Everywhere we turn we are seeing stories of input costs rising. Raw materials like sugar, wheat and oils are up and as manufacturers, this impacts your bottom line significantly. It begs the question, what do manufacturers do to cover these costs?
More often than not, manufacturers are passing on these costs, at least in part, to retailers. From there, retailers are faced with their own choice. Do they increase product prices to consumers to protect their margins or do they limit promotions and discounts? Managing these particular decisions could have a major impact on consumer behavior.
In a perfect world, price increases are small and brand affinity is strong enough that consumers won’t notice the difference… but that’s not always the case.
Consumers only have so much money allotted to feed their families each week. As they shop the grocery store aisles, consciously or unconsciously, they’ll be making decisions at every turn. If one product is all of a sudden a few cents more expensive than an alternative, and perhaps that product is even on promotion, they might sway away from brands they know and love. Alternatively, they might purchase less in general, realizing that they simply don’t have enough spend to support the “nice to have” items that aren’t a true necessity.
Bottom line: if the price goes up, the velocity may go down, and that might lead to a less profitable scenario overall.
The first step in determining how to manage these drops in profit is to identify them and understand why they are happening. While we can’t control inflation, we can offer support in managing these complex pricing decisions through the use of data.
Every week we process retail sales data that details the total number of units and total dollars sold for each of the active SKUs and then, based on individual price, we track net sales and velocity. We then provide these charts to manufacturers who can review and identify problems. You can see price changes clearly and whether retailers implemented prices you expected them to and how the volume behaved after they took that pricing. You are then in a position to have the right discussion with retailers if something is not working, and you can clearly demonstrate why, using data to make your point.
With access to sophisticated data like this, you can enjoy incredible visibility into consumption and make meaningful adjustments to your pricing strategy to optimize for maximum profit. As the saying goes, hope is not a plan, Springboard customers have more control when using this data to achieve the profit targets they expect.
Being able to understand, anticipate and address how all the 10 cent decisions you make in your pricing and supply chain impact your bottom line is something you simply can’t put a price on.