The Price Is Right At H-E-B With Consumer Demand Management From DemandTec

Promoting old-fashioned values in a modern, competitive retail marketplace

The H.E. Butt Grocery Company (www.heb.com) has a history of providing exceptional customer service, low prices, and a friendly shopping environment, all of which have helped it grow into one of the largest independently owned food retailers in North America. H-E-B currently has more than 300 supermarkets and over 55,000 employees in the southwest U.S. and Mexico.

Key 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.