“Highly important but less adept—There is a gap between retailers’ opinions of the value of advanced pricing and promotion practices and their self-ratings of their performance. Does this signal peril or opportunity?”
The high-profile national conversation about rising consumer prices has shone a brighter spotlight on retailer practices. In a report issued by the U.S. Federal Trade Commission on March 21, Feeding America in a Time of Crisis, the FTC staff called out certain grocery, wholesale, and supplier companies for actions the agency maintains have led to increased consumer costs and unfair profits in the wake of the Covid supply chain disruptions.
Grocery retailers nationally may interpret this scrutiny as a call to action to re-examine their pricing and promotion capabilities, with an eye toward balancing outcomes across profit, sales, price image, and other key business objectives.
Recognizing the surging degree of interest in how grocery retailers set prices today, DemandTec commissioned new industry research in partnership with Retail Systems Research, also released this month. The study, Aligning Pricing & Promotion Optimization Ambition to Operational Reality, reveals that most FMCG retailers need to promptly adopt new skills to stay competitive with market leaders.
Most FMCG retailers regard pricing and promotion optimization to be essential skills, but far fewer follow through with high effectiveness, the researchers found. These gaps between “how important” and “how well” reveal significant business improvement opportunities at a moment when all eyes are upon the grocery retail industry.
Mind the Gaps
Listening to practitioners, how important/how well analyses bring important opportunities for business improvement to the surface.
Mind the Gaps: Retailers’ Stance on Pricing and Promotion
When given the choice, 87 percent of retailers say pricing optimization is an important component to achieving their pricing and promotion initiatives (60 percent of them cite this as “very important”). Yet only 27 percent of grocery respondents strongly agree that they have a price optimization solution in place that can help them meet these demands.
To compound issues further, this trend of high value/low ability extends to their ability to offer effective promotions to increasingly demanding shoppers. An even larger majority of retailers, 96 percent, indicate that promotion optimization is important (62 percent say “very important”). However, just 34 percent strongly agree that they have an effective promotion solution in place.
Viewed across the industry, the gaps present an imperative for many FMCG retailers to adopt more rigorous pricing and promotion practices. Swift action is essential to remain competitive with market leaders. With added regulatory scrutiny factored in, maintaining shoppers’ perception of price fairness is also a strategic and operational imperative.
Bridge the Gaps
The DemandTec/RSR report probes deeper to reveal that despite many years of experience using pricing solutions to distinguish traffic-builders from profit-builders within their assortments, FMCG retailers as a group lack much of the prerequisite expertise or “technological maturity” for greater success. Today, as the speed of decision-making continues to accelerate and market leaders press their advantages, retailers need to confront their organizational inertia and move decisively.
Closing the pricing and promotion optimization gap is a critical strategic initiative that requires commitment from senior leadership. An experienced technical partner can make all the difference. Let us show you how to begin
