After the recent lockdown events, only the laziest one didn't claim that retail has changed. However, such information often ended up simply stating a bold fact or describing the consequences. At Competera, we find this approach ineffective. Instead of describing, we identify critical action points to help you find the path to stay proactive in your daily tasks related to pricing.
In this piece, we present a record of one of our webinars about reflecting cost-pushes or one of the most typical challenges retailers face in times of crisis. The collapse of the economics is causing a domino effect – suppliers increase their prices, logistics costs get higher, and everything else becomes more expensive. So, our Lead Pricing Architect Vladimir Kuchkanov tells how to increase your prices to reflect margin decrease on selected products as well as to protect the revenue of the entire category.
The Business Growth Engine is changing.
Usually, during normal times your business growth depends on three main factors. They are availability, awareness, and relevance. They are equal and play different roles at different stages of business maturity. During crises, everything changes. The ability to supply the needed amount of merchandise becomes the main challenge. Consequently, awareness becomes less critical than relevance and availability. With the changes in business drivers, retailers also observe a boom in the essential categories, a blast in non-essential categories, and the growing importance of maintaining relative price attractiveness.
New Pricing Needs
If you list the main requests for pricing from retailers during the crisis, the two most popular sounds like:
How do I offset a cost-push?
How do I find a balance between scale and profitability?
Keep them in mind while making a strategy on how to outperform your competitors.
Relative price attractiveness
It's the simplest and the most challenging point at the same time. You should be the last one to raise prices among competitors. As data from past crises in the European market shows, this strategy was the most effective in the medium and long term.
Identify and follow only true competitors
Nowadays, when price monitoring and product matching aren't extraordinary, spraying the focus on all of your competitors, in the long run, leads to margin delusion (especially, while pricing your KVIs). Advanced tools can help. For example, thanks to ML technologies, you can match price reductions only by those competitors who put pressure on your sales even where they are difficult to identify, e.g., marketplaces. Here you can find more info about this solution.
Beware of price thresholds
Last but not least, with the decline in purchasing power associated with the crisis, the issue of holding price thresholds for different products becomes urgent. In simple words, you need to set prices within psychologically comfortable limits for your customers. The buyers themselves will help you to identify such price thresholds. For example, you can conduct an interview based on the Price Sensitivity Meter system.
Of course, these points are only the top of our webinar's iceberg, so feel free to watch the full video as well as surf across our official YouTube channel to find more useful content.