Pricing & Promotion Challenges

Inflation is a major challenge for CPG brands, impacting their pricing and promotion practices. However, this is just one of many pricing and promotion challenges brands face. From competitive pricing to over-reliance on promotions, there is a lot to balance. Here are five pricing and promotion challenges that you may encounter:

1. Inflationary Pressure: Inflationary pressure is a significant challenge for CPG brands. The key is to hit the right numbers to avoid margin losses while still keeping consumers satisfied. It’s not easy when supply costs are rising, but companies can identify emerging demand spaces and reposition pricing effectively.
2. Competitive Pricing: Many brands focus too much on where their competitors are priced and the promotions they’re running. However, if your overhead costs are higher than the competition, this model can eat into your profits. Pricing is the most critical lever impacting commercial results.
3. Misunderstanding the Consumer: During tough times, consumers behave in ways that many brands don’t understand. While consumers may cut back on non-essentials, they still want to find joy in shopping. Brands need to know what their customers are willing to spend on, including affordable luxuries.
4. Over-Promoting: Brands may rely too heavily on promotional sales during tough times, but over half of all trade promotions result in little to no sales lift. Measuring trade promotion effectiveness can be tricky, but diving deep into data can help anticipate potential problems.
5. Deciding with Poor Data: Poor or inaccurate data won’t help brands position their products correctly. Emerging brands, in particular, may make decisions based solely on sales data provided by retailers. Instead, investing in third-party POS and panel data can help act quickly on accurate and current trends.

With more than 60% of Americans believing we’re in a recession, brands need all the tools in their belt to succeed. By addressing these pricing and promotion challenges, brands can make informed decisions to stay competitive and profitable.

Grocery Departments highlight the impact of inflation

At the grocery store, inflation in the food sector is currently at 11%, which is higher than in the non-food sector that stands at 9%. The impact of rising prices was more noticeable in the non-food sector, where sales dropped by 4%, compared to a 2% drop in the food sector. It’s not surprising that 36% of consumers expect to spend more on groceries and home goods this year, which is likely to affect all categories of consumer-packaged goods. When consumers have to spend more on essential items, they are likely to reduce their spending in other areas. To ensure success in 2023 when inflation persists, it’s crucial to understand how to position your products appropriately and remain top-of-mind among consumers.

Pricing & Promotions Best Practices

The CPG industry faces a host of challenges that can impact its growth. However, by implementing a few best practices, brands can mitigate the damage and build a stronger foundation for growth in 2023 and beyond. Whether sales are up or down, adhering to these practices can help avoid sudden losses when outside factors change demand. Pricing and promotion practices are critical to a brand’s ability to gain market share and defend against competition. Here are five best practices for pricing and promotion optimization:

1. Define Your Audience: To succeed, every brand needs a supportive consumer base. However, without a clear understanding of who they are and what they care about, brands will miss the mark. Identifying the target audience requires analyzing sales data and panel data, looking at consumers who buy the products, those who shop the entire category, the competition, and similar markets. Once the brand has a better understanding of its targets, it can set prices that match their needs, time promotions properly, craft effective marketing efforts, and more.
2. Factor In Everything: To get the best returns on pricing and promotions, brands need a broad data set that includes sales and panel data and outside factors such as supply chain issues, inflation, consumer sentiment, government issues, and more. These factors help brands better understand the state of the market and the future. For example, if sustainable products are too expensive for 41% of consumers, the brand may be missing other needs or concerns.
3. Link Pricing and Promotion: Pricing and promotion are closely linked. Though they operate independently, they rely heavily on one another. When prices are too high for consumers, they become more reliant on promotions. But, this can harm margins and velocity. Brands and retailers may need to strategically align promotions around key meals and seasonal items to win over cost-conscious consumers.
4. Pick the Right Strategy: When it comes to pricing, CPG brands use five common strategies. However, using a less optimal strategy can keep margins low or prevent stronger market penetration. Brands need to review their pricing regularly and identify what works best with their brand and consumers. Poor pricing rarely leads to additional shelf space.
5. Work with Your Retailers: CPG brands are part of a larger ecosystem that includes suppliers and retailers. Brands cannot operate independently and need the insights of retailers who see shoppers flocking to or ignoring products. Building relationships with retailers and getting their insights into a better pricing and promotion strategy can lead to increased sales and benefits for everyone involved.

Pricing & Promotion Tools: Byzzer for Emerging Brands

Byzzer is the ultimate solution for emerging brands seeking to compete with larger competitors. With its self-service platform, NIQ provides reliable data and insights that were previously only accessible to those with extensive personnel and resources. This levels the playing field and enables emerging brands to build a strong plan with ease. By providing ad hoc data on demand, access to over 40 CPG reports, and the availability of data experts, Byzzer simplifies the process of making informed decisions. The platform offers several key reports, including the Smart Pricing Action Report, Category and Brand Trend Report, Competitor Comparison Report, and Omnisales Performance Report, which can be instrumental in driving success.