Few words in business are more widely used than the ubiquitous “strategy.” This convenient label may be attached to almost any collection of our ideas in order to impart gravitas to their meaning. And yet, so often, those strategies consist of little more than a set of goals or targets, a loose sense of our direction of travel, or — worse still — an expression of unsubstantiated hope.
It is surely time to tighten up the definition of such an important component of the business lexicon. A practical definition of strategy might be “a plan to achieve an objective.” Under this interpretation, it is clear that specifying the objective, or desired future state, is essential. However, the starting point, or current state, also needs to be clearly understood. If a strategy is a plan to get from “A” to “B,” it is surprising how little attention is often given to the true characteristics of Point A. You would not get very far using a map with this approach, and in business, the understanding of Point A requires considerably more than pinpointing your current physical location.
Imagine the following situation. A stranger approaches you with a map, asking you to explain the most effective way to get to his destination. You find your current location on the map and point out the roads that offer the most direct route. The stranger shakes his head and asks you to try again. You quickly spot your mistake; he obviously does not have a car. Your new plan involves a series of train connections. Another shake of the head. Thinking now that he may be a little short of funds, you ask him how much he wishes to spend on his journey. “Nothing at all,” is the reply. You eventually ask him to explain what he really has in mind, and his answer immediately clears up the mystery — he is leading a charity walk. The advice he needs from you is to show him the most attractive route for 30 walkers through remote countryside, avoiding the large towns and main roads.
In business, too, strategies can miss the mark because we have not fully understood the context.
A structured approach to strategy development
The five headings in Figure 1 encompass the ground that should be covered to develop a robust strategy.
In business, context is vital. The long-term history of acquisitions, disposals, major initiatives, people movements and financial performance often contains valuable insights about the current state of the business and the reasons for change. Motivation and the proposed speed and direction of travel have a lot to do with history. Relating the performance of your and competitors’ businesses to the correct market segmentation and share can reveal a great deal about Point A that really matters in a strategic context. We generally find that the work involved with correctly characterizing this starting position can absorb up to 70% of the effort required to formulate strategy.
In contrast, the definition of Point B can be relatively straightforward. The shareholders, board, CEO and senior management will generally have discussed the ambitions and expectations for development over at least the next five years. Simple objectives can be powerful: Doubling the size of the business, achieving a market-leading position, and raising margins to levels attained by competitors or by the business itself in the recent past are all valid goals. The more difficult task is to ensure that these objectives have taken into account both the context (as above) and the means available (see below).
Detailed milestones and metrics associated with individual initiatives are essential in activating strategies (see L.E.K. Consulting’s Executive Insights on Value Activation), but you also need clear and simple mechanisms for measuring progress toward your objectives at the higher strategic level. How will you know when you have arrived at your destination? What metrics would reassure you that you are on track during the journey? If the objective itself is defined as a measurable target, setting milestones simply means deciding on the timing of progress along the way. The milestones for more qualitative objectives, such as “developing a reputation as a technology leader in our field,” generally require more thought. Without measurement, a strategy loses its power to engage.
The means available to pursue a strategy often receive too little attention. What strategic assets do you possess? The only steel plant in the country? Oil or gas fields with the lowest cost of production? A set of prime retail locations in every major conurbation in the country? The majority of valuable slots at a congested hub airport? Strategic assets open up valuable opportunities not available to competitors, and thus they alter the range of options that can be pursued. They may also require investment to maintain or protect, which might limit alternative development paths.
John Kay, in his book The Foundations of Corporate Success1, postulates that many of the competencies that are truly sustainable tend to fall under one of three headings:
- Architecture (internal and external architecture and networks)
- Reputation (all the ways in which customers perceive added value)
- Innovation (the ability to exploit innovation more or less continuously)
A thorough review of competences in these three areas will inform both the objectives set and the strategies to attain them.
Companies often make the claim that “people are our greatest asset,” while doing little to check the veracity of that statement, maintain the asset or improve the quality of the talent pool. More time is spent translating a strategy into financial projections than is spent attempting the more difficult task of forecasting skills shortages in the key areas of the business that will deliver the strategy (see L.E.K.’s Executive Insights on Skills Management).
Questions that need to be asked include:
- How good is the senior management team responsible for delivering the strategy?
- How well do they work together under pressure?
- What should be their individual focus on developing leadership skills?
- What capacity does the team have to deliver growth strategies beyond “business as usual”?
