Major economic catalysts, like the COVID-19 pandemic and the Russian invasion of Ukraine, have led to tremendous changes. Economic changes are a given in a capitalist economy, but lately, brands have weathered more than their fair share of market shifts.
And, thanks to significant increases in inflation, consumer habits are changing yet again—after over two years of uncertainty and flux. The cost of goods, and particularly of food-related goods, is increasing so much that there’s no end in sight to these inflation increases.
The Consumer Price Index has been increasing over the past six months, reaching a nearly 10% increase in the cost of all goods. We knew this change was coming, but inflation continues to increase well beyond experts’ initial estimates. In response to increasing prices, consumers are changing their behavior.
Consumer packaged goods brands are scrambling to adjust to this new reality, combatting challenges like:
- An increase in private label goods
- Increased labor costs
- Higher costs of raw goods
- Supply chain issues
- Increasing transportation costs
- Transportation delays
Where does this leave CPG brands? They inevitably have to increase their prices to stay profitable, but cost-conscious consumers aren’t going to stand for that. With so many challenges on CPG brands’ plates right now, it’s never been more important to stay ahead of the next big economic catalyst.
4 strategies to stay ahead with pricing for CPG
Whether it’s war, disease, or disruption, there are so many factors that can cause yet another big shift in our global economy. As a CPG brand, you have little control over that, but you’re still responsible for boosting revenue in this challenging climate.
That’s why it’s so critical to build an agile, forward-thinking brand right now, before things change again. Make these four critical changes so your brand can weather an uncertain economic future.
1. Employee retention
It’s no secret that the job market favors employees right now. Since CPG companies have more job openings than filled positions, hiring the right people has never been more important.
You rely on your employees to transport your products, produce them, market them to customers, and more—but without a full staff, your brand won’t have the hands on deck to change with the times.
Ensure that your institutional knowledge stays at your organization by investing heavily in employee retention. By engaging your employees, you can boost productivity by as much as 18% and significantly reduce the costs that come with replacing employees.
2. Dynamic data and analytics
It’s impossible to predict the economy with 100% certainty, but data intelligence makes it much easier to understand consumer patterns. Don’t be caught flat-footed when the next big economic event occurs: dynamic data and analytics are a must for CPG brands.
Data platforms like WiseAthena make it possible to identify gaps in your operations and adjust your pricing, products, and promotions to get ahead.
For example, with an AI-driven solution like WiseAthena, your brand can improve:
- Pricing: Market conditions can change at the drop of a hat, so it’s important to competitively price your products. Through the power of data, Wise Athena optimizes pricing for CPG, automatically. Keep all of your pricing strategies in one place, visualize their impact on your bottom line, and look at multiple scenarios in one dashboard. Dynamic pricing is a must for meeting consumer expectations, optimizing profit margins, and accurately meeting demand. This is especially important in a market where cost-conscious consumers are looking for sales and deals.
- Competitive Responsiveness: With Wise Athena’s cross-elasticity modeling, you can see the impact that pricing adjustments are having across the category. Whether you’re the leader or a follower, you can see which products are most affected by competitive pricing movement and how your strategies will affect volume outcomes. It’s the best way to hone your focus and increase your operational agility.
- Operations: Predicative software can also look at the data to predict trends—which can have a big impact on your operations. For example, if the data suggests retailers are too inefficient for your margins, you might consider switching to a DTC model.
- Product testing: Dynamic data reveals growth opportunities that your competitors might not notice. It also makes product testing much easier, revealing in-depth insights from market testing. This allows CPG brands to innovate with the times, roll out new products to keep consumers engaged, and maximize profits.
3. Product optimization
Which products are your biggest winners? In a challenging economic environment, it’s not feasible to have a gigantic product spread. Variety can spell problems for CPG brands, especially with surging costs for transportation, storage, and labor.
To succeed, you need to plan for economic scarcity. That means it’s critical to keep your product spread as simple as possible. Look at data from platforms like WiseAthena to understand which products contribute the most to your bottom line—and which ones you need to sunset. It’s all about boosting volume, so don’t be afraid to remove products that aren’t selling well.
4. Demand modeling with predictive analysis
Nobody could have predicted how consumers would fight over toilet paper at Costco, but it’s possible to predict future consumer trends with dynamic data.
Wise Athena’s predicative demand planning can allow you to optimize your purchasing of raw materials and your routing of products to keep shelves stocked. This can also help reduce the need to pull products out of retailers where demand may be less.
Smarter pricing for CPG starts here
Today’s economy is historic for so many reasons, and unfortunately, it shows no sign of normalizing. That’s why CPG brands have to embrace dynamic, agile models going forward. We can’t predict the next big economic catalyst, but brands will need to make changes right now to thrive in the future.
It all starts with AI-driven predictive analytics. WiseAthena makes it possible for CPG brands to earn predictable revenue in an unpredictable world. See how we take the guesswork out of pricing in a tricky environment: book your WiseAthena demo now.