This document discusses the challenges faced by suppliers from the rise of discount retailers and presents strategies for suppliers to maintain leadership in price positioning. It notes that long-term price deflation erodes profit margins and reactive short-term tactics further damage value. It recommends that suppliers establish rational price corridors between grocery and discount stores, define an effective pricing structure, understand discounters' strategies and priorities, and empower sales teams to make proactive pricing decisions.
Price: The Price at which the product is sold to the customer is a key part of the marketing mix. A comparison must be made with the prices of competitors product.
Price: The Price at which the product is sold to the customer is a key part of the marketing mix. A comparison must be made with the prices of competitors product.
slide share on promotion strategy how the promotion strategy works in selling out the products and how promotion activities are necessary to sell the more products and to increase the sale as well as profit of the company
slide share on promotion strategy how the promotion strategy works in selling out the products and how promotion activities are necessary to sell the more products and to increase the sale as well as profit of the company
65% of executives believe that they are not able to charge the prices they deserve for their products and services *
46% of companies believe they are involved in price wars. In some countries, such as Japan that figure is as high as 85% *
Why are so many companies failing to achieve prices for their products and services that reflect the true value they provide to customers? In our experience, with hi tech, energy and healthcare clients, failure to achieve value pricing is due to lack of preparation, communication capabilities and negotiation skills of the sales people.
What you will learn:
- Dynamics between price discounts and profitability.
- Quantifying and communicating the impact of the offer value to justify a fair price.
- Identifying the specific buyers who recognize the importance a good value offering.
- Circumventing price-only procurement buyers without alienating them.
* 'Global Pricing Study 2011: "Weak pricing cuts profits by 25%"'. Simon – Kucher. August 2011.
This document reviews best practice in pricing processes to provide a reference against which current practices and proposals can be tested. Our objectives have been: to research the attributes of world-class pricing through publications and academic sources; to investigate how these attributes are applied in practice to products and services; to assess pricing processes in successful businesses.
In recent years a new attitude toward pricing has emerged. Deregulation and international free trade agreements have increased competition. Price promotion has eroded the power of brand loyalty. Pricing has assumed greater importance to most businesses.
As markets increasingly assume a global dimension, customers can more easily compare prices between one region or country and another, using the internet or a fax machine. They can often locate the same product, or an
acceptable substitute, from another source. Customers are more demanding and fickle, and their expectations increasingly difficult to fulfil.
Price inflation in western economies is now at its lowest for decades. Price increases are no longer accepted without protest from customers, if at all.
The Chairman of General Electric has predicted the onset of the ‘Value Decade’. Global price competition will strengthen because of: reduced product differentiation; global over-capacity for production; significantly diminished trade barriers; efficient information and distribution systems; providing customers with easy access to the prices of suppliers; a growing lack of customers’ loyalty to individual suppliers. Choice will be increasingly driven by price.
This is a challenging scenario that reinforces the need for an integrated strategy and concerted managerial action on pricing.
Pricing processes have lagged behind developments in the market place. They are often characterised by internal conflict between accountants wishing to maximise profit per unit and marketing specialists who seek to maximise
throughput. They are also affected by the potential for strained relations with good customers.
Some companies have downsized their operations to a level where diminishing returns cause them to question the benefits of continuing to focus upon reducing costs. As they switch their attention from cost cutting to adding
value, pricing naturally assumes increased weight in the marketing mix.
We have found many companies reluctant to discuss their own processes.
Some may wish to avoid betraying a lack of sophistication.
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2. 1 The rise of discounters
2 The long-term impact for the industry
3 An effective way to leadership in price positioning
4 How to find out more
3. As the retail price wars evolve, suppliers will come under continuing
pressure to grow value simultaneously across all channels
What are the challenges?
Long term price deflation
erodes profit margins
Short term reactionary tactics
have a knock on effect in the
market, eroding further value
Price match guarantee &
promo promiscuity
intensifying trade spend
pressure
Evolving price war further
diluting brand loyalty and
reducing ability to charge a
brand premium
GROCERY
Profit
erosion
CONVENIENCE DISCOUNTERS
- Price deflation as other channels
expand their convenience offering
+ Price consortiums benefitting
from scale to rebalance supplier
negotiations
+ Rapid share gains
+ High shopper value
perception
- Mounting profit concerns
- Hypermarkets losing traction in
favour of smaller formats
- Shrinking ability to command a
premium for branded products
Channel leakage
4. 1 The rise of discounters
2 The long-term impact for the industry
3 An effective way to leadership in price positioning
4 How to find out more
5. Amid the rise of discounters value growth will remain tied to
pricing
DISCOUNTERS ARE THE NEW
PRICE BAROMETER
Morrisons will be joined by their competitors in
price matching against the discounters, as a new
price floor is established
PRICE DEFLATION
IS HERE TO STAY
Consistent competitive pressures, wage
deflation and shopper value perception will
further erode prices
TRADING WILL ONLY
GET TOUGHER
Retailers will expect suppliers to fuel the
price war through increasing trade
investment
2006
Introduction of loyalty schemes
and targeted consumer
promotions led to rapid value
growth in the top 4
2008
Recession severely affects
average basket spend and
promo promiscuity,
eroding value in branded
products
2009
Creation of revenue growth
functions allowed companies to
improve net price realisation
through quick wins
TODAY
Big four invest over £1bn in price war
Discounters gain significant traction
across the consumer landscape
6. 1 The rise of discounters
2 The long-term impact for the industry
3 An effective way to leadership in price positioning
4 How to find out more
7. Leading in pricing & winning in the discounters era:
What you can do to retain value?
