By John Moss, CEO, Flintfox
Retailers and FMCG brands have never been under such pressure. Just as they began to recover from the effects of COVID-19 and lockdown, working with suppliers to restart supply chains and enticing shoppers back into stores, the unthinkable happened – war in Europe.
Now those supply chains are once again under pressure as rising prices, together with the spectre of high and sustained inflation, are eroding margins and damaging shopper confidence. Retailers and FMCG businesses must be able to respond to changes in the market and in consumer behaviour more quickly and efficiently than was the case just a few years ago.
Attracting and retaining price conscious customers while protecting margins has never been so challenging – and so important.
Pricing made on sound data
Despite the importance of pricing being hinged to costs, 39% of businesses say they are unable to keep up with the scale of real-time cost fluctuations occurring in the market,
according to in-depth research which we recently conducted in partnership with Forrester.
The risk of critical pricing decisions being made without solid and current data is that mistakes can be made, opportunities for price increases are missed or action isn’t taken in time for margins to be protected.
Sharp price increases on the wrong SKUs can deter customers from purchasing, while uninformed and haphazard reductions can critically impact profit margins. Retailers are struggling to drive their bottom line due to their reliance on outdated and error prone spreadsheets to make business decisions.
According to our research with Forrester, 60% of retailers feel that poor quality data is a fundamental weakness in their pricing strategy. We also found that just over half (52%) of retailers find it hard to execute different pricing for products across different channels.
Without accurate visibility on costs, businesses often rely on untargeted, broad-based price rises, hitting the full spectrum of their customers. This can damage not only their revenue but their reputation. With the cost of living crisis deepening and the prospect of supply chain challenges worsening, this kind of shot in the dark is even more risky.
What is interesting is that while companies have embraced digitisation across so many aspects of their operations, from CRM to people management, too many are still not taking the same approach to their pricing.
A new approach to maintaining and maximising margins
Intelligent pricing allows businesses to analyse, act and automate to keep up with the speed at which market conditions are changing.
By adopting an Intelligent pricing platform, businesses can bring together disparate data sets into one single source of truth to get an instant and full view of their costs. This data can then be used to undertake instantaneous price calculations enabling pricing adjustments that are timely and based on solid data.
Automated pricing can take hundreds or thousands of data sets and bring them together to serve up to 5,000 prices per second, calibrated to create the necessary margins, no matter how complex the pricing strategy. Businesses can see which products can absorb some cost increase, which need to be maintained to protect the customer base and where gains can be achieved. They’re able to identify profit opportunities that wouldn’t be evident with manual analysis.
This is particularly helpful as, today more than ever, retailers and FMCG brands need to be able to adopt a combination of discount-based components. These might include specific money-offer deals or percentage reductions based on volume offers. It could also relate to total spend and upcharge components like freight charges. Managing channel-specific promotions has never been easier or more cost-effective.
Benefits for sales teams
Away from shelves and screens, automated pricing can help sales teams in B2B and wholesale markets make informed decisions when it comes to discounting products to win new customers. With pricing data and margins visible in their systems, salespeople can offer the best deal without impacting profitability.
In these situations, salespeople don’t want to have to try to remember which discounts are available and when they can be applied, access to an automated pricing engine reduces the amount of time that teams spend on pricing administration and because changes can be made quickly and are applied immediately, sales teams have more time to get out to meet customers.
With nearly half (44%) of companies recognising that integrated intelligent pricing accelerates sales volumes and growth, according to our research with Forrester, it’s not surprising that a growing number of retailers and FMCG companies are replacing their pricing spreadsheets with this new technology. Already many businesses are seeing the benefit of automated, intelligent pricing with over three quarters (77%) of those in charge of pricing that we surveyed intending to adopt technology for better decision-making.
We’re working with a major soft drinks manufacturer who has seen the benefits of intelligent pricing to improve pricing transparency and visibility. Having retired legacy supply chain and pricing systems, they’re now able to manage advanced pricing and promotions, reduce operating costs and monitor margins across each of their channels.
These are challenging times for retailers and FMCG companies. However, as it’s often pointed out, the Japanese word for “crisis” comprises both “danger” and “opportunity.” Now is the time for forward thinking companies to seize the opportunity to use the latest technology to power up their pricing strategy and help manage their way through the turbulence to gain competitive advantage in the future.