Pricing Strategy

PRICING STRATEGY A fresh outlook on effec:ve pricing

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

CONTENTS





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

CONTENTS





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?

…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…

…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

• £ Revenu

e

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

CONTENTS





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

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 Com

mercial Capability

Data

Strategic Culture

Analy=cs

Collabora=on

Outside In Consider commercial strategy from the consumer, customer and wider value chain

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

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

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 Co

mmercialisa=on

Idea=o

n

Planning

Laun

ch & Evaluate

Considered Execution

CONTENTS





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