An important aspect of answering the “means” question is to work out how much financial firepower is available for strategic development. Capital is often available to fund value-creating strategies, but there are always practical constraints on the cash at your disposal. There is also no point in developing a strategy that pitches your company into a spending war against better-funded competitors.
It should be possible from the preceding four steps to define your strategy as the high-level plan to move from a clear starting position to a measurable endpoint, taking into account the means that you have available and the nuances of context and history that will influence successful delivery.
We are not talking about detailed action plans; those come later during the activation phase. The strategy needs to define the overall architecture of the plan and the principles you intend to follow. To return to the example of the charity walkers, they will proceed on foot, using pathways that take in good scenery and using the shortest route that includes facilities such as cafes and pubs and a place to stay overnight.
Strategy is all about choices — coherent choices that fit into an overarching plan to reach an objective. We often use the diagram in Figure 2 to illustrate some of the headings that are important in creating a coherent business strategy. Not all of them need to be under consideration every time, but each of the choices made must be consistent with the overall strategy. As a result, the high-level plan must be in place before making the choices that are relevant to the strategy being created.
Your strategic choices need to be coherent; they must optimize the business model you adopt for the assets at your disposal and the strength of your management team, and make full use of your predictions for the external environment. A balanced focus on all these elements is vital.
Following the COMMS framework will allow you to address the relevant questions when formulating a strategy. The acronym itself is a reminder to communicate your strategy widely throughout your organization. Everyone needs to understand the plan, feel committed to it and know the part they will play in the delivery.
1. Kay, J. (2007) The Foundations of Corporate Success: How Business Strategies Add Value. Oxford: Oxford Paperbacks.
A brick-and-mortar retailer buys an e-commerce platform. An internet technology company picks up a mobile phone manufacturer. A chain of pharmacies announces its intent to acquire a health insurer.
Today’s corporate tie-ups increasingly aim to transform the acquirer’s business rather than reinforce it. Why? Some point to major shifts in skill sets that companies need. Others note the diminishing number of attractive same-sector acquisition targets as industries consolidate and as investors search for ways to put their growing cash reserves to work.
But there’s more to it than that. The current cohort of acquisitions goes well beyond the typical defensive, synergy-driven, horizontal integration that marked previous M&A spurts. These new deals are taking parent companies in uncharted directions. This tells us businesses aren’t acquiring other businesses simply to expand what they’re already doing. They’re doing it because, strategically, they have to — if they want to survive over the medium to long term.
Though recent acquisitions may seem idiosyncratic, they all have in common the need to find new avenues for growth in mature markets or to deal with accelerating change. Let’s unpack some recent examples.
Capability upgrades. Technology, manufacturing, research and development, or human know-how — whatever the capability, acquisitions are a way to acquire it. Along this vein, Detroit-based General Motors acquired Silicon Valley startup Cruise Automation, which makes autonomous driving systems. While Cruise is a far cry from old-line auto manufacturing, GM saw in it an opportunity to advance its own capabilities in autonomous vehicles by acquiring talent and technology that would have taken too long to develop organically. With Cruise’s capabilities, GM is now a serious contender in the autonomous vehicle race against competitors such as Waymo.
Market breakthroughs. It can take years to build distribution networks or gain a foothold in a particular market. An acquisition, though, can accomplish both in relatively short order. PetSmart, for example, launched a historic bid to take over online pet supply retailer Chewy.com, surpassing in deal value Walmart’s prior-year acquisition of Jet.com. In one fell swoop, PetSmart — a traditional retailer with more than 1,500 physical locations — claimed a place among the fastest-growing segments of the increasingly dominant world of ecommerce. Chewy, for its part, gained a bulwark against established brick-and-mortar competitors, including those operating in one of retail’s bright spots: pet care services.
Reshaping the consumer experience. When it comes to seizing opportunities among underserved consumers, industry needn’t be a barrier. That’s why recent speculation about a Walmart-Humana deal raises so many possibilities. With the average Walmart customer skewing older, its ability to offer Humana’s Medicare Advantage product — the insurer’s biggest line of business — could further serve the needs of Walmart’s senior shoppers while meeting federal value-based requirements for healthcare. And with Walmart’s presence in rural markets, Humana might just open a door to healthcare in areas where hospitals increasingly are folding up shop.
