Pricing Maturity Report_FMCG and Retail Industry

European Pricing Maturity2013Results and key findings - FMCG & Retail Industry

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Results and key findings - FMCG & Retail Industry

The only B2C industry represented in this study, and remarkably, the industry with by far the lowest actual pricing maturity in Europe (according to the Q2 2013 survey). Interesting to note that respondents significantly underestimated their own pricing maturity.

40% of respondents have 8 or more people working on pricing in their organisations worldwide.

All respondents have 3-5 years of experience in their functions as pricing/revenue managers.

According to respondents, a price optimisation strategy and a strong data analytics system is much more than a “nice to have” business initiative. They all agree that it is of utmost importance during the journey to pricing maturity.

Since tendering hardly features amongst respondents of this survey, with only 1 person using it, this report will focus on some extra pricing performance gaps which respondents identified, instead of devoting a section to tendering as in the other industry reports.

Perceived pricing maturity 2,06 = LEVEL 2

Actual pricing maturity 2,08 = LEVEL 2

Ambition within 12 months3,24 = LEVEL 3

FMCG & Retail industry – observations

Lowest actual pricing maturity

Figure 1: Distribution of respondents within the FMCG & Retail industry

Figure 2: Distribution of respondents within the FMCG & Retail industry

Source : EPP European Pricing Maturity Study – 2013


Perception Reality Ambition

Level 1: Price list maintenance

60% 100% 0%

Level 2: Transactional control

40% 0% 20%

Level 3: Full value capturing

0% 0% 80%

Level 4: Full profit optimisation

0% 0% 0%

perception reality ambition

60%

100%

Level 1:Price List Maintenance

You try to sell anything to anyone at all prices

40%

0%

20%

Level 2:Gain transactional control

and optimize

You sell the right products to the right cutomers at the

right prices

0% 0%

80%

Level 3:Full Value Capturing

You sell segmented solutions at value based

prices

0% 0% 0%

Level 4:Profit Optimisation

You develop end-user solutions with different

revenue models

CHASM0%

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In 60% of the cases, the discount structure grew historically and is not monitored very well. This needs to be reviewed to make sure that there are no channel conflicts. Also, respondents indicate that they would like to move towards a more performance based discounting structure, eliminate unconditional discounts. Think, for example, of loyalty programmes etc. On the other side of the spectrum, they also indicate that price increases need to be better prepared, again in 60% of the respondents companies increases are poorly prepared and effects are not monitored.

Every single respondent from this sector in the Q2 2013 survey indicated that pricing know-how is stored in Excel sheets and dispersed throughout organisation. Next step for them is to centralise price lists and discount grids and link it to their ERP system to enable specific price reporting. Retailers are often drowning in the amount of data available to them, but they lack the insight into how to use it and the resources to help them move forward.

Develop and implement value argumentations to support the sales force and enforce win/loss reporting and analysis. Prepare and monitor the effects of price increases (and decreases) closely to improve future promotional efforts. To the degree possible, move towards an incentive system which is linked to target price realisation. Reduce deviation from standard contract terms by implementing and enforcing authorisation structure.

Discounting strategy

Tools & Systems

Price execution

FMCG & Retail industry – gap analysis



Reality Ambition

Price Strategy 1,90 3,30

Price Policy & Setting 1,73 3,13

Discounting strategy 1,40 3,40

Price Execution 1,73 3,30

Monitoring 1,75 3,25

System & Tools 1,30 3,20

Governance & Org. 1,96 3,20

Tendering 2,00 3,00

Figure 3: Gap analysis: FMCG & Retail industry

Figure 4: Distribution of maturity scores across components of the pricing framework

TenderingGovernance & Org.

System & ToolsMonitoring

Price ExecutionDiscount Strategy

Price Policy SettingPrice Strategy

Actual PMI score

0.00 1.00 2.00 3.00 4.00

Gap with Ambition

1.001.241.90

1.501.57

2.001.40

1.40

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80% of respondents admit that there is only limited management of product life cycles at their organisations, and that this is mostly not integrated in their pricing strategy. They often end up with obsolete stock.

Life cycle pricing needs to be focussed on, with the goal in the near future being to establish active fade in, fade out pricing strategies.FMCG & Retailers need to better understand the relation between perceived value and price. Price/value maps need to be installed per segment and aligned with market strategy.

Price elasticity needs to be explored and understood at least via transactional price data analysis, if not via advanced research tools. 4/5ths of respondents indicate that knowledge about the responsiveness of consumers to fluctuations in price is not readily available to the pricing team.

If you would like more information or to arrange an informal discussion on the issues raised in the EPP European Pricing Benchmark Study and how they affect your organisation, please contact:

Project Manager:Nicolene [email protected]

President & Founder of EPP:Pol [email protected]

Product/price life cycle

Price positioning

Price elasticity

FMCG & Retail industry – gap analysis

mailto:Nicolene.Barnard%40pricingplatform.eu

mailto:pva%40pricingplatform.eu

Pricing Maturity Report_FMCG and Retail Industry

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