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Brands consumer ’ s mind , while the larger sized product on the right shows that if they increased price by even one cent , they ’ d lose around 35 percent of the optimized volume by exceeding a psychological price cliff at $ 6 . Understanding the pricing landscape of your brand and competition and combining it with the consumers ’ willingness to pay can help make more strategic decisions .
Once a brand understands the landscape and the consumer ’ s perspective on pricing , then elasticity modeling becomes an important addition to the analysis . Simulating the impact of price changes at a specific retailer will help understand where pricing changes could enhance brand and retailer profitability and identify where they may be leaking market share due to excessively high prices .
Retailers expect brands to look outside of just pricing to help offset rising costs . In a Retailer Confidential survey completed by Acosta Group in September 2022 , a leader at a large national retailer said to aid in cost reduction , they ’ d like to see brands have “ more focus on growing the core and less around massive SKU proliferation . Most new SKUs don ’ t end up lasting , which causes a lot of unnecessary costs throughout the supply chain . CPGs need to focus on reducing costs in their own supply chain rather than continuing to drive inflation .”
Leveraging RGM ’ s Mix Management lever can be extremely helpful to prune unnecessary SKUs and shift the portfolio mix to highlight cost savings opportunities and drive more profitable sales . In many of the analyses we ’ ve done , somewhere between 30-to-40 percent of items contribute only eight-to-ten percent of profit . Analyzing the
Simulating the impact of price changes at a specific retailer will help understand where pricing changes could enhance brand and retailer profitability
Julie Oxner www . acosta . group entire portfolio based on item role , profitability , sales , and distribution levels often identifies opportunities in the portfolio , and Acosta Group recommends doing this analysis at least once a year .
Pricing and Mix Management are two RGM levers that can help brands during this inflationary environment . These analyses can identify opportunities to improve profitability through pricing or assortment and identify areas where cost reduction is needed . RGM is a crucial strategy because it allows brands to optimize pricing , assortment , and promotions to maximize revenue and profits . By leveraging data analytics and consumer insights , brands can make more informed decisions and stay ahead of the competition . RGM requires cross-functional collaboration and change management to build capabilities and leverage analytical tools . Even brands without comprehensive RGM tools and capabilities can begin to leverage the principles shared here to better navigate the inflationary and recessionary environment . ■
Julie Oxner is SVP of Business Intelligence at Acosta Group . Acosta Group is a collective of the most trusted retail , marketing and foodservice agencies empowering brands and retailers to win in the modern marketplace . By delivering transformative , commerce-focused solutions and more than 95 years of expertise , Acosta Group connects brands with people at every point in the consumer journey . Comprised of Acosta , CORE Foodservice , Mosaic , Premium Retail Services and ActionLink , Acosta Group understands and anticipates evolving consumer needs , fueling accelerated performance to connect tomorrow ’ s commerce today .
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