Supra

June 15, 2022

"The State of Pricing 2022" study for medium-sized consumer goods manufacturers.

Frank Buckler

Co-Founder, Supra.tools

In cooperation with Ostfalia University, SUPRA conducted a survey of 255 marketing executives in the US and Europe. The results reveal an acute need for better pricing insights solutions. A staggering 88% advocate the use of Implicit Intelligence™ solutions.

Pricing is an art that has been neglected for years – especially in the mid-market dominated consumer goods industry. Pricing has many different areas to focus on: Pricing strategies, pricing insights, pricing organization or pricing controlling. Where should one put the focus? 

This is reason enough to carry out an extensive study that sheds light on the subject. 

Who exactly was surveyed?

The study only accepted marketing managers from companies in the consumer goods industry (67%), as well as consumer appliances, fashion, and pet products. In addition, only companies from 10 million to 1000 million in revenue were admitted (45% had more than 100 million). Thus, an expanded definition of medium-sized companies was applied. 

It also ensured that all participants were either the pricing decision-maker themselves or a member of the decision-making body. 57% were the primary decision-maker. 

An enormous number of pricing decisions

81% of respondents sell in 5 or more markets. 83% sell more than 100 SKUs and 76% also launch more than 100 new SKUs each year. 

So it turns out that companies in the industry have thousands or even tens of thousands of pricing decisions to make – year after year. 

A good reason to ask how companies can master this complexity while making good, profitable decisions. 

Which pricing areas are particularly important?

The study asked companies a specific question “What impact would it have if you got 10% better in any of the following areas?”  

“Most crucial impact” answered about 1/3 for those three topics:  

  • Price insights. Understanding willingness to pay. Understanding the exact relationship between a price change and the impact on demand and profits. 

  • Price organization. Managing pricing knowledge and skills and building a workable organization that effectively improves the pricing system. 

  • Pricing controlling. Having a system in place that makes sure pricing actions are actually implemented. 

Companies see only a downstream significance in: 

  • Pricing strategy. Defining follower vs. leader strategy, clear definition of pricing segments, defined reaction rules for competitive actions. 

  • Pricing system. Working product bundles, rebate and condition structure, communication of price moves. 

In which pricing areas is there a need to catch up?

The study also asked how the company is currently positioned in these areas. 

Only 12% answered “bad” or “fair” in the area of price controlling. Companies with current pricing software systems are usually well-positioned in this area. 

In the areas of strategy, systems and organization, around 20% each saw a need to catch up by stating “bad” or “fair”. 

Only in the area of pricing insights is there a clear gap. 33% of all companies do not see themselves in a good position. 

Pricing Insights is the most important area with potential

Of the three pricing areas with high leverage, it is in the area of pricing insights that there is a perceived performance gap. It is the area where the consumer goods industry has a sore spot. 

In quiet anticipation of this finding, the study went one step further and briefly introduced respondents to a promising new technology: Implicit Intelligence™

88% see potential in Implicit Intelligence™

24% of the respondents said the use of this technology should be a top priority and 64% would probably like to take a closer look at the technology.  

An approval rate of 88% (64+24) is also astonishing since “only” one-third of the respondents unaided saw a clear need to catch up in the area of pricing insights. 

Learn which price your target customers are willing to pay.

Start finding your profit-maximizing price in no-time and comparably “no costs” thru Implicit Intelligence™

Pricing Optimizer - Supra.tools

In summary...

…the study reveals the high importance of pricing for consumer goods manufacturers. Even mid-sized companies have to profitably set thousands or tens of thousands of prices every year. Pricing is an undertaking that is still more of an art than a science. This could change. 

The areas of insights, organization and controlling are of particular importance. Today, pricing controlling is very well covered by pricing software solutions. The topic of organization is the “perennial issue” of all management topics. Everything stands and falls with the people and how they manage to work together. 

However, not only does the topic of pricing insights have enormous leverage for success – according to the respondents – there is also a considerable need to catch up. 

This need to catch up exists also and primarily because science and solution providers currently still offer solutions that always come with a drawback. Either too complicated and expensive or not valid enough.  

With Implicit Intelligence™ there is an emerging technology that could already celebrate respectable successes. 

The authors of the study – Ostfalia University and Supra.tools – are offering a free consultation until June 2022 to discuss with companies in the industry and answer questions.  

Just reach out to Wolfgang@supra.tools 

AFTERTHOUGHT: This is why this topic is crucial

Top-Pricing Insight: The Power of Margin Expansion Opportunities 

Margins are the decisive factor in determining a company’s success. They can significantly increase or decrease a company’s profit. For this reason, in addition to the price customers are willing to pay, it is important to thoroughly understand and analyze margins to ensure that the business remains profitable. 

Margin expansion allows you to achieve higher profits 

As your sales increase, you can raise your prices to increase your profits. At the same time, increasing efficiency allows you to reduce your costs and thus increase your profit margins. This interplay of sales and cost reduction is the magic of margin expansion. 

Margin expansion allows you to take risks 

When you have higher profits, you have more room to invest and take risks. This means you can invest in new products or services or enter new markets. In short, with higher margins, you have more freedom to experiment and develop – which in turn makes your business more robust and resilient. 

Newsletter:

Keep updated on the latest Pricing Insights know-how and do-how.

In my email newsletter “Pricing Insights” I cover the whole range of pricing insights solutions-from Garbor Granger to Conjoint, from NeuroPricing to Pricing Software Systems. I describe the application in various fields from new product pricing to promotion, from brand premium to feature pricing.

Keep up to date here.