These trends have all placed significant pressure on FMCG companies to deliver earnings growth in mature markets.

Retailer Power

Retailer power is increasing with suppliers bidding up category margins to ensure share of the shelf and survival at the range review. In addition, suppliers have become increasingly reliant on price promotions to deliver topline sales results with the hope and expectation that this will deliver bottom line earnings. The reality is that baseline sales are in decline, margins are being eroded and the ability for suppliers to negotiate their way out of price discounting commitments diminishes.

Retailers are also driving their buyers to achieve 'dashboard" hurdle rates of earnings growth and profitability via margin enhancement and trade spend. This situation ensures that suppliers spend valuable company EBIT buying pages in catalogues, floor media and other supermarket real estate rental that in truth lines the retailer's pocket 5 fold to what the supplier achieves in incremental profit.

Return on Trade Funds Invested

• Much of this ineffective spend is designed to provide support for the retailer dashboard
• In the short term this may be effective in preparation for a strategic thrust into new categories or as "bridge" to develop working relationships with buyers
• Long term it is not a source of advantage and leaves a supplier exposed to the next highest bidding supplier in battle for limited shelf space to determine who will have access to the consumer
  

Emerging in the retail landscape

• A move away from deep discounts that drive demand spikes and cause supply chain havoc
• The introduction of rollback pricing to branded goods that is half way between EDLP and long term discount are underway
• Active retail shelf price management is another initiative that sees market leaders and followers signalling intent and driving more value into the category via responsible and steady price rises
  

Working with Pricing Insight

In the consumer goods industry, we concentrate on the following issues:

• Price elasticity modelling
• Trade Spend management planning
• Market Segmentation
• Competitive analysis and end game planning
• Pricing and value-to-customer
• Distribution channels, especially in connection with pricing and sales incentives
• We base our recommendations on concrete quantitative analyses, using tools such as conjoint measurement, multidimensional scaling or causal analysis
  

Our decision support models make it possible to accurately predict the effectiveness of marketing decisions. We support you in the implementation process and follow up on the results.

Project examples:

• Retail price strategy for a food company
• Category price repositioning
• Promotional elasticity and optimisation management
• Price Rise management program
• Vendor rationalisation planning

Contact us:

Email : info@pricinginsight.com.au
Ph:      +61 2 9973 4099