Incrementality Analysis: Understanding How HIVERY Curate Thinks About POD Change
In the ever-evolving world of retail, finding opportunities to increase sales and optimize your assortment is essential. Retailers often grapple with questions like, "What happens if we add another Point of Distribution (POD)?" or "Will introducing a new product boost overall revenue?" These questions are at the heart of assortment optimization and can be answered precisely using HIVERY Curate.
Understanding Incrementality
Incrementality is a critical concept in retail. It refers to the additional sales and revenue generated by making specific changes to your assortment. One way to explore incrementality is by considering how introducing a new product or POD can impact your overall sales.
Let's delve into a practical example to illustrate the power of incrementality with HIVERY Curate. Imagine you are a convenience store owner, and you currently sell three widgets, each contributing to your sales as follows:
You've been contemplating adding a fourth widget to your assortment, and your supplier expects this new widget (Widget 4) to generate $70 in sales. Naturally, you anticipate an increase in total sales:
However, real-world outcomes often differ from expectations. When you introduce Widget 4, it not only impacts its own sales but also affects the performance of the existing widgets:
As seen in the table above, Widget 4 did perform as expected by contributing $70 in sales. However, the introduction of Widget 4 led to changes in the sales of the other widgets. This change in performance is known as "demand transfer" or "cannibalization." Of Widget 4's $70 in sales, $20 was transferred from Widget 1, and $10 each was transferred from Widgets 2 and 3. However, Widget 4 still managed to grow the category by $30, as the remaining $40 is an additional incremental contribution to the overall sales.
Harnessing HIVERY Curate for Incrementality Insights
HIVERY Curate is designed to provide retailers with valuable insights into incrementality, helping you make informed decisions about your assortment strategy. The Demand Transfer model within Curate uses advanced techniques, including Consumer Decision Trees, to map items and predict how demand will transfer within a category when new items are introduced.
Moreover, Curate's Recommender model, currently in the proof-of-concept stage, aims to provide intelligent recommendations to end-users within an interactive interface. These recommendations are based on the insights gained from demand transfer predictions and overall category performance. For instance, it might recommend adding a more unique, lower-performing item, as it is expected to have fewer dollars transferred from other items in the category, thereby adding additional incremental dollars to the category's total revenue.
In conclusion, HIVERY Curate empowers retailers to understand and harness the power of incrementality in assortment optimization. By accurately predicting how changes to your assortment will affect sales and offering intelligent recommendations, Curate ensures you have the insights you need to make strategic decisions that drive revenue growth. With incrementality at your fingertips, you can confidently navigate the dynamic landscape of retail and unlock new opportunities for success.
See a live demo HIVERY Curate in action or yourself or read more about HIVERY's Demand Transfer Model .