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Introducing Spresso: A new solution to balance profit and conversion

When it comes to pricing strategy, balancing profit and conversion has long been a challenge for retailers, and one compounded by today’s rapidly changing commerce landscape. 

Macroeconomic factors such as rising costs of goods, fluctuating costs of shipping, changing consumer demand, and inflation make keeping up with pricing decisions nearly impossible. These factors, combined with the phasing out of cookies and third-party data tools, leave retailers in a lurch and seeking solutions to combat their real business problems, of which pricing and profitability remain paramount. 

Introducing Spresso Insights: 
Introducing Spresso, modular SaaS solutions that leverage machine learning, advanced analytics, and AI to deliver actionable data-driven insights and better business outcomes. 

The solutions were developed with retailers at the forefront of the design. In proud partnership with Google Cloud, and available in the GCP Marketplace, Spresso aims to empower retailers to take meaningful action on their most powerful asset, their data. 

Price optimization, built by retailers for real-world problems
Spresso’s price optimization solution was created in direct response to retailers’ challenges with pricing.

The solution offers retailers compelling benefits including:

Increased SKU-level profitability without compromising conversion.

Use of first-party data, empowering retailers to make proactive pricing decisions based on their consumers’ behavior, not competitors’ pricing.

Real-time dynamic pricing, automatically routing site traffic to the top-performing price point, effectively balancing profit with consumers’ willingness to pay, meaning you’re always hedged. 

In addition to Price Optimization, Spresso’s inaugural marketplace offering includes Customer Quality and Retention module, designed to help businesses predict LTV and combat customer churn. Using data and advanced analytics support the shift into a proactive retention strategy. 

Whether it be pricing or retention, empowering businesses to adopt proactive strategies is a centralized theme for Spresso. With a stated mission of democratizing advanced analytics through actionable insights, Spresso’s solutions are designed to empower proactive strategies for all facets of business – from marketing to finance, merchandising to data science.

It is also precisely why Google is excited about the partnership. 

Insights, ready for action in GCP Marketplace
The decision to use Google Cloud for Spresso was a simple one. The product suite, security, performance, and scale Google Cloud brings to Spresso are unmatched. 

For Spresso, being powered by GCP means increased developer velocity, scalability, and unparalleled security. With Google Kubernetes Engine, the Spresso team has been able to focus on the solution instead of cloud management. This has allowed the product to move at the speed of innovation, iterating quickly and launching new products and features as needed. 

Plus, since Google Kubernetes Engine has automatic cluster management, autoscaling, and built-in security best practices, Spresso is able to provide a robust scalable solution. 

In addition to Google Kubernetes Engine, the suite of other products that GCP offers including Pub/Sub, Memorystore, Cloud SQL, Cloud DNS, and Cloud Storage, provides Spresso a central platform from which to build and scale the product.

For retailers, Spresso being powered by GCP means lighting fast optimization and price calls without slowing down their website. Spresso can scale with a retailer’s business so they can focus on acquisition and profitability. Lastly, it means peace of mind as retailers know their customers’ data is secure.

As a trusted partner of Google Cloud, Spresso is able to bring advanced analytics to a wide array of retailers who stand to benefit from the solutions. Through Spresso’s listing in the GCP Marketplace, retailers have easy access to the price optimization module, a proven solution to combat pricing woes and drive revenue growth, at their fingertips. 

Multi-armed bandit algorithm
The foundation of the price optimization module is a multi-armed bandit algorithm (MAB). A favorite of innovative, data-driven cultures, multi-armed bandits use machine learning algorithms to dynamically allocate traffic to best-performing variations and away from those underperforming. 

One of the primary reasons MABs are a favorite of data-driven cultures is their ability to optimize for multiple objectives. In the case of Spresso, the Price Optimization solution balances for conversion and profit, according to the goals set within the console.

How it works
While MABs are beloved by data scientists, one needn’t be a data scientist to reap the benefits of Spresso’s price optimization solution. The Spresso app is designed for all functions of a retail business to navigate with ease and is an especially valuable tool for the merchandising team. They simply set a minimum and maximum price for the product based on their knowledge of the business and specify the desired balance, or goal, between conversion and profit.

The bandit determines five price points, equally distributed within the specified range, and immediately starts to present those price points equally to consumers on the retailer’s website.

Then, in real-time, the bandit identifies which price point is performing the best, either converting at the highest rate or generating the most profit, according to the goals set within the app, and begins to drive more site traffic to that price point.

The bandit is always on, meaning the exploration never stops, keeping a small percentage of traffic at other price points. 

So, if something happens and consumers are suddenly willing to pay more, the bandit picks up on that change and dynamically shifts, adjusting to the new best-performing price point. 

Furthermore, implementation is straightforward with only three inputs needed – event data, catalog data, and a call to Spresso for pricing.

Early Spresso customer success stories
Despite a turbulent macroeconomic climate and decreased site traffic, e-commerce retailer Boxed was able to leverage Spresso insights to net an additional $3,000,000+ annualized incremental profit by improving margin percentage while maintaining conversion.

In a recent case study, Boxed used Spresso’s price optimization module for their 550 lowest-margin SKUs. Based on seasonality, they knew traffic would be decreasing on these items and wanted to make up the forecasted impact to their bottom line. The retailer set a goal of increasing profit while holding conversion in the Spresso console. 

In under 2 months, the price optimization solution was able to increase the margin on the 550 SKUs from 0.8% to 5.1% while maintaining the same conversion, resulting in millions of additional annualized revenue for Boxed. 

“Last quarter, we were able to report an increase of 88% in gross profit, and the Spresso Price Optimization bandit was integral part of that. Better yet, that profit came without sacrificing conversion or customer experience. With what feels like a simple flip of a switch we were able to find literally millions of dollars hiding in the business. The ROI of this solution was realized in just a few days – something I haven’t seen with any other solution we’ve invested in.” said Chieh Huang, CEO of Boxed. 

Alison Weick, President of eCommerce at Boxed agreed, “Spresso’s price optimization solution is my merchandising team’s secret weapon. We’ve been able to break free of manual scraping and use our data to make pricing decisions that have proven to resonate with our customers.”

Striking the right price
As the retail industry continues to evolve and grapple with the complexities of pricing strategy, it’s clear that retailers need innovative solutions to help them stay competitive. 

With Spresso’s price optimization module, retailers can take control of their pricing strategy and drive profitability at the SKU level. Leveraging first-party data and real-time optimization allows retailers to strike the right balance between profit and conversion. 

And with the added benefits of being a trusted partner of Google Cloud, retailers can trust in the security, performance, and scalability of the Spresso platform. 

Retailers are invited to try the solution for themselves, to learn more check out the Spresso GCP Marketplace listing or visit the Spresso website here.

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