As these cases show, contemporary acquisitions increasingly cross sector lines. They often extend and upend rather than consolidate markets. They also can open up vast new ecosystems. CVS’ planned acquisition of health insurer Aetna, for instance, is also a bid for the retail giant to enter an interconnected community ranging from digital health to provider networks to corporate customers.
Whatever the imperative, recent transactions suggest a growing belief among business leaders that many of the things considered essential to company performance — including technology, talent, customer bases, products and services — can be impossible to achieve unless they buy them outright.
Getting ahead of the risks
Still, these are very risky bets to make. For them to pay off, companies can’t assume that whatever they buy can be reshaped into something strategic. Any unknowns, from customer dynamics to the new organization’s value proposition against competitors, must be made known. How realistic is leadership’s vision for the acquisition? What role does the acquisition play in advancing a strategic agenda? What will it cost to make it all happen? With asset prices at record levels, careful due diligence is more critical than ever.
Business leaders also must consider the process they’ll use to capture sought-after strategic benefits once the acquisition closes. The tradition of absorbing target companies into the corporate parent is giving way to more nuanced approaches, including:
Preservation. This approach seeks to preserve the target’s organizational autonomy (because of skills, culture, geographic distance, etc., that need to be preserved) while the strategic benefits of the acquisition may be independent of the buyer’s business. This might be important, for instance, when a company seeking to enter a new market needs to keep the target’s focus on its own market. However, back-office functions might be integrated.
Symbiosis. A symbiotic integration starts as a preservation model except that there is a greater interdependence between the strategies of the two companies. For instance, GM would likely follow a symbiotic integration of Cruise in order to preserve how Cruise operates, but will need to integrate its capabilities into GM’s autonomous vehicle efforts.
Holding. A holding company keeps the acquired entity independent of the parent. No operational integration is necessary. Private equity firms are among those that take a holding approach with the companies they acquire, as the markets, skill sets, customers and channels for each portfolio company are likely very different.
As acquisitions become more unconventional and their stakes continue to rise, companies will find that their outcomes hinge on strong competencies in due diligence and post-merger integration.
No organization can remain the same. But the changes that modern companies face are happening too quickly for them to respond with the assets and resources they already have. In this environment, acquisitions — often daring ones — are a differentiating factor. As a result, they’ve become an ongoing responsibility among executive teams accountable to investors, customers, employees and their own exacting standards for success. The good news is that there’s an extensive body of knowledge around M&A best practices — and some novel approaches to capturing the value of a target without traditional post-merger integration. Firms should make the most of these to stay relevant during this period of historic upheaval.
Editor’s note: This article previously appeared in Harvard Business Review (HBR.org).
Why Companies Are Using M&A to Transform Themselves, Not Just to Grow was written by François Mallette and John Goddard, Partners in L.E.K. Consulting’s Private Equity practice. François is based in Boston and John is based in London.
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They call it the “Amazon effect” — the disruption that happens when the Seattle ecommerce behemoth enters a new corner of retail. Somehow, though, the grocery business always seemed immune.
All that ended on June 16, 2017, when Amazon announced its acquisition of Whole Foods Market, a grocer with more than 460 brick-and-mortar stores. The $13.7 billion deal sent shock waves through a sector already struggling with razor-thin margins and cutthroat competition.
In this Executive Insights, we unpack what Amazon’s foray into stores means for the grocery market. We’ll look at what the Whole Foods acquisition reveals about Amazon’s strategies in the grocery industry, how changing consumer preferences are reshaping the grocery landscape and the ways that ecommerce retailers are responding. We’ll also go over some of the implications of these trends for traditional brick-and-mortar grocers.
Before we get into that, however, let’s review where digital grocery sales stand today.
Cleared for takeoff
As of 2017, the $800 billion food and beverage retail sector claimed only about 2% of online sales. Its ecommerce penetration is dwarfed by other consumer sectors such as media, sporting goods, electronics, home furnishings, clothing — even health and personal care. But the gap is rapidly closing (see Figure 1). By 2022, ecommerce’s share of food and beverage sales will have significantly increased from 2017 (see Table 1).
We estimate that online sales will account for as much as 20% of the overall food and beverage market by 2025 (see Figure 2). If the share of internet sales does reach 20% — a tenfold increase over 2016 — that additional 18% share will come at the expense of other distribution channels. In the $800 billion food and beverage market, that amounts to $140 billion to $150 billion shifting away from brick-and-mortar retail. And shelf-stable foods will be the first to go.
