(Pictured: Left, Will Hankla; Right, Brandon Pemberton)
Over the last decade, the industry dynamics for food companies have radically changed. New distribution points have emerged as convenience, discount and e-Commerce options have begun to directly compete with traditional grocery. Consumers have fallen in love with small brands that gained placement in large retailers — brands that are now taking market share from incumbents. Yet total demand has not increased. In fact, overall food consumption in the U.S. has barely kept pace with population growth over the past few decades.
At the start of the recession in 2008, consumers chased value and lower price points, compounding the challenges of sluggish product growth. Private label products captured share as consumers perceived them to be quality alternatives to branded products. In turn, food brands reduced prices to remain competitive.
At the same time, consumers began using online price comparison tools in their search for the best value. As many as 40% of consumers comparison shop on price when purchasing food, according to a 2019 Datamonitor survey. A 2018 eCommerce Foundation report shows this percentage jumps to 88% when consumers are purchasing online across multiple food categories. It’s no wonder food companies feel pressured to lower prices.
As the marketplace has become more competitive, benchmarking has become more complex. Up to 65% of food pricing is set by competitive pricing analysis, a 2018 Datamonitor survey of food companies found. But this doesn’t mean companies must reduce prices to meet competitor-set thresholds. Growing consumer interest in functional food and nutritional make-up increases the complexity and importance of both strategic pricing and consumer comparisons.
Packaged food brands in categories such as juice, cereal and yogurt are finding that including functional ingredients — such as antioxidants — opens up new categories of competition and new price points. While price will always be the primary driver for consumers, a 2015 Nielsen survey reported the least consumer price sensitivity in these categories; ingredients are the top selection criteria after price, taste and promotion. All products within a category are not the same, and understanding like-for-like competitor pricing is even more complex.
Strategic Pricing Comes At A Cost
Price is the single greatest lever organizations can useto grow revenue and profits. With increased pricing comparisons and transparency available to consumers, it is critical that food companies understand their products’ positioning in the market on a real-time basis. A Digital Analytics Association study shows tremendous upside for companies that use competitive pricing analysis: a 14% increase in product pricing. However, these insights come at a cost, as 40% of managers spend 50% of their time blending and preparing data for analysis. Is there time for a better way?
Using Robotic Process Automation (RPA)
Robotic process automation (RPA) uses artificial intelligence (AI) and machine learning capabilities to handle high-volume, repeatable tasks. The benefits of RPA are compelling, including reduced human error and labor, improved data security, integrated data management and higher employee satisfaction. RPA use is becoming widespread; the global market for this technology is expected to reach $1.2 billion by 2021, compared to the 2016 market value of $271 million according to RPA firm CiGen.
Pricing Intelligence With RPA
RPA-driven pricing intelligence can give food companies a real-time view into their marketplace. RPA tools offer a dynamic and potentially customizable platform to solve critical use cases for food sales, product and marketing leaders.
Key features of a pricing intelligence program include:
- Competitive landscape monitoring. Dynamic views of comprehensive data on competitor prices, availability, fulfillment and promotions give leaders up-to-date awareness of the complete market for their products;
- Intelligent product classification. Product data is made meaningful through domain-specific classification that enables attribute-based comparison. Leaders can understand not only brand activity, but also key food attributes such as ingredients, portion size, and nutritional information; and
- Pricing insights. Leaders and managers can act on pricing data through comprehensive insights and reports to manage product positioning and execute pricing strategy with confidence.
How A Pricing Intelligence Platform Works
Pricing intelligence often calls on a suite of technologies to gather, organize and visualize the marketplace in which food companies operate. Platform architecture enables expansive market canvassing in real time, and more importantly, gives food companies the ability to quickly pivot, enhance and customize the data, views and insights they need to achieve outcomes.
Pricing intelligence platforms give food companies the effective tools to:
- Gather data. Using RPA supports competitive landscape monitoring to view comprehensive data on competitor prices, availability, fulfillment, and promotions.
- Organize data. Product data can be filtered through an intelligent data classification engine that allows for attribute-based, like-for-like comparisons across broad data sets.
- Understand and act on data. Data can be presented in self-service views and dashboards that enable decision makers and data consumers to quickly understand and act on pricing events in their market.
Establish An Enduring Capability
Establishing a pricing intelligence capability allows food companies to make strategic decisions with a continuously refreshed high-quality data set. Product specification and attribute specificity contribute to the value of this data when supported by a data classification engine that enables true like-for-like comparisons. The value of this capability extends to the entire organization, with self-service dashboards and predetermined use cases that enable insight democratization.
The food industry is more competitive and complex than ever, with no signs of easing. As demand remains constant and overall pricing is compressed by new low-cost retail outlets, the ability to find openings for strategic and higher pricing is critical to a food company’s growth. RPA-driven pricing intelligence offers an opportunity for food companies to efficiently and strategically find optimal price points to drive top-line growth.
Will Hankla and Brandon Pemberton are consultants with Point B, an integrated management consulting, venture investment, and real estate development firm. Hankla has an extensive background in business operations and supply chain management; Pemberton works extensively with retail and consumer goods companies.