Many of today’s retailers still use the following competitive strategy:

• Identify the key competitors by store grouping
• Identify the items that your merchants feel are most important to your customers (based on their intuitive experience)
• Establish a competitive price check process and then either match your competitors prices or make sure that your key items are within an agreed upon range or price index.

This strategy was effective in the past, but it’s no longer enough as the competitive landscape grows increasingly sophisticated and your customers move to more value oriented purchasing.

Today’s successful strategies balance intuition with quantitative, fact-based analysis derived from Consumer Demand Management science. CDM analyzes terabytes of data using mathematical modeling engines to determine accurate elasticity and cross-elasticity relationships for every item in every store. It leverages all POS, market basket, syndicated and panel data, and weighs in with transaction log (T-log) and loyalty data to further understand traffic generation, affinities and basket contents and profitability – specifically within the competitive environment you face.

This comprehensive analysis is the only way to quantify cannibalization and dominant halo effects. It is the only way to determine the relative effectiveness of promotions and pricing across products and customer segments in your competitive arena. This powerful modeling environment enables you to test the outcomes of merchandising strategies before they are implemented. While gut feel will never be obsolete, when you support your merchandising intuitions with demand science, you reduce risk and stay ahead of your competitors.

Read the CDM white paper

What will you do? More importantly how will your customers respond?

Did you know that consumers are much more sensitive to price changes in the ice Cream category than Frozen Pizza or Ready to Eat Cereal? Also, did you know that customers are much more sensitive to price changes on the top 20 selling Ice Cream SKUs than the rest of the category? This is an anomaly when compared to other frozen categories or even some other well known non-frozen categories such as RTE Cereal. Recently DemandTec was asked to provide specific information for a Refrigerated & Frozen Foods Retailer investigation. The investigation indicates that retailers and manufacturers must be very careful in how they pass on the planned cost increases through the supply chain to the shelf. An across-the-board increase will certainly have negative implications, and just because other retailers will take that tactic does not mean that you need to.

What if there was a way to grow the category against the marketplace because of your unique consumer intelligence? What if the proper retail price mix not only gave you a competitive advantage, it also allowed you to make gains in the marketplace?

Consumer Demand Management technology helps define specific consumer demand category, cross-category and total store impacts to answer these questions. Merchants can now understand the impact of proposed retails before they hit the shelf. Contact me if you’d like to discuss your ice cream pricing strategy before you make price changes. kevin.sterneckert@demandtec.com

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