Profile: DemandTec, Inc. (DMAN.O)

DemandTec, Inc., incorporated on November 1, 1999, is a provider of consumer demand management (CDM) solutions. The Company’s software services enable retailers and consumer products (CP) companies to define merchandising and marketing strategies based on a scientific understanding of consumer behavior and make actionable pricing, promotion and other merchandising and marketing recommendations. The Company delivers its applications by means of a software-as-a-service (SaaS) model, which allows it to capture and analyze the retailer and market-level data and enhance its software services to address its customers’ ever-changing merchandising and marketing needs. The Company’s solutions for the retail and CP industries include DemandTec Lifecycle Price Optimization, DemandTec End-to-End Promotion Management, DemandTec Assortment & Space, DemandTec Targeted Marketing and DemandTec Trade Effectiveness. In February 2009, the Company completed its acquisition of Connect3 Systems, Inc., a provider of advertising planning and execution software.

Everyday Price Optimization and Everyday Price Management

Everyday Price Optimization and Everyday Price Management enable retailers and CP companies to establish everyday prices for their products, using both optimization techniques based on a scientific understanding of consumer behavior, as well as rules-based pricing methods. Using Everyday Price Optimization, customers create scenarios, in which they define objectives, such as increased revenues, profitability and/or sales volume and optimize prices to achieve these objectives. Everyday Price Optimization would likely generate different optimized prices for the same item carried by competing retailers in stores located in the same geographic location, since consumer behavior varies between competitors and each retailer has its own vendor costs and strategic pricing objectives.

Using Everyday Price Management, customers define pricing rules and apply those rules-based prices to merchandise categories that are not modeled and optimized using Everyday Price Optimization. Features of Everyday Price Management include rules management and rules-based pricing, which is a set of retail pricing rules with a rules editor and rules relaxation capabilities to handle conflicts; advanced price maintenance, which comprises operational price management features to handle frequent vendor cost changes and competitive price changes, and price delivery, comprising regularly scheduled delivery of recommended base prices to customers. Both Everyday Price Optimization and Everyday Price Management utilize a library of configurable business rules that act as constraints on the optimization by limiting the set of possible outcomes.

Promotion Planning and Optimization

Promotion Planning and Optimization enables retailers and CP companies to create and simulate multiple scenarios based on mathematical forecasts of results in order to evaluate tradeoffs among various promotions, such as discounts, advertisements and displays. Features of Promotion Planning and Optimization include Store/SKU-level modeling, which includes the ability to plan promotions that maximize total store impact on all categories by taking into account promotional response by item by store, cannibalization, halo effects, and cross-elasticity effects of everyday prices in place; Category plan management, which includes the ability to build complete promotions by defining deal terms, discounts, time periods, and promotion types, and associating these promotions with individual ads, displays, radio spots, and other media, taking into account factors, such as pull-through effects, cannibalization between promoted items and regularly priced items, cannibalization between stacked promotions, and the pantry-loading effect of successive promotions; master calendar, which includes aggregate category plans into a master calendar that provides a single, unified view of all planned events across categories; event and tactic management, which includes the ability to plan and manage different promotional events and capture individual performance details such as holidays, features and in-store displays; deal management integration, which includes the ability for all vendor offers entered into DemandTec’s Deal Management software service to flow directly into Promotion Planning and Optimization for analysis, optimization and forecasting, and pre-configured outbound interfaces, which includes the ability to export promotional forecast information to supply chain systems, promotional details to advertisement execution systems (including its Advertising and Marketing Execution service, as well as other offerings from third parties), and other details to other customer systems.

Markdown Optimization

Markdown Optimization incorporates the science of Consumer Demand Management to enable retailers to design optimal plans that set markdown timing and depth to maximize profitability or meet inventory objectives for every clearance item in every store. Markdown Optimization supports a wide range of markdown types, including seasonal, short product lifecycle, event and holiday, category reset, cycle refresh, and standard discount markdowns. Features of Markdown Optimization include scenario management, with the ability to create and forecast multiple scenarios in order to evaluate tradeoffs between timing and depth of markdown prices, as well as other factors such as the number of markdowns taken within a time period; science-based, which includes the ability to design markdown plans based on the price elasticity and inventory position at each store; rules management, with the ability to configure markdown-specific rules; re-optimization, with the ability to re-optimize plans and prices on a weekly basis to adjust for changes in demand and inventory position, and automated workflow process, which includes the ability to create and initiate new markdown plans and scenarios automatically based on category-specific rules defined by the retailer so that merchants can simply log into the system to review the results of planned optimizations.

