According to Forrester Research, Inc. (Nasdaq: FORR), more and more retailers are adopting pricing solutions that recommend the optimal prices throughout the product life cycle — from initial pricing to markdowns — to improve top-line performance. At the same time, these tools are evolving from standalone solutions to those integrated with the supply chain and offered by a variety of vendors. Forrester’s assessment of the latest solutions from the five leading vendors revealed that pricing optimization is still an emerging market, with different leaders in each stage of the product life cycle.
“Although most retailers understand the benefits of a tool that can manage prices throughout the life cycle, we found that these solutions are still purchased as standalone tools to address specific needs,” said Noha Tohamy, principal analyst at Forrester Research. “For example, an apparel retailer may purchase a markdown optimization component to better manage clearance prices, while a large grocer would be more interested in base pricing. The vendors need to provide a compelling integrated offering to overcome this challenge and prove the benefits of business intelligence across the entire product life cycle.”
To assess the latest price optimization solutions throughout the product life cycle, Forrester applied its WaveTM methodology to offerings from the five leading vendors. Vendors from a variety of backgrounds were invited to participate, including: retail-focused (Khimetrics and DemandTec), ERP and legacy merchandizing (Retek), and supply chain planning and execution (i2 Technologies and Manugistics). ProfitLogic, JDA, and SAP declined to participate.
Vendors were rated in each component of the product life cycle across three dimensions — functionality, strategy, and market presence. All five vendors’ offerings varied in each of the categories throughout the product life cycle.
- Initial pricing — recommends category- and store-level prices to meet corporate objectives. Khimetrics edges out DemandTec in functionality.
- Promotions pricing — analyzes results from past promotions and their effectiveness and recommends the optimal promotional event throughout different phases of the product’s life. Khimetrics is the clear leader.
- Markdown pricing — determines the best method for clearing inventory at the end of a season or end of life of a product. i2 is ahead of supply chain competitor, Manugistics.
- Overall pricing — offers overall visibility and recommends optimal pricing along the entire product life cycle. Retek led for the full suite offering.
The research mentioned in this press release, the August 10, 2004, Tech Choices “Grading Retail Pricing Solutions,” is available to WholeView 2™ clients and can be found at www.forrester.com.
The Forrester Wave Methodology
The Forrester Wave methodology is open, rigorous, and unbiased. Forrester starts with an open criteria review process, verifies findings against customer interviews, and checks facts with vendors. This research is performed without sponsorship to help user companies make better vendor selections. Forrester does not charge vendors in any way to participate in a Forrester Wave.