instrument their shopping experience with smartphones, media tablets, and retailer-supplied shopping devices. In-aisle price lookups and product comparisons make most products known value items (KVIs).

To remain competitive, IDC Retail Insights recommends a comprehensive RRM 2.0 strategy that incorporates omnichannel capabilities in product life-cycle pricing plus two dimensions of life-cycle customer offer management: one extending across the customer's years-long relationship with the brand and another spanning the before, during, and after aspects of each instrumented shopping episode—from browsing to buy to using. In addition, IDC Retail Insights recommends that retailers employ a next generation RRM strategy to the context of customer-centric one-to-one marketing environments, where offers to customers, not the promotion of products, is the currency of the day. RRM tactics need to maximize the value the brand can capture by increasing the share of each customer's needs it can satisfy day-in and day-out to build lifetime financial value and peer advocacy.

According to Greg Girard, program director, IDC Retail Insights, "With the rise of omnichannel commerce and a customer-centric environment, it is imperative that retail revenue management solutions advance to the next generation by adding a second dimension to its framework, for the optimization of consumer offers, which must be coordinated with RRM's legacy capabilities in optimizing product pricing and promotion."

Several leading retailers today recognize the imperative need for next generation RRM solutions to address key challenges and make critical improvements to ensure customer satisfaction. Recent examples include:

Target Corporation (NYSE: TGT), the second largest general merchandise retailer in the United States, recently selected DemandTec Shopper Insights to complete its planned deployment of DemandTec's entire nextGEN solution suite. As such, Target and its trading partners will now have the ability to quickly identify new opportunities to reach specific guest segments with more tailored assortments, promotions, and pricing.

Meanwhile, Sam's Club, a division of Wal-Mart Stores, Inc. (NYSE: WMT), recently announced it had achieved higher than expected results from its transformational eValues program enabled by FICO Retail Action Manager, a marketing decision application using a combination of predictive analytics, rules, and optimization technology. As a result, Sam's Club is the first retailer to automate the combination of these technologies to target highly-customized offers to its members as its core predictive technology platform.

Aldo Group Inc. recently implemented Oracle Retail Markdown Optimization to gain greater visibility into customer demand, the impact of price points on inventory levels and gross margin performance, while optimizing in-season inventory management decisions.

With a keen eye towards customer satisfaction and optimal pricing, discount retailer Fred's Inc. of Memphis, Tenn. (NASDAQ: FRED) recently selected KSS Retail, a dunnhumby company, as its provider of price modeling, forecasting, and price optimization. Fred's, with more than 670 stores and 300 pharmacies throughout 15 states, will utilize KSS Retail's PriceStrat solution to optimize pricing and promotions to enhance its competitive position and deliver customer value.

Known for providing consumers with value and convenience for branded products, Pamida, operators of more than 200 general merchandise stores across 17 Midwestern states, relies on the Revionics Advanced Pricing Solution (RAPS) to calibrate prices on every item, in every store, each week across all categories to ensure Pamida achieves its desired price image and financial objectives.

The new report describes in detail the IDC Retail Insights RRM 2.0 Capabilities Model and assesses key RRM 1.0 vendors and vendors coming from a customer offer management heritage against this model, setting the stage for an IDC MarketScape of the RRM 2.0 application and services space due to be published later this year.

For additional information about this study, or to arrange a one-on-one briefing with Greg Girard, please contact Sarah Murray at 781-378-2674 orsarahbethmurray@gmail.com. Reports are available to qualified members of the media. For information on purchasing reports, contact insights@idc.com; reporters should email sarahbethmurray@gmail.com.

About IDC Retail Insights

IDC Retail Insights assists retail businesses and IT leaders, as well as the suppliers who serve them, in making more effective technology decisions by providing accurate, timely, and insightful fact-based research and consulting services. Staffed by senior analysts with decades of industry experience, our global research analyzes and advises on business and technology issues facing the retail industry. International Data Corporation (IDC) is the premier global provider of market intelligence, advisory services, and events for the information technology market. IDC is a subsidiary of IDG, the world's leading technology, media, research, and events company. For more information, please visit www.idc-ri.com, email info@idc-ri.com, or call 508-935-4490. Visit the IDC Retail Insights Community at http://idc-insights-community.com/retail.

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