CASE STUDY

Price Point Optimization for a Leading Food Service Client Helps Enhance Profitability Levels

Dec 26, 2017

The client: A food service company

Area of engagement: Price point optimization

The food service industry is one of the largest industries in the United States and the companies in this space are planning to expand their consumer base to increase their foothold in the market. The food service establishments comprise of any outlets that serve food outside the home such as restaurants, carry out operations, cafeterias, and catering and vending companies. With the rising consumer expectations, the commercial food service establishments are planning on devising effective measures to improve their bottom line and meet the consumer demands. In the current landscape, the ever-evolving customer demands, rapid urbanization, favorable demographics, increased disposable income, and changing lifestyles and food habits are driving the growth of the industry. Although the food service space is witnessing promising growth owing to numerous competitors, the industry is subjected to certain factors. These factors include:

  • Impact of digitization: With the growth of food retail expected to remain low, players are looking for promising ways to engage with customers and open new revenue streams. With the growth of e-retail platforms, consumers are looking for convenience in their product offerings. The altering preferences of the customers are compelling foodservice retailers to offer ease and convenience in their product offerings to meet consumers’ priorities.

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  • Stringent government regulations: Since consumers are becoming more conscious about their health outcomes, it becomes a mandate for government authorities to devise quality measures to provide safe and reliable food service to customers. Also, with the increasing instances of food allergies, the government across the globe has made it a mandate to ensure safety in the food products offered.

The aforementioned challenges are some of the major factors fueling the adoption of price optimization strategies. Price optimization involves the use of mathematical programs to calculate how the demand for the products varies at different levels. Moreover, the solution can be leveraged to combined data across different data sets with information and inventory levels to recommend prices to enhance the current profit margins. The modeling also helps organizations to use pricing as a lever and tailor pricing for different customer segments by simulating how the customers respond to price changes. Moreover, price optimization modeling can help forecast demand, develop pricing and promotion strategies, and improve customer satisfaction levels.

The Business Challenge

The US Food and Drug Administration rates almost 80 million cases of food-related illnesses every year.

A leading client in the food service sector wanted to understand the impact of price differentiation across prominent customer segments and draft a robust pricing strategy to improve customer satisfaction. The client also wanted to collect historical data including the company’s pricing and promotions, competitor’s prices, and economic conditions. Moreover, with the help of Quantzig’s price optimization solution, the food service sector client wanted to devise better initial pricing, promotional pricing, and discount pricing strategies.

price optimixation

To know more about how price optimization helped the food service firm, request for more information from our analytics experts.

The Solution and the Business Impact

With the help of the price optimization solution offered by Quantzig, the prominent food service client was able to set temporary prices for companies to spur sales for items with longer life cycles. The client also gained adequate insights into the customer buying patterns in real-time and initiated strategic ways to retain their most profitable customers. The solution offered also helped the client define profitability levels and understand how sensitive their customers are to the fluctuations in the product prices.

Price Optimization Solution Predictive Insights

The analytics solution offered by Quantzig helped the food service client identify customer segments with a higher probability of cancellation. The client further gained a detailed analysis of the market in which the company operates by creating a competitive management analysis. Also, the client was able to reflect market competition and customer behavior to predict new renewal rates for customers.

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