It was a privilege for Wise Athena to participate in the Promotion Optimization Institute Spring Virtual Engagement Summit this past Tuesday and Wednesday, May 25-26. As with prior conferences, the POI offered an engaging and inspiring series of networking and learning opportunities.
It’s time to transform pricing and trade promotion strategy from alchemy to science. The world has changed. The way we do business has changed. Your success can stay the same, or even improve.
On Wednesday, Wise Athena presented “Reviving the Retail Sector: How to Mitigate the Risk of Raising Prices” to conference attendees. Much of our leadership team, including co-founders Alfonso Vázquez and Octavio Hinojosa, Desiree Byrd (Head of Sales-US), and María Martín-Raso (Chief of Staff) spoke with Pam Brown from the Promotion Optimization Institute about helping CPG teams to achieve the perfect balance between value capture, competitiveness, and market balance. To achieve this, it is essential to use AI and Machine Learning, such that risks are minimized and revenue is optimized when raising prices.
“Price increases will be among the largest since 2018 – shortages from the chaos in global shipping markets will cascade from factories to ports to stores, and finally down to the consumers,” said Desiree Byrd, as the discussion opened.
We know how difficult it can be for CPGs to raise prices. Even as material costs increase and prices fluctuate, there are additional variables that companies must consider thoroughly before raising prices. Among them:
• Is now the right time to increase prices?
• Will consumers be resistant to the price change?
• How will increasing prices affect your market share?
• Can you reach your 2021 goals without increasing prices?
• Are you extending beyond the elasticity of your product and hurting your bottom line?
One highlight of the discussion was based around how CPGs and their RGM teams are increasingly using Artificial Intelligence (AI) and machine learning to take back control and propel their businesses forward. It’s not enough to collect data anymore—companies need tools like AI/ML to transform their data into valuable insights.
“We see CPGs pivoting on innovation and on a better understanding of how products are performing in the new normal,” said María Martín-Raso.
In short, companies that don’t utilize data in decision-making cannot keep up with the times. Resistance to change is no longer an option. The presence of AI will continue to expand in our day-to-day lives, empowering more customers and retailers to make better economic decisions.
CPGs should be using similar platforms to ensure they’re strengthening price architecture and maximizing results. Don’t get lost in a sea of rapidly changing markets and evolving customer needs/preferences. Take control by operationalizing the data that is already available. This is necessary for CPGs to survive in the age we are now living.
“There are categories in which it will be much easier to carry out price increases. On the other hand, some categories will present greater sensitivity to an increase, thus running the risk of losing demand,” added VP Octavio Hinojosa.
CEO Alfonso Vazquez noted that, “When a SKU is inelastic it’s easier for you to increase the price without anyone noticing, and without dropping your sales.”
Alfonso also spoke at length about the time it takes to implement a price increase. He pointed out that tactics like downsizing product and headcount, among others, are very high risk and lag in the ability to realize results when agile decision making is now necessary to survive. Alternatively, using predictive, high-definition price elasticities and cross elasticities is more agile & lower risk.
This is where AI/ML can help the most, decreasing effort and risk, by:
• Optimizing price increases through weighing cross elasticities, between different retailers and channels, within your portfolio itself, and in comparison to the competition
• Measuring and predicting foot traffic at retailers (physically and virtually)
• Understanding how erratic consumer purchasing may be affecting your profit, volume & overall strategy with retail trading partners
• Utilizing Omnichannel Analytics to execute customized promotion strategies
• Determining how price increases might impact retailer revenue and, ultimately, their decision to continue carrying your items
“We see CPGs pivoting on innovation and on a better understanding of how products are performing in the new normal,” said María Martín-Raso.
As María Martín-Raso pointed out, “Smart CPGs are cherry picking both the products to raise the price, and when to do it. There’s a leading manufacturer that has chosen to increase prices for their baby and feminine care products, and to do it three months after their competitors, not other products, and not at any other time.”
This kind of advanced decision-making requires serious data and predictive technologies. Simply put, your RGM, Finance, Trade Marketing, and Sales teams need the most advanced predictive technologies to achieve truly unprecedented results. If you’re ready to be our next success story, please reach out to us. We’d love to discuss how Wise Athena can take your trade effectiveness to the next level.
Again, we’re so grateful to the Promotion Optimization Institute for giving us the opportunity to present and reach a whole new group of CPGs interested in exploring new & disruptive methodology in predictive analytics.
