Pricing Strategy

Pricing Strategy

• 1.
  PRICING  STRATEGY   A  fresh  outlook  on  effec:ve  pricing  
• 2.
    CONTENTS       1. An  evolved  role  for   Pricing  Strategy   2. Against  the  backgrop   of  an  ever  more   challenging  landscape   3. Leading  success  in   Pricing  Strategy   requires  a  strategic   step-­‐change   4. How  to  find  out  more  
• 3.
    CONTENTS       1. An  evolved  role  for   Pricing  Strategy   2. Against  the  backgrop   of  an  ever  more   challenging  landscape   3. Leading  success  in   Pricing  Strategy   requires  a  strategic   step-­‐change   4. How  to  find  out  more  
• 4.
  Pricing  strategy  plays a  major  role  in  driving  growth,  but   needs  to  evolve  into  a  core  strategic  asset But  –  in  many  businesses,  Pricing  is  under-­‐leveraged,  too  tac=cal  and  designed  from  the  “bo@om-­‐up”… …given  current  market  dynamics,  this  has  to  change  -­‐  Pricing  has  to  evolve  into  a  strategic  growth  lever •  Drive  strategy  through  a  consumer-­‐lens  to  develop  the  right  price,    &  range  across  the  porFolio •  Develop  &  embed  best  prac=ces  to  transform  Price  Pack  into  a  strategic  capability  across  the  business •  Enhance  innova=on  with  increased  commercial  insight,  rigour  &  focus  at  key  stages  to  sustain  success •  Evolve  price  posi=oning  across  channels  to  drive  margin  &  differen=ate  based  on  consumer  need A  fundamental  driver  of  long-­‐term  growth,  directly  connec=ng  commercial  teams  to  the  consumer… PORTFOLIO  STRATEGY PRICE  ARCHITECTURE CUSTOMER  TERMS CONSUMER  BENEFIT Drive  brand  equity  &   consumer-­‐value  through   innova=ve  pricing Work  with  retail   landscape  to  develop   terms  across  channels Op=mal  price/pack   architecture  to  drive   penetra=on   Direct  average  prices   across  the  porFolio  to   growth  sales  &  margin Develop  fundamental   skills,  capabili=es  and   structures INTERNAL  CAPABILITIES PRICING  STRATEGY  JOURNEY
• 5.
    CONTENTS       1. An  evolved  role  for   Pricing  Strategy   2. Against  the  backgrop   of  an  ever  more   challenging  landscape   3. Leading  success  in   Pricing  Strategy   requires  a  strategic   step-­‐change   4. How  to  find  out  more  
• 6.
  Industry-­‐wide  issues  are having  a  significant  effect  on   growth  &  profitability… Margin  Dilu=on Value  created  through  sales  diluted  through  costly  customer   terms  &  promo  cycles Rise  of  the  Discounter Emergence  of  discounters  as  credible  alterna=ves  to  tradi=onal  retailers,  en=cing   consumers  with  compelling  value-­‐based  proposi=ons  at  comparable  quality   Retailer  Price  Wars Destruc=ve  price  wars  undercut  compe==on  &   combat  discounters,  as  suppliers  see  margin  &   brand  equity  erosion Consumer  Promo-­‐Promiscuity Consumers  buying  more  on  promo,  amplifying  margin   pressures  &  crea=ng  a  culture  of  discoun=ng Lack  of  Sustained  Innova=on  Success Significant  investments  made  in  Innova=on  &  NPD,  but  most  fail   within  the  12  month  mark     The  Future…? More  of  the  same,  or  can  companies  turn   it  around  with  evolved,  integrated  Pricing   thinking?
• 7.
  …with  companies  beginning to  feel  the  pressure… Revenue  &  margin  growth  in   decline,  whilst  spend  is   increasingly  difficult  to  control   Innova:on  process  lacks   commercial  rigour,  is  too  reac6ve,   and  rarely  delivers  aSer  the  first  12   months…   Customers  feel  we  lack  credible   commercial  strategies,  affec:ng   rela:onships…   Annual  trade  investments  are   increasing  ahead  of  margin…   P&L  is  increasingly  geared   through  significant  promo   investment…   Price  &  Pack  strategy  s:ll  isn’t   considered  as  an  internal   strategic  capability…     Our  channel  strategy  &  price   posi:oning  lacks  clarity  &  clear   governance…  
• 8.
  …suffering  from  a visible  impact  on  performance   • Business  Impacts •  Failure  to  capitalise  on  growth  opportuni=es  diverts   focus  &  resources  &  detracts  from  successful  innova=on •  Significant  costs  emerge  from  write-­‐offs  and  excess  stock   sold  below  market  value  to  discounters •  Overly  intensive  resource,  energy  &  capital  spent  in   developing  unsuccessful  NPD •  Increased  trading  &  reputa=onal  costs  as  customer  &   consumer  confidence  falters 24%   • NPD  Life  Cycle •  12  Months •  24  Months •  36  Months •  0-­‐6  Months 76%  of  FMCG  launches  fail  in  the  first  year Highly-­‐geared,  unsustainable  P&L   • £  Revenue 5  years  ago 2  years  ago Today •  8  years  ago • Business  Impacts •  Baselines  decline  as  a  result  of  chronic  price  wars   •  Shoppers  become  increasingly  promo-­‐promiscuous,   driving  promo  downward-­‐spiral •  Significant  &  con=nuous  investment  in  Promo   required  to  sustain  revenues,  at  detriment  of  margin •  Urgent  need  to  reverse  “promo  junky”  consumers,   without  any  sustainable  mechanism  to  do  so • %  Promo Baseline Sold  on  Promo
• 9.
