PRICE OPTIMISATION & INFLATION
You increased prices. Several times.
What to do next?
Shoppers tend to respond to inflation by becoming more price sensitive and making more deliberate purchasing decisions. As supermarket prices have already increased substantially, consumers are likely to seek out alternatives or reduce their overall spending.
So what to do next?
Monitoring of pricing effectiveness
Not once, but ongoing price elasticity measurement.
At Accuris, we provide continuous monitoring and evaluation services to ensure that your pricing strategy remains suitable and effective within the current market context. Our team utilizes a variety of metrics, including base price elasticity and promo price elasticity, which are updated monthly to reflect changes in consumer behavior such as trading up, down, or switching to alternative products. Through this approach, we are able to identify which products and formats can sustain further price increases and help you to take advantage of competitive price increases. Additionally, we analyze the alternatives that shoppers switch to in order to provide you with valuable insights on consumer preferences and market trends. Our goal is to help you optimize your pricing strategy and stay ahead of the competition in today's rapidly evolving market.
Our monthly updated report tells you:
- Which products and formats can sustain further price increases (and how much)?
- What alternatives do shoppers switch to?
- How to take advantage of competitive price increases?
Which products and formats can sustain further price increases?
Pricing opportunities can be identified when base price elasticity and promo price elasticity are analysed for your brands and competitors alike with the most recent data. Accuris tracks elasticities on a monthly basis, so you can quickly respond to the most recent market trends and adjust your pricing policy whenever needed.
Price increases can often result in a shift towards alternative brands, as certain consumers may opt out of purchasing the affected product due to the increased cost. In this regard, it is critical for businesses to accurately forecast the potential impact of price changes on their market share. Fortunately, Accuris possesses the capability to forecast which brands will experience a decline in demand and which ones will remain successful following price changes.
Price competition is not solely restricted to inter-brand rivalry, as retailers also engage in competitive pricing. Prominent brands have the potential to steer consumers towards specific retailers, however, the impact of promotions should not be underestimated. In some cases, promotional offers can entice consumers to shift their entire shopping basket to a different store while reducing their expenditure at their regular store. At Accuris, we possess the ability to track retail switching with an unprecedented level of granularity, allowing us to identify which brands and promotions are driving consumer migration between retailers.
5 ideas to consider for your next optimisation round
Price optimization is an essential element in the fast-moving consumer goods (FMCG) industry. In this highly competitive market, optimizing prices is crucial for companies to increase their market share, attract new customers, and retain existing ones. However, it is not an easy task, and many businesses often struggle with finding the right balance between maximizing profit and maintaining customer loyalty. In this article, we will discuss the top 10 best practices in price optimization for FMCG, and how Accuris can help companies achieve their pricing objectives.
Traditional calculations are no longer adequate
Conventional practices employed in price elasticity calculations have become inadequate in today's market. Despite this, it remains prevalent to see price optimization conducted in isolation. The traditional method of calculating price elasticity per product neglects the interdependence between products within the category. Consequently, companies base their pricing policies on a single numerical value per product, disregarding the broader context. Given the current inflationary climate, it is crucial to account for the impact of competition, retailer-specific policies, and the interplay between base and promotional pricing when developing pricing strategies.
Conduct Market Research: Before setting prices, it is crucial to understand the current market trends, competitor pricing, and customer demand. Accuris provides businesses with detailed market analysis, including competitor pricing, market trends, and consumer behavior data, to help them make informed pricing decisions.
Use Data Analytics: In FMCG, data analytics is key to understanding consumer behavior and optimizing prices accordingly. Accuris utilizes advanced analytics tools to analyze sales data, identify trends, and forecast demand to optimize prices effectively.
Develop a Pricing Strategy: A well-developed pricing strategy can help businesses achieve their pricing objectives. Accuris works with businesses to develop customized pricing strategies that align with their goals and market conditions.
Segment Customers: Not all customers have the same pricing sensitivity. By segmenting customers based on their needs and preferences, businesses can tailor prices to specific customer groups. Accuris offers businesses the ability to segment customers based on their behavior and preferences to optimize prices for different customer segments.
Leverage Promotions: Promotions can help drive sales and attract new customers, but they must be strategically planned and executed. Accuris helps businesses develop and implement effective promotional campaigns to maximize the benefits of promotions.
Monitor Competitor Pricing: In a highly competitive market, monitoring competitor pricing is essential. Accuris provides businesses with real-time competitor pricing data to help them stay ahead of the competition and adjust their prices accordingly.
Adjust Prices Regularly: Prices must be adjusted regularly to reflect changing market conditions and consumer behavior. Accuris provides businesses with the ability to adjust prices in real-time, ensuring that prices are always optimized for maximum profitability.
Test Pricing Strategies: Testing different pricing strategies can help businesses identify the most effective pricing strategies for their products. Accuris provides businesses with the ability to test different pricing strategies and measure their effectiveness.
Use Dynamic Pricing: Dynamic pricing is a pricing strategy that adjusts prices in real-time based on demand and market conditions. Accuris offers businesses dynamic pricing capabilities, allowing them to adjust prices in real-time and optimize profits.
Monitor and Measure Results: It is essential to monitor and measure the results of pricing optimization efforts continually. Accuris provides businesses with detailed analytics and reporting tools to track performance and measure the effectiveness of pricing strategies.
In conclusion, optimizing prices in the FMCG industry is critical for businesses to succeed in a highly competitive market. The ten best practices outlined above, combined with Accuris' data analytics capabilities and expertise, can help businesses achieve their pricing objectives and increase their profitability. By leveraging Accuris' advanced pricing optimization tools and expertise, businesses can stay ahead of the competition and optimize their prices for maximum profitability.
Attendees and speakers at past Accuris conferences included professionals from:
Arla Foods, Benecol Ltd, Britvic Plc, Carlsberg Group, Carrefour, Coca-Cola EuroPacific Partners, Conair Corporation, Coty, Danone, Diageo, FrieslandCampina, General Mills, Hanesbrands Inc., Heineken, Henkel, Jacobs Douwe Egberts, Johnson & Johnson, Kimberly-Clark, Kp Snacks Ltd, Lego Group, L’Oréal, Mars, McCormick, Monster Energy, Nestlé, Nomad Foods Europe, PepsiCo, Perfetti Van Melle, Premier Foods, Procter & Gamble, Reckitt Benckiser, Sainsbury, Saputo Inc., Sigma, Tata Consumer Products, Tesco, The Coca-Cola Company, The Heineken Company, The Kraft Heinz Company, Unilever, Unilever Food Solutions Nederland, Upfield, Waitrose, Warburtons, Weetabix.
Track how shoppers switch between offers on a daily basis and measure the revenue streams they generate
What we do
Accuris provides revenue optimisation services and consulting. We have been using machine learning - mainly Bayesian statistics - since the early 2000s. We use all your available data to detect how shoppers switch between brands, stores and segments. Our Source of Business® model explains revenue streams generated for each promo and media campaign and for new product introductions and assortment changes.
Why it matters
Revenue indicators based on gross rather than net impact will lead to sub-optimal or even wrong decisions. Net effects strip out back-and-forth switching and other false positives. Promotions, price increases and new listings can lead to strong revenue increases in gross terms, but net results may be much lower or negative, thereby misleading decision making.
What other agencies do
Data providers and consulting agencies do not integrate all required data sources to get the full picture of how shoppers behave. They tend to use static methods or once-a-year regression approaches to explain market dynamics. This was perhaps sufficient a decade ago but is not enough for modern markets and categories where shoppers switch between offers on a daily basis.