But grocers won’t give up without a fight. They’ll strike back with fresh, fresh-prepared and even frozen offerings — in other words, the categories least suited to Amazon-style supply chains. Already, grocers are extending the convenience and instant gratification of fresh foods into last-mile delivery, another area where Amazon is more challenged to compete.
More on that later. First let’s look at the current state of themarket that Amazon has entered, and what we know so far about how Amazon fits in.
The online land grab
Traditional grocery stores. Competition among grocery retailers had been escalating well before Whole Foods joined the Amazon portfolio. For decades, typical net profits have hovered in the low single digits. Now traditional grocery stores are feeling the pressure of “food everywhere” as other retailers — discounters, convenience stores, drugstores and dollar stores among them — turn to fresh and processed foods as a way to drive traffic.
Against this backdrop, grocery investors did not take kindly to the news of Amazon’s Whole Foods acquisition. While Amazon’s own stock price stayed about the same, the stock prices of five other retailers — Walmart, Costco, Sprouts, SuperValu and Kroger — fell an average of 15% over the next two days. Two months later, on Aug. 24, Amazon and Whole Foods announced an immediate markdown in prices on a range of items — and stock prices among the five fell again.
Consumers, on the other hand, liked what they heard. According to a recent L.E.K. Consulting survey, 83% of consumers who had used Amazon offerings knew about the Whole Foods acquisition, and most of them felt positive about it (see Figure 3).
With Whole Foods, Amazon gained hundreds of potential distribution hubs. And their locations are relatively dense. Of all U.S. households, 33 million are within 5 miles of a Whole Foods store. Among households with income over $100,000 a year, 33% are within 3 miles of a store.
Interestingly, Amazon’s price reductions at Whole Foods may have further extended its reach among the affluent. According to research firm Thasos Group, foot traffic at Whole Foods increased 33% in the week after the acquisition, and these new shoppers included the wealthiest of Walmart, Kroger and Costco customers.
Online-offline integration. Amazon’s next move was to integrate Whole Foods with its Prime subscription service. Taking advantage of a strong overlap between the two sets of customers (see Figure 5), the company began offering to Prime members online orders of pantry items from the Whole Foods 365 house brand. Later, Amazon announced the rollout of Prime Now one- and two-hour grocery order delivery, plus an extension of its 5% cash-back benefit to Amazon Prime cardholders for purchases at Whole Foods.
As it increased the visibility of Whole Foods online, Amazon likewise raised its own profile at Whole Foods locations. The stores now have Amazon Lockers, accept voice orders from Amazon Echo and offer Amazon electronic devices for sale. What’s next is anyone’s guess, but with the launch of the Amazon Go grocery store in Seattle, the introduction of checkout-free Whole Foods stores seems to be merely a matter of time.
Up-and-coming business models. The integration of Whole Foods with Prime raised speculation that newer, more efficient grocery players would get caught up in Amazon’s wake as well. And for good reason. In one fell swoop, Amazon checked rival delivery services like Peapod and Instacart. It also blocked meal kit providers like Blue Apron, Plated and Hello Fresh from direct access to one of the country’s largest natural-foods retail brands.
This has escalated a pitched battle to control the so-called last mile of grocery distribution. Brick-and-mortar grocers, for example, are experimenting with store pickup of online orders. In 2016 Kroger added more than 420 curbside pickup locations, contributing to a total of 640 today. Walmart, which offers curbside pickup at 900 locations, has added 120 “pickup towers” across the country. These are essentially giant vending machines where customers can collect same-day orders.
In 2018, Kroger made another major push into online grocery with its announcement of a strategic partnership with U.K.-based Ocado, the world’s largest dedicated online grocery retailer, with plans to open a total of 20 warehouses in the next three years. According to its annual report, Ocado has “transformed the way the nation can shop for groceries by developing a unique business model based on highly efficient, fully automated, Customer Fulfilment Centres (CFCs), flexible and easy-to-use customer software, and friendly and timely last mile delivery.”
On the delivery side, grocery stores are pairing with fleet services at a brisk rate: Kroger and Uber, Walmart and Uber, Walmart and Instacart, and Aldi and Instacart. Grocers are also eyeing meal kit companies like Plated, which Albertson’s snapped up in a 2017 acquisition. But Walmart may be the most ambitious of them all. Its 2016 acquisition of Jet.com and subsequent partnership with Google reveal intentions to build an ecommerce capability to rival Amazon and resonate with a new generation of food shoppers.
