www.demandtec.com

A DemAnDTeC CusTomer suCCess sTory

CompAny snApshoT

n Revenue$14.2 Billion

n Market SectorGrocery

n GeographyOver 300 supermarkets in the Southwest U.S. and Mexico

CusTomer overview

ChallengeTo thwart the advances of giant discount retailers, leading grocery store chain H-E-B needed a more strategic pricing system to support its evolving business strategy

solution A comprehensive Consumer Demand Management (CDM) enterprise software solution from DemandTec

Key Benefits Ability to simulate and predict complex pricing strategies prior to implementation, achieve business rules compliance, meet financial objectives, and continually enhance customer satisfaction and price reputation

Promoting Old-Fashioned Values In a Modern, Competitive Retail MarketplaceKey to H-E-B’s success is its reputation for consistently low pricing. Over the last few years, H-E-B’s pricing came under increased pressure when giant discount retailers entered its markets. To help offset this competition, H-E-B partnered with DemandTec in order to provide the merchandising team with a powerful set of pricing tools.

Reacting to a more complex competitive pricing environment proved to be a challenge for H-E-B’s legacy pricing applications. H-E-B’s existing pricing system, a library of spreadsheets, made it difficult to define competitive pricing strategies and quickly execute accurate prices across hundreds of stores and tens of thousands of products. While H-E-B was working on its next set of prices, competitors would preempt those moves with yet another set of price changes. “Pricing data is highly perishable,” explains Mark Bradshaw, Director of Strategic Pricing, H-E-B. “With our previous spreadsheet system, we could react to information, but sometimes not until after our competitors had changed their pricing strategies.” In addition, H-E-B’s legacy systems were unable to model and forecast consumer demand, or provide insight into strategic considerations such as the optimum price differential between its private label products and leading national brands. Nor could the legacy systems systematically track pricing inconsistencies such as if a particular smaller-sized item was a better deal than the larger size of the same product. As a result, prices started to fall out of alignment with H-E-B’s overall merchandising strategy.

Keeping Competitors at Bay With a Next-Generation Pricing SystemRetailers can gain a huge advantage over their competition with an ability to accurately forecast and shape consumer demand. To maintain its competitive position – and protect its long-standing price reputation with its customers – H-E-B needed a pricing solution that would enable it to precisely forecast demand, consistently enforce complex pricing rules, and support its dual objectives of delivering great value for its customers while achieving its business objectives for market share and financial performance. To meet these challenges, H-E-B turned to DemandTec. “H-E-B evaluated several software vendors and chose DemandTec because of the features and functions provided by the DemandTec Lifecycle Pricing solution,” says Scott McClelland, Division President, H-E-B. “DemandTec differentiates itself from competitors by providing scaleable software and sophisticated science that enable our merchants to develop superior merchandising strategies.” Adds McClelland, “We’ve partnered with DemandTec for over three years now, and are extremely pleased with the quality of the results that our teams have delivered to the business.”

The Price is Right at H-E-B with Consumer Demand Management from DemandTec

CusTomer suCCess sTory

www.demandtec.comCopyright © 2011, DemandTec, Inc. All rights reserved. Printed in the USA. DemandTec and the DemandTec logo are registered trademarks of DemandTec, Inc. All other trademarks mentioned in this document are the property of their respective owners.

08/11

“With the simulation

capabilities of the DemandTec

solution, we were able

to predict how we could

simultaneously increase

our gross margin dollars

and achieve our desired

competitive position –

which amounted to a major

improvement in our business.”

Mark Bradshaw Director of Strategic Pricing H.E. Butt Grocery Company

“DemandTec differentiates

itself from competitors

by providing scaleable

software and sophisticated

science that enable our

merchants to develop superior

merchandising strategies.

We’ve partnered with

DemandTec for over three

years now, and are extremely

pleased with the quality of the

results that our teams have

delivered to the business.”

Scott McClelland Division President

H.E. Butt Grocery Company

Capitalizing On a Complementary Relationship and Proven TechnologyKeeping in mind the primary goals of enforcing H-E-B’s pricing rules and aligning prices with the competitive strategy of each category, DemandTec’s software platform analyzed two years of point-of-sale (POS) data to provide H-E-B with a detailed forecast about how each of the company’s pricing rules would impact consumer demand and financial performance of every item in every store. The solution also analyzed every possible combination of rules, items, zones, and time periods, enabling H-E-B to run virtually unlimited “what if” scenarios to simulate various competitive strategies and the resulting impact on the business.

This ability to simulate complex pricing strategies and assess their impact on volume and financial performance prior to execution is critical in helping H-E-B make more informed, accurate decisions. Bradshaw explains, “To try to improve our price performance against the competition in a particular product category, we determined that using our previous manual spreadsheet method would have meant a considerable financial investment on H-E-B’s part. But with the simulation capabilities of DemandTec solution, we were able to predict how we could simultaneously increase our gross margin dollars and achieve our desired competitive position – which amounted to a major improvement in our business.”

Additional Benefits for H-E-B H-E-B is also using the predictive capabilities of DemandTec software to help its procurement department lower the total cost of goods. “When one of our suppliers informed us of a cost increase on a key product, we were able to use the software to simulate various pass thru scenarios and determine the best way to reflect the cost increase on the shelf,” says Bradshaw. “Also, by using the software and working with the suppliers ahead of a cost increase, our business development managers were able to better negotiate cost terms. This saved H-E-B a significant amount of money, while also maintaining volume goals for the vendor. This amounts to a win-win-win situation – the consumer, the supplier, and H-E-B all benefit.”

With its sophisticated modeling and forecasting capability, and dynamic rules management functionality, DemandTec’s software allows H-E-B to effectively and profitably compete with larger discount retailers without matching prices item for item – something that H-E-B was unable to do before implementing DemandTec software. To extend these capabilities into other merchandising processes, H-E-B is currently evaluating DemandTec’s promotion and markdown applications. According to Bradshaw, “I see significant opportunities in using a common platform to predict and improve our promotion and markdown pricing strategies. This approach will enable H-E-B to manage the entire pricing lifecycle from one integrated system.” Bradshaw explains, “We are also looking to DemandTec to help us evaluate market-basket data, assess key value items in a category, and determine optimal zoning strategies. With this level of understanding around consumer demand, we can write merchandising strategies to make better business decisions.”

Learn More About DemandTec For more information on how you can partner with DemandTec, call 1.650.645.7100 or visit www.demandtec.com.

DemandTec, Inc.One Franklin Parkway, Building 910 n San Mateo, CA 94403tel 650.645.7100