Welcome to LTP - Advanced Analytics & Business Consultancy

Jan 7, 2022

The growth in popularity of online shopping – especially during the pandemic – and the increase in the number of online retailers means consumer goods companies must adapt their marketing and sales strategy to incorporate this growing way of selling.

Companies previously relied on securing shelf space at eye-level or perhaps placing confectionary at the till; online retailers changed this setting, as all competitors and their assortment and pricing can be instantly compared. As an example, consumers who would purchase confectionery as a habit in-store may not purchase online as they are not prompted in the same manner.

Adapting to these changes is no small feat and doing so profitably is even harder.

Companies were forced to rethink their existing omnichannel strategies and shift operations to deal with online shopping behavior.

As consumers may easily and rapidly compare prices between competitors and retail channels, a robust pricing definition strategy, consistent and well-defined across channels is required to maintain interest while assuring the desired revenue.

When and how to change portfolio prices?

The definition of the price to apply should be closely tied to the intended business goals at any given time (i.e., balancing increased profit and revenue with business development and customer satisfaction, within available supply capacity and desired service level).

While the combination of all the factors impacting and impacted by pricing decisions is complex to anticipate, analytical models allow teams to do so by providing detailed estimations of the impact of any decision on sales and other key business metrics.

Ensuring accurate estimations is a must for prescriptive pricing engines, especially regarding substitution effects across the category’s portfolio.

Companies must target a fine combination of internal sales analysis and market research data to properly model consumers’ expected response to pricing changes across the different channels. This is even more effective when the modeling actively considers channel-specific consumer segmentations that enable marketing and sales teams to optimize pricing and promotional strategies at a more granular level, including one-to-one approaches whenever possible to execute.


Here’s an overview of our approach to determine profitable pricing opportunities:

1. Leverage past performance into granular elasticity estimations

Each customer’s behavior in past campaigns is a strong predictor of future response. With a high volume of transactional data, ideally complemented with detailed market research, it is possible to anticipate the customer response for potential offers, discounts, or pricing changes, thus evaluation the overall impact on cross-portfolio sales and overall business performance.

2. Embed key consumer and competitor behavior characteristics

Gathering benchmark and external research data insights is key towards incorporating main consumer behavior trends and each company’s positioning and strategy within any pricing or promotional prescriptive processes. This will allow planning teams to concretely anticipate competitor responses and simultaneously analyze the expected outcomes of any action.

3. Model the profitability impact of possible actions

Dynamic pricing and promotional strategies will have impacts across multiple different key financial metrics, especially regarding overall category margins when accounting for direct impacts and substitution effects. Active and reactive actions must always account for these impacts in a granular manner across all portfolio products, making sure to account for strategic supply and retail strategies to ensure long-term margin sustainability across key market stakeholders.

4. Deploy overall decision-optimization processes

Having a customized pricing and promotional planning tool will allow you to identify the most relevant actions throughout the different channels that maximize business efficiency while enabling agile decision scenario simulations. This will not only provide planning teams with automatic dynamic prescriptions for pricing and promotional actions, but also allow them to actively simulate different scenarios and have access to detailed impact on each product sales and gross margin impacts.

Companies are lately facing additional challenges to managing their prices and promotional activity across multiple channels while maintaining a coherent omnichannel strategy accounting for evolving consumer behavior and expectations.

Deploying analytical tools and processes to enable agile tactical and operational decision making that embeds marketing strategy and competitor actions throughout portfolio products is a sure way to achieve higher decision-making efficiency and optimize overall category performance.

By: Pedro Campelo , Luís Guimarães

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