Manufacturers were traditionally strong in developing price packs combinations successfully to minimize cannibalization across channels and maximize market share. However, there have been fundamental trends which have resulted in additional complexity to price pack decisions.

So, let’s discuss some of these complexities:

  • Economic Slowdown: The economic slowdown resulted in a dramatic increase of value seeking consumers with enhanced shopper survivalist mentality. This is the most significant trend putting pressure on manufacturers to get their price pack act right.
  • Proliferation of SKUs: SKUs have been increasing dramatically across manufacturers and brands. This makes it complex for brand managers to rationalize their SKU in their portfolio leading to operational and sales related inefficiencies.
  • Channel Fragmentation: Brand Managers now need to plan SKUs for each of the multiple channels. A customer in Walmart is very different from the one in Costco or Seven Eleven. SKUs have to be planned with respect to consumer expectation from the relevant retail formats. For instance, a customer who just wants to pick up a chocolate bar, would go to the closest Seven Eleven while a customer buying weekly grocery is more likely to visit Walmart and pick up an entire Chocolate pack for the family.
  • Price Transparency: Digital and online channels have added the aspect of price visibility for CPG manufacturers. This is especially true due to thriving hyper local grocery services offered by online retailers. For e.g. Diapers are increasingly being sold online. Online retailers make tracking per diaper cost easier across manufacturers.
  • Personalization: Digital channels have made the concept of serving the “individual consumer” a reality and put enormous pressure on CPG manufacturers to serve them and make them happy. In addition, the competitive landscape adds to the problem ith “mass selling” rendered ineffective due to smaller, nimble competitors selling customized stuff for the “individual consumer”.

These key complexities raise the following questions for decision makers:

  • How do I rationalize my SKUs to improve margins? Which ones should be continued and which ones to be discontinued?
  • Of the SKUs to be continued, which ones should be stocked in which retail formats?
  • How do I enhance penetration of my new product which are the SKUs which will push rapid adoption?
  • Which SKUs will cannibalize and which ones will add to incremental sales?
  • What could be optimal price packs based on simulated competitors new packs / SKUs?
  • What kind of packaging / packs cater most to the value oriented shopper?

Such decisions need to be taken efficiently and brand managers need solutions to resolve their “Price Pack” dilemma. Absolutdata’s Price Pack Architecture solution is a step ahead of traditional pricing techniques and can potentially help CPG manufacturers take informed decisions. This technique takes into account Point of Sale (POS) data for validation of results.

To know more about Price Pack Architecture, please view the webinar recording “Target Profit with Intelligent Pricing”.

Authored by – Imran Saeed – Director, Analytics at Absolutdata , along with Aviral Mathur – Manager, Marketing Analytics at Absolutdata