An Update from MPSI

Hal Reid had the opportunity to conduct an interview with Jim Auten, MPSI's president and CEO.MPSI primarily provides data such as traffic counts and demographics, and modeling services, to the petroleum and convenience store markets.Auten shares the company's latest goals and new areas of interest.

Hal Reid (HR): I notice that the new Technical Advisory Board consists entirely of academics from both the information technology, including artificial intelligence and modeling. In addition, I see expertise in imagery and remote sensing.As your business seems to be focused on petroleum and convenience retailers, how exactly are you going to use these academic experts?

Jim Auten (JA): Although MPSI's recent past has focused on the Petroleum and Convenience retailers, our retail expertise has application beyond these industry segments and we intend to exploit potential leverage of that expertise.While maintaining our commitment to traditional businesses, our diversification strategy will target new departments within our core customer base where we believe there are substantial growth opportunities with customers we know, and new retailing industries where decisions are based on convenience retailing concepts.We've increased our direct sales force and established partnerships with complimentary companies that are actively helping us to grow both our traditional and non-petroleum customer base.

We established the Technical Advisory Board to bring next-generation technologies into our product and service offerings.The combination of new scientific methods with MPSI's retail expertise will allow us to identify new products and guide the techniques employed to insure that our data and modeling products set the standards within our business niche and are at the same time cost effective applications for our customers.

HR: One of your products, TrafficMetrix, is used by almost every retailer as part of a standard set of data for market and site evaluation.As you now seem to be focused on petroleum and convenience retailers, what is going to be the direction of this product? Is it going to remain, be enhanced, or perhaps become an international product?

JA: Our U.S.TrafficMetrix is in fact used by customers in a variety of industries including restaurants, coffee retailers, telecommunications, discount retailers, commercial realtors, pharmacies, rental car agencies, grocery retailers, etc.MPSI recently announced the availability of a significant enhancement and update to the TrafficMetrix product and we will continue to dedicate resources to this product in order to keep the information up-to-date with semi-annual releases.

We currently offer an international TrafficMetrix product in 18 different countries.New countries will be added as our modeling customers take us to new areas around the globe.The majority of our international TrafficMetrix data is collected via MPSI field surveyors taking manual counts which are fed into a model that we've developed, which takes into consideration time of day and day of week and converts the count to an annual average daily traffic (AADT).This model was developed and validated against known counts in countries where this information is available.

HR: A unique offering that you have for petroleum and convenience retailers is photographs of the competition.Just how extensive is this database and does it cover other types of retailers?

JA: In the U.S. alone, MPSI has digital photographs for more than 100,000 retail outlets that are primarily gasoline stations, convenience stores and car washes.We also do business in 85+ international countries where it is standard procedure for our surveyors to take digital photographs.As we diversify into other retailing industries, digital photographs are a purchase option that we offer our customers.

HR: With the new Technical Advisory board as a resource, are you planning some additional modeling products beyond the Huff Model? If so, are these going to be more oriented toward retail petroleum than traditional retail?

JA: Yes.The Technical Advisory Board will be an important resource in helping us to identify the technologies to best serve the needs of our customers.We recently held our first Technology Board meeting, at our corporate headquarters, where we identified, defined and prioritized a number of potential new data and modeling products.We believe these new products will appeal to traditional retail as well as petroleum and will expand MPSI's brand value into the strategic planning arena which supplements our traditional concentration on capital and operational planning.

HR: On your Web site there is mention of tapping into the expertise of the Santa Fe Institute.Can you elaborate on how this is going to impact your business and what resources they will bring to MPSI?

JA: Our company has been a member of the Santa Fe Institute since 2002.This membership provides us with access to leading-edge research and provides a source of expertise to support and solve complex retail modeling challenges.In the past, we have incorporated techniques learned from the institute to model new retailing concepts. We also continually review the research they've done to determine if any of these new techniques could be incorporated into our models to improve accuracy and processes to reduce costs and/or timing.

HR: A topic of general international business interest is the level of oil consumption in both China and India.Are these new dynamics having any major impact on your business?

JA: Yes.We expect these to have a major impact in the near future.Both of these markets have been regulated which means that petroleum retailing has been done through government companies having basically no competition.With deregulation underway and markets opening up, MPSI will move in either with its traditional clients that expand into these markets or through existing localized petroleum companies.Our goal is to teach companies how to implement best of breed practices in retail network planning in these countries.

HR: With a lot of consolidation among gasoline retailer and the transition to C-store/gasoline combo stores in the US, how have these changes affected the balance of your business, domestic and international?

JA: Domestically MPSI's business has grown steadily over the last several years.The brand consolidations in the states have gone beyond the rapid growth stage and have now stabilized.With low margins on gasoline sales, retailers are placing stronger emphasis on their ancillary offerings, including convenience store, quick service restaurant and car wash. These changes in focus have made MPSI's products even more important in helping them understand these offerings and compete successfully.

Consolidations have also stabilized internationally.Unlike the U.S., England, and France where a lot of product is sold through non-traditional retailers or independent marketers, other countries are beset by traditional global petroleum refiner marketers and/or local refiner marketers that have been operating in a regulated market.The opening up of these regulated markets and the consolidation of mergers has provided growth opportunities for MPSI with both the global and local players.

HR: I see one of your product offerings is Huff's Market Area Planner.Dr.Huff consults currently with ESRI and is using additional modeling methodology within Business Analyst.Is this product's growth or functionality affected by this or do you have another link to multivariate modeling?

JA: Huff's Market Area Planner is a very technical product that requires the user to have a strong statistical background as well as access to substantial consumer research data, site location data and industry-specific retail knowledge.Because of this, we have found this product to primarily appeal to colleges and universities that wish to use this as a teaching tool.While we still intend to offer the product to customers who have the expertise and data, we do not have any plans to update or enhance it primarily due to the fact that this group of users constitutes only a small sample of those that need models.

We provide another multivariate modeling product, Retail Explorer, which includes pre-packaged algorithms and a variety of other modeling techniques that we customize for specific industries.Retail Explorer does not require the user to have a statistical background or any data for that matter.MPSI has field surveyors to collect supply-side data and can provide demographics and traffic count information for any location in the US to drive the demand-side of the model.Retail Explorer is a desktop/laptop application that MPSI has refined and improved over its 35-year history.More than 200 retailers around the globe license and use Retail Explorer to support their network planning activities.

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