    CONTENTS       1. An  evolved  role  for   Pricing  Strategy   2. Against  the  backgrop   of  an  ever  more   challenging  landscape   3. Leading  success  in   Pricing  Strategy   requires  a  strategic   step-­‐change   4. How  to  find  out  more  
• 10.
  Companies  need  to shik  focus  to  lead  success  in   Pricing  Strategy Drive  strategy  through  a  consumer-­‐lens  to  develop  the  right  price,   pack  &  range  across  the  porFolio Evolve  price  posi=oning  across  channels  to  drive  margin  &   differen=ate  based  on  consumer  need Enhance  innova=on  with  increased  commercial  analysis,  rigour  &   focus  at  key  stages  to  sustain  NPD  success Develop  &  embed  best  prac=ces  to  transform  Pricing  into  a  strategic   capability  across  the  business 1   2   3   4  
• 11.
  Develop  &  embed best  prac=ces  to  transform  Pricing   into  a  strategic  capability  across  the  business Integrate  &  align  func=ons  to  transform  ways  of  working  across  &  within  teams Promote  a  strategic,  innova=ve  culture  to  develop  robust  &  sustainable  commercial  strategy Simplify  &  ra=onalise  data  streams  to  leverage  exis=ng  resources  &  unlock  new  value Develop  simple  and  effec=ve  analy=c  models  &  tools  to  improve  insight  depth,  range  &  quality   Pricing  as  a  Strategic  Commercial  Capability Data   Strategic   Culture Analy=cs Collabora=on Outside  In Consider  commercial  strategy  from  the  consumer,  customer  and  wider  value  chain
• 12.
  Benefits •  Strategy  framed by  outside-­‐in  consumer  trends,   rather  than  bo@om-­‐up  business  mandates •  Balanced  ra=onal  &  emo=onal  consumer  insights •  Informs  credible  &  compelling  category  stories   for  customers •  Aligns  diverse  business  func=ons  around  a  single,   mutually  beneficial  goal •  Refocuses  category  agendas  back  to  quality,   value  and  equity  growth •  Iden=fies  unique  white-­‐spaces  and  sources  of   future  growth  based  on  genuine  need Drive  strategy  through  a  consumer-­‐lens  to  develop   the  right  price,  pack  &  range  across  the  porFolio • Develop  an  “outside-­‐in”  approach,  pulng   the  consumer  at  the  core  of  Pricing • Drive  strategy  with  authen=c  and  whole-­‐ minded  consumer  insights • Connect  organisa=on,  customers  &   compe=tors  through  a  consumer-­‐lens CUSTOMER   /  CHANNEL COMPETITION ORGANISATION SHOPPER  /  CONSUMER
• 13.
  Evolve  price  posi=oning across  channels  to  drive   margin  &  differen=ate  based  on  consumer  need •  Sales-­‐led  change  in  business  philosophy  to  develop  channel  pricing  leadership  vs.  peers •  Develop  considered,  strategic  consumer  price  posi=oning  price  with  clear  maximin  corridors •  Establish  enablers,  skills  &  frameworks  to  implement  defensible  pricing  structures  with  customers Evolve  pricing   strategy  across   channels  to  drive   margin  &   differen=ate *  Actual  price  (range)  at  1me  of  publica1on  for  a    specific  Cola  brand
• 14.
  Enhance  innova=on  with increased  commercial  analysis,   rigour  &  focus  at  key  stages  to  sustain  NPD  success Expanded Ideation Outside-In Commercialisation Sustained Execution X-Functional Planning Incorporate  idea=on-­‐phase  insights  with     compe=tor  war-­‐gaming,  customer   review  &  organisa=onal  readiness   assessments  to  comprehensively   evaluate  &  sign-­‐off  NPD  success  from  a   commercial  lens Include  whole-­‐minded  &  non-­‐obvious   consumer  insights,  and  price,  pack,   porFolio  &  channel  analysis  to   expand  range  &  depth  of  idea=on Form  cross-­‐func=onal  teams  to   develop  credible  commercial   founda=ons,  clear  category  stories   and  tac=cal  growth  levers,  driving   belief  &  buy-­‐in  across  the   organisa=on Create  internal  &  external   branding,  communica=ons  &   launch  plans. Develop  whole-­‐minded  KPIs   &  methodologies  to  evaluate   success,  refine  NPDs  in-­‐ market,  and  diffuse   knowledge  &  best-­‐prac=ces   effec=vely Commercialisa=on Idea=on Planning Launch  &  Evaluate   Considered Execution
• 15.
    CONTENTS       1. An  evolved  role  for   Pricing  Strategy   2. Against  the  backgrop   of  an  ever  more   challenging  landscape   3. Leading  success  in   Pricing  Strategy   requires  a  strategic   step-­‐change   4. How  to  find  out  more  
• 16.
  Interested?  How  to find  out  more… We are Fifth P. Since 2011, we’ve worked with our clients in the FMCG & consumer product industries across Europe to create growth strategies that sustain long-term growth & leave lasting legacies +44  (0)  20  3735  5762 info@fikh-­‐p.com