Evolving shopping behavior
Penetration of online grocery. That new generation — techsavvy, experience-oriented and pressed for time — happens to signal the future of digital grocery. By 2025, millennials will make up 75% of the U.S. workforce, a trajectory reflected in their relative willingness to shop for groceries in whatever format best suits their lifestyles. That could be any combination of online delivery, in-store pickup, automatic subscription or virtual supermarket (see Figure 6).
In response, digital grocery will likely continue its rapid expansion. Consider that in 2015, according to Morgan Stanley Research, the share of consumers ordering fresh food online was just 8%. It reached 26% just one year later. Today, according to L.E.K.’s survey, roughly 40% of consumers have used online or ecommerce grocery services, and on average they expect to increase their rate of online purchasing (see Figure 7).
Personalization and convenience. As ecommerce retailers abbreviate the path to purchase, online grocery shopping continues to improve. Consumers gain a personalized, curated shopping experience via loyalty rewards for high-consumption items, oneclick “buy it again” capabilities and preset delivery specifications. This digital shelf approach also helps consumers shop more efficiently (especially if they’re using a mobile device) and makes ecommerce baskets stickier than the brick-and-mortar ones.
The catch? This increased efficiency could lead to less browsing by repeat shoppers. It also could reduce the rates at which new products are discovered and tried. (Consider that on Amazon.com, 70% of consumers never click past the first page of search results.) However, digital sales are only part of the equation in an integrated online-offline grocery model like Amazon. Grocery store sales are qualitatively influenced by digital technologies.
Crowdsourced dynamic shelf. A key advantage of digital shelves is that they let consumers actively engage with and provide real-time feedback to retailers and manufacturers through product ratings and reviews, questions and answers, photos, and other user-generated content.
Robust consumer browsing and purchase data is the key to all this, and algorithms put it to good use. They respond to incoming information by adjusting product placement, point-of-sale marketing and pricing on the fly. This enables rapid-fire iteration and a more optimized digital shelf compared with brick-and-mortar retail.
Online reviews deserve their own mention because shoppers so often rely on them to make their purchase decisions. According to a PowerReviews study, if reviews are available on an ecommerce grocery site, then 93% of shoppers will read them at least occasionally. Reviews can also have a halo effect on brick-and-mortar sales as consumers investigate items on their phones while in stores. The halo effect isn’t as high for grocery as it is for highticket categories like appliances. Even so, shoppers are more likely to purchase something new if the product has reviews.
The imperative to adapt
Amazon’s online shopping site, along with its Echo and Alexa products, uses proprietary data capture and analytical tools. The tools track each consumer’s online activity so Amazon can show advertisements, inventory and store layouts that more closely match the consumer’s preferences. The tools also optimize distribution logistics for both supplier and consumer.
This has several implications for grocers. One is that, with tools like Amazon’s, they can create trend-forward, private-label products and feature them on a digital shelf. Of course, in the Whole Foods 365 brand, Amazon already has one of the grocery business’s most recognizable private labels — one that generated $1.6 million in its first month of online sales. But Costco (for instance) also has a strong private-label brand, Kirkland Signature, which accounts for about a quarter of Costco’s sales. Now Kirkland is available on Instacart. And Walmart recently launched its own private-label grocery brand, Uniquely J, on the Jet.com ecommerce platform.
Another implication is that digital grocers can offer wider brand and product assortments than their brick-and-mortar counterparts. The incremental cost of carrying one additional SKU is much lower for ecommerce retailers than for brick-and-mortar stores, which are limited by the physical space they have for shelf and backroom inventory. Compare Amazon’s 1.5 million SKUs with Whole Foods’ 20,000. Even Walmart carries only 100,000 SKUs in its stores. Instacart is a much smaller operation than Walmart, but it has three times as many SKUs because it’s online. Because their selection is so much greater, digital grocers have a long-tail advantage, so called because they get the shoppers who are looking for smaller brands, unique flavors, seasonal items or otherwise hard-to-find items.
Groceries in general have an advantage over other ecommerce products in that purchases are habitual and frequent. These qualities lend themselves to automated “smart” and voice ordering. With the foot traffic data coming in from Whole Foods’ physical locations — some 8 million customers per week worldwide — Amazon may finally have what its algorithms need to draw consumers away from their local grocery stores.
