THE SITUATION: Pricing is the number one driver of profit. Getting pricing right is paramount to ensure that value is not left on the table or that products don’t sit on the shelf. While the importance of pricing is clear, developing an effective pricing strategy is increasingly challenging for many CPG manufacturers. Recent structural changes in the marketplace have rendered traditional pricing assumptions and practices irrelevant:
- Since the Recession, shoppers across all segments have a new value-seeking mindset
- Retailers are resisting price advances from manufacturers and value retailers are growing
- Challenger brands and private label are altering the pricing architecture of many categories
Increased input cost volatility combined with slow growth within traditional retail channels has turned pricing into a discipline that needs to be always ‘on.’ However, the level of organizational focus and resources dedicated to pricing often lags other disciplines and too often pricing activity is initiated as a reaction to changes in costs versus establishing a proactive pricing approach. Pricing analysis itself is often limited to price elasticity studies that ignore many broad market factors, such as shoppers’ willingness to pay, competitive response, and reception by retailers. Anticipating the reaction of retailers and developing strategies to overcome objections from the start is critical to ensure pricing recommendations are broadly executed at retail. Strategic pricing should be proactive and comprehensive – staying out in front of the consumer, shopper and retailer.
OUR SOLUTION: In order to implement a price management strategy that maximizes profits, traditional pricing analytics (e.g. elasticity modelling) must be integrated with a broader range of consumer, shopper and retailer insights. Our ValueCatalyst™ approach to strategic pricing does this by focusing on the shopper value equation as a critical input to optimize brand pricing and to establish a profitable category pricing architecture.
ValueCatalyst™ combines traditional pricing measures and analytics with a deep understanding of benefits most valued by the shopper. By broadening our clients' view of shopper behavior, we open up a broader range of solutions. By considering the complete shopper value equation within the context of a category, we can determine the most profitable pricing strategy—whether it be a simple price change, a cost reduction by removing an unappreciated benefit, or a holistic product repositioning.
END BENEFIT: Our goal is to provide clients with viable options for profitable growth, a path out of margin squeezes, and improved pricing power. Insights from ValueCatalyst™ ensure organizations are able to achieve long term growth goals while capturing the greatest possible share of value in the market.TALK TO AN EXPERT