CPG Company Outpaces Competition with Competitive Pricing Analysis

June 3, 2019

Despite a growing economy, consumer packaged goods (CPG) brands in Canada are reeling under the pressure from shifts in customer behaviour and buying patterns. Also, with the advent of e-commerce, it has become easier for customers to easily compare prices from various vendors. With this, developing accurate pricing strategies have become imperative for companies in the CPG industry. Furthermore, continuously monitoring the price changes employed by competitors and constantly making changes in pricing strategies are becoming vital for CPG companies to drive profitability. This is where companies realize the importance of leveraging competitive pricing analysis.

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Business Challenge

The client is a CPG company based out of Canada. As the client was new to the market, they were facing difficulties in competitively pricing their products. Also, the client lacked data on their competitors’ pricing and promotional strategies. This made it difficult for them to build strategic pricing plans to support their product’s pricing and promotional strategies. They even ignored changes in cost, competitive environment, and in customer’s preferences. With this, the company struggled with meeting their sales target for the initial year. Also, they were losing their customers and market share to their competitors. The client, therefore approached Infiniti Research to leverage their expertise in offering competitive pricing analysis solution.

Other challenges the client was looking to address by leveraging Infiniti’s competitive pricing analysis were:

  • The client set prices for their products based on their manufacturing and distribution costs. They did not analyze their customers’ perceptions of value. This gradually resulted in prolonged sales cycles and affected the company’s profits. With Infiniti’s competitive pricing analysis, they wanted to analyze how their competitors set prices for their products according to the perceived value of the product.
  • The client was facing difficulties in analyzing unexpected price fluctuations in the market. With Infiniti’s competitive pricing analysis, they wanted to monitor the prices employed by their competitors.
  • With Infiniti’s competitive pricing analysis, they wanted to measure customers’ sensitivity to price changes and identify the price gap with their competitors.
  • The client realized that pricing is one of the main factors behind customers’ purchasing decision. By leveraging Infiniti’s competitive pricing analysis, they were able to accurately price their products and meet the fluctuating market demand.

Our Approach

  • The initial phase of competitive pricing analysis engagement involved gathering detailed insights into client’s key competitors in the Canadian CPG market. This also involved analyzing the niches they deal with, pricing strategy that they follow, their profit percentage, and their growth rate.
  • The second phase involved identifying the explicit cost (the cost incurred by the company for making all the physical payments and the contractual obligations) and implicit cost (costs on which the firm waives any opportunity of earning a profit from the use of its internal resources by third parties). This helped the client to understand the total cost of ownership of the product.
  • The third phase of this competitive pricing analysis engagement involved identifying customers’ sensitivity to price changes and developing effective strategies to meet their demands.
  • The final phase involved analyzing competitors’ strengths and weaknesses to help the client differentiate themselves by offering products and services that fill gaps that their competitors have not addressed.

Results Obtained

With Infiniti’s competitive pricing analysis solution, the client was able to competitively price their products relative to the competition. Also, Infiniti’s competitive pricing analysis helped the client to adapt to dynamic pricing, which allowed them to compete much better in the industry and maximize profit with each pricing change. This helped them surpass the competition and achieve their annual sales target. The competitive pricing analysis also helped the client to develop flexible pricing strategies and respond to unexpected price fluctuations in the market. As a result, they were able to enhance their profit margin by 