Meanwhile, consumer packaged goods (CPG) manufacturers and brands can study Amazon’s efforts with Whole Foods to see what they can apply to their own digital grocery endeavors. At a minimum, firms will need to:
- Develop a comprehensive digital strategy. CPG companies will have to strike a balance between what they need from their own website (showcase the brand or drive sales volume?) and what they need from an e-tail partner model as it relates to Amazon (sell through or sell against?).
- Optimize the digital shelf. Free from the constraints of physical space, firms must develop capabilities to manage their digital assets, showcase their products (think 3-D and CGI images) and stay top-of-mind among consumers (through, for example, loyalty programs and digital marketing). There’s also the need to manage online reviews and feedback, whether through a vendor or an internal team.
- Rethink price pack architecture. Digital grocery offersthe chance to create “swim lanes” of different product configurations — multipacks, variety packs and other special features — that are attuned to the needs of online shoppers and that mask product price comparisons to traditional channels.
- Package for at-home delivery. Collaboration with leading suppliers is required to develop distinctive, efficient directto-consumer packaging. This includes rethinking external packaging in ways that are new to many brands. It also involves re-evaluation of boxes, pouches, envelopes, and even packing materials in light of the brand and the consumer’s unboxing experience. Attributes to aim for include small, low-cost and flexible — with an emphasis on sustainable materials where possible.
Much has changed since Amazon’s initial foray into the grocery market more than a decade ago. Back then, the company launched AmazonFresh into a market where shipments had different challenges from other consumer goods — challenges in which stores with real estate seemed to have the advantage.
Fresh and frozen foods are still in a class of their own. But technology has changed since 2007, along with Amazon’s willingness to embrace brick-and-mortar retail. Add to this the wave of innovative business models we’ve seen from new entrants, and the message for food retail becomes clear: In store or online, the world of groceries is going digital. It’s time for brands to get on board.
Digital Grocery Lessons From Amazon’s Acquisition of Whole Foods was written by Rob Wilson, Manny Picciola and Maria Steingoltz, Managing Directors in L.E.K. Consulting’s Food & Beverage practice. Rob, Manny and Maria are based in Chicago.
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Historically, merchants used their instinct, experience and other intangibles to determine which products consumers would buy. Today, however, the most successful merchants leverage big data and advanced analytics to manage their SKUs, arming themselves with data and data-mining tools that enable them to make decisions based more on statistics than on hunches, more on science than on art.
Organizations that leverage this information and these new-school merchandising tools have an edge over those organizations that rely on a gut feeling: The adoption of such tools — such as product associations, algorithms and L.E.K. Consulting’s merchandising process — enables merchants to make more informed and efficient assortment decisions, thereby driving top-line sales, maintaining more efficient inventory allocations and reducing product development costs.
Learn more about the challenges that product associations and association algorithms present, and how our new-school merchandising process ensures that you have appropriate data to inform major portfolio decisions, thereby driving significant profit for years to come.
Background and Challenge
A fashion retailer asked L.E.K. Consulting to help refine its promotional strategy. The client's promotional approach at the time of engagement was highly complex, with constantly changing deals and multiple layers of discounts. This made it difficult both for customers to understand the true price of an item, and for management to track changes in customer buying behavior. As a result, management feared that they were degrading margins without driving sales growth.
Approach and Recommendations
Over a four-month period, our team developed a Promotional Playbook that outlined actionable rules for designing promotions with a specific performance goal in mind (e.g. driving traffic, driving conversion, or basket-building) across key business dimensions:
- Time of Year and Day of Week: when to run certain promotions based on the elasticity of customer behavior
- In-Stores & Online: how to optimize promotions based on the different purchasing behavior of retail and ecommerce customers
- Product Categories: which product categories to promote, considering seasonal elasticity and bundling opportunities
- Promotion Type: what mechanism (e.g. % off, new price, buy-one-get-one, etc.) promotions should be designed to reach a given day's performance goal
- Customer Segment: who to target based on different consumers' elasticity to promotion types and depths
In order to inform our findings, we utilized L.E.K.’s advanced analytics capabilities to run elasticity analyses, regressions, and product category association analysis to understand the effectiveness of promotions at the SKU-level and used a business intelligence tool to visualize key output. This evidence-based approach was critical to gaining alignment across the executive and leadership team to the new strategy.
The client realized significant benefit from our work, reporting sales and profit growth above analyst expectations, resulting in stock price appreciation of more than 20% upon announcement.