Sales director need to lead the way in changing the mind-set
of the business towards channel pricing leadership
Achieve a well considered and rational consumer price
positioning and corridors; groceries VS discounters first and
foremost
Establish the right enablers to implement a defensible pricing
structure
1
3
4
Ascertain your future role as a category and as a business
within the discounters’ overall strategy
2
8. Sales director need to lead the way in changing the mind-set
of the business towards channel pricing leadership
1
TODAY TOMORROW
Adaptive approach
Less reactive
approach than in
the past but pricing
and promotion
decisions still
heavily adapting to
customer landscape
Pre-emptive
approach
New mind-set
across the business
in setting price
positioning and
clear level of
accountability in
the team as to who
manages it
Cultural Shift to
empower NAMs to
make effective and
considered channel-wide
decisions
A
Having the right
tracking and measuring
mechanism to provide
relevant insights
B
Embedding price
positioning as a critical
step in the sales
planning cycle
C
YESTERDAY
Reactive approach
Pricing and
promotion
decisions taken in
response to
external events
RESPONSIVE TO CUSTOMER CHANGES
IN PRICING STRATEGIES
PROACTIVE
STRATEGY
MANAGEMENT
9. Ascertain your future role as a category and as a business
within the discounters’ overall strategy
2
Apply analytical rigour to fully understand and monitor the discounter’s point of view
of the FMCG world via a mix of primary research and secondary data analysis. Clarity
on their priorities will better inform your price positioning decisions.
How do they identify
their main
competitors?
What are their national
plans in terms of
geographical expansion?
How do they want to price
position themselves in the
market and how can we
support the execution of
their pricing strategy?
What shopper
segments are they
after? How are they
changing their in-store
customer experience?
What role does the UK
market play in the group
global growth strategy?
What level of margins are
they prepared to operate
within?
What’s the role of
premium brands VS
private labels in
their overall brand
strategy?
To what extend are the
willing to dilute their
model by trading up their
merchandise assortment
to higher quality
products?
What are their overall
assortment priorities for
the future (breadth and
depth), outside the
beverage category?
What are their shopper
engagement programs
and how can we support
them via pricing and
pack decisions?
10. Achieve a well considered and rational consumer price positioning
and corridors; groceries VS discounters first and foremost
3
Ensure consistent Target Price
positioning across channels and
against competitors in order to
achieve financial ambitions
Clear channel and customer roles in
the current landscape and within
future trends
Determine pricing relationships in
the market and identify key product
battlefields for customers
Assess the impact of channel
leakages and identify the most
material products
DICOUNTERS VS GROCERY STORES PRICE POSITIONING
Do Grocery and Discounters need to be in the
same corridor?
Do we need to differentiate the packs so that
they don’t conflict?
11. Establish the right enablers to implement a defensible
pricing structure
4
Define the right structural pricing to
help achieve and manage the
consumer price corridors in the
market
Structure the pricing to your customer
in line with how you want them to
behave in the market.
The key is to contrast customers’
strategy :
– Whom they are trying to compete
with?
– What do they want to price position
themselves in the market?
– What level of margins are they
prepared to operate within?
Lidl Asda
List
Price
Net
Invoice
Price
Triple
Net
Price
On-Invoice
Discount
Promo
Investment
Terms
Use Rate Card Pricing, promo and trade
investment by customer to support price
positioning
12. 1 The rise of discounters
2 The long-term impact for the industry
3 An effective way to leadership in price positioning
4 How to find out more
13. Interested? How to find out more…
+44 7521 012 923
info@fifth-p.com
We are Fifth P. Since 2011, we’ve worked with our clients in the FMCG & consumer product industries across
Europe to create growth strategies that sustain long-term growth & leave lasting legacies
Not sure if this slide or slide 10 goes first. Personal opinion is this one, as don’t think you necessarily need to go down into the details on meeting one – these give sufficient detail to talk around, but should have the full case studies of these examples in appendix at least, if not as the next slide…
Maybe need 2 X these slides
Case study snapshot rules
The pithy one-liner (orange text)
A la Accenture ads, a pithy one-line summation of the project, ensuring £££ / % is detailed – one line overview of why we did it
The Brief
One line statement of issue
Company logo
Our Approach
The three key things that we did, succinctly, clearly, using as little technical / etc. jargon as possible – i.e. make it accessible
Lasting Impact
Three key benefits to the approach – succinct, tangible, believable
Will need input from you guys and Sahaj to refine the case studies in this format. Equally, will need to choose the right ones for Suntory