As consumers we have all been trained by industry to save money. Flying somewhere? Take the red-eye. Want to watch a movie? How about that bargain matinee! Need a rental car? Those weekend deals are probably your best bet. Now imagine if this notion of dynamic pricing applied not just to a few categories but across the board to include even the most basic of our consumer products. The headline in the Sept 2012 Wall Street Journal article said it all – “Coming Soon: Toilet Paper Priced like Airline Tickets”.
Yield or revenue management is a technique that was pioneered by the global airline industry to understand and influence consumer behavior in order to maximize profits (or yield) from a given resource. Weissbeerger is a start-up based in Tel Aviv (Israel) and which is part of SAP Startup Focus, a program that helps promising startups in the Big Data, predictive and real-time analytics space develop new applications on SAP HANA and accelerate market traction. The founder, Omer Agiv, figured out that extending the idea of yield management to the global alcoholic beverage industry made perfectly good sense, starting with his favorite drink beer. After all, the beer industry is a vast global entity (est. revenues US$500 Billion in 2013), where consumption is flat, consolidation is rife and the cost of launching new products continues to rise.
What Omer and his team discovered was that brewers were operating in virtual darkness when it came to true consumption related insight about their products. Yes, brand owners have spent tons of cash in doing more traditional market research but lacked the vital “last mile” kind of information that is vital to them as they roll out expensive sales promotions and marketing campaigns. For e.g. in Europe, Carlsberg discovered that 70% of Carlsberg is consumed during 8pm-10pm in urban places vs. only 40% in suburbs. This allowed them to test dynamic pricing and discounting based on real-time data which was impossible before.
Not only did the participating breweries get smart about maximizing their profits, they also discovered (a) The “generous bartender syndrome” – in a typical bar environment, 20% of the draught beer pour is inaccurate, and once things could be measured and monitored, it was fairly simple for a bar owner to take simple corrective action (b) It allowed bars to introduce a new business model which didn’t exist before i.e. giving customers a magnetic card and allowing them to self-pour from any tap, in any amount, and be billed simply on the basis of their total consumption. No surprises, as consumers went away from the fixed price for a fixed quantity model (i.e. US$ 5 for a pint of lager), they found themselves trying all kinds of beers in all kinds of random amounts, and consumption went up by a whopping 30%. For an industry that has been struggling to raise profitability, this was Godsend.
New critical technology have made a business like Weissbeerger even possible – (a) the emergence of SAP HANA, an in-memory database platform that allows analytics to be performed in real-time even on very large datasets and (b) flow sensors that can be fit not only onto draught beer taps but also on individual liquor bottles, so that consumers can freely drink what they want and be very accurately charged for their total consumption.
Since its inception in 2012, SAP Startup Focus has worked with over 650 startups and has successfully shepherded dozens of commercialized applications that are available for customers today. To learn more about SAP Startup Focus, please visit http://www.saphana.com/community/learn/startups
Weissbeerger – another innovative startup using the power of SAP HANA to extract value from Big Data and radically change the industry status quo.
(This blog first appeared on SAP Insider here)