Price Optimization at Northern Group Retail
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Case Details:
Case Code : MKTG085
Case Length : 9 Pages
Period : 2002-2003
Pub Date : 2005
Teaching Note : Available
Organization : Northern Group Retail
Retail ing
Countries : Canada
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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
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Excerpts
The Northern Group under York
Soon after taking over the Northern Group, York conducted a research to analyze the reasons for the poor performance of the stores. The analysis revealed that the Northern Group brands had a loyal customer following and good brand recognition in Canada. The poor performance was a result of inefficient internal processes. Too many retail locations also diluted the brand...
The Price Optimization System
York implemented a price optimization software called Pricing4Profit, which was developed by a company called ProfitLogic.
The integration of the software with the business processes used at Northern Group began in August 2002 and continued upto mid-September.
Northern Group provided ProfitLogic with three years of SKU data to allow the
software vendor to establish a pattern for inventory movement and develop
predictive models.
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Northern Group also installed a new Sun platform in the company's technical environment to run the new technology (Refer Exhibit-II). After dealing with tool interaction and configuration needs, ProfitLogic began a four-week project of adjusting the analytical engine of the software to meet the specific needs of Northern Group.
Within that time frame the retailer finalized business process, tested strategies and developed training materials to accelerate the deployment of technology in the company. The new technology was formally rolled out in mid-November...
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Benefits Obtained
Northern Group obtained significant benefits through the implementation of price optimization software. Firstly, it allowed the company to maximize returns and obtain the highest margins possible, by providing a scientific tool which determined the ideal prices at which to sell the given merchandize. The price was fixed on the level of demand that the software expected for the merchandize. If it anticipated that the demand would fall, it recommended a corresponding lowering of prices, so that customers were always offered what they were ready to pay for a given item at a given time... |
Exhibits
Exhibit I: The Northern Group Brands
Exhibit II: The Technology Environment at Northern Group
Exhibit III: The Future of Price Optimization Applications
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