Deal Management

Deal Management enables retailers and CP companies to automate and streamline the presentation, negotiation and reconciliation of trade promotion offers. The Deal Management and Promotion Planning and Optimization services are integrated such that offers entered by CP companies are available for analysis, optimization and forecasting by retailers, and both parties can manage the status of those trade promotions in an interactive, collaborative environment. Features of Deal Management for the retailer include offer sheet mapping, which uses each retailer’s existing paper-based offer format to ease adoption by retailers; online collaboration, which provides a common platform for retailers and their trading partners to present and negotiate the terms of trade promotion offers, eliminating the large number of emails, faxes, and spreadsheets that typically go back and forth between parties, thereby reducing errors; Web portal, which boosts the retailer’s productivity by pushing data entry work to the suppliers and allowing the suppliers to enter deal information; retailer item catalog-based entry, which provides vendors use of retailer-specific item catalogs in order to eliminate data-entry errors; electronic document and deal history archive, which provides version control of offers, final contract terms, user activity and communications in order to facilitate regulatory compliance and dispute resolution, and accounting and reconciliation, which provides for reconciliation of invoicing and deduction notices with CP trading partners.

When a retailer implements Deal Management, that retailer requires that all of its CP trading partners submit and negotiate their future trade promotion offers electronically through the Deal Management software service. The Company offers two editions of this service for CP companies: Deal Management, which is offered at no charge and allows vendors to submit promotion offers by selecting valid items from the retailer’s item catalog, and Advanced Deal Management (previously referred to as VendorPlus), which is a paid upgrade that includes additional features specific to a CP company, such as accounting and reconciliation, transaction and workflow reporting, catalog management, vendor item catalog synchronization and deal history archiving.

Assortment Optimization

Assortment Optimization enables retailers to determine which items should be stocked, by store or store cluster, based on the customers. Features of Assortment Optimization include Advanced modeling and optimization science, which enables the creation of efficient, customer-centric assortments based on a quantitative understanding of incrementality (an item’s ability to increase overall category sales) and transferable demand (the degree to which sales volume shifts to similar items or leaves the store when one item is delisted); multiple data inputs, which incorporates market, loyalty card, planogram, and cost data into the optimization process; automated processes, which includes automated processes and wizards to address the assortment challenges merchants face every day, such as performing straight optimizations, increasing or decreasing SKU count and space, and making one-in-one-out changes to assortments, and What if analyses, which enables retailers to run multiple scenarios and compare results to identify the strategy to meet company objectives, such as protecting private label items and image items.

Trade Planning and Optimization

Trade Planning and Optimization helps CP company managers to forecast promotion and pricing activity in a unified planning environment. Features of Trade Planning and Optimization for CP companies include optimization and forecasting, which predict key volume and financial metrics for brands and overall retail category; common analytical platform, which optimize trade planning with unified pricing and promotion planning based on the same underlying consumption data; trade planning use cases, which create, forecast and build plans that include periodic trade promotions (i.e., temporary discounts with or without ad or display support), as well as price advances or buy-downs of the retail price using trade funds, and demand elasticity curves for every item in the category, which quantify the financial impact of competitive trade activity against promoted items, total portfolio and even a retailer’s entire category.

Advanced Deal Management

Advanced Deal Management provides capabilities that are tailored for CP companies and brokers. Advanced Deal Management subscribers also have access to add-on services that are unavailable to basic Deal Management subscribers. Features of Deal Management for CP companies and brokers include role-based access, which access to multiple users by product line enables rapid and more effective user adoption; customized item catalog, which manufacturer-centric item catalog customized by promoted group supports a more logical way of building and entering promotions; long-term deal archive, which provides full seven-year history of all deal data, including full documentation of offer versions and written negotiations between trading partners supports, among other benefits, compliance with regulatory requirements; advanced data reporting, which includes detailed reporting and data export features support better business decisions, and funds tracking , which includes accurate visibility into available trade spending balances and the ability to reconcile planned trade promotion activity against actual in-store execution.

The Company competes with SAP AG, Oracle Corporation, KSS Group, SAS, Inc., ACNielsen, Information Resources, Inc., McKinsey & Company, Inc., Deloitte & Touche LLP and Accenture.