Key Elements: Determines which product attributes drive category performance Quantifies impact of incremental and transferable customer demand for each item on category sales Leverages same tools and expertise we apply for optimization of client's total marketing budget Can incorporate syndicated market data (e.g., IRI, Nielsen) to help clients identify potential opportunity items

Assortment Optimization helps retailers determine which items should be stocked, substituted, and deleted at each store so as to maximize sales, profit or productivity, and ROI goals.

Using customer behavioral insights and item perceptions, items are classified into groups of similar characteristics commonly referred to as Transferable Demand (TD) Groups. TD refers to the fact that when a particular item is removed from the assortment (“delisted”), some of its sales will be lost, but some will be transferred to other similar products. The portion transferred to other products is the TD. Assortment models use consumer switching behavior to predict the degree to which an item’s sales will transfer to other similar items.

With assortment optimization, merchants can get specific recommendations on improving gross margin return on inventory investment (GMROII) or other metrics to achieve business goals.

Our Approach to Assortment Analytics

Quantify each item’s impact to the category sales when it is delisted. What portion of the item’s sales will transfer to other similar items? What portion of the item’s sales will be lost? ► Group items into segments based on attributes Customer Behavior Insights Item Perceptions ► Sequence household purchases over time Customer 1 ABBBBBCBBBB Customer 2 CCBCBBAAAAACADDDAA Customer 3 AAAADADDDACDDDDBBBB Customer 4 ABDDCBDDDADBBDDDD ►Construct switching frequency and demand transfer probability matrices Determine which items should be stocked, substituted, and removed to maximize category sales or profit. What is the optimal size of product line based on business sales and profit objectives? How do you manage risk of changing assortments with stock outs? What assortment configuration provides the best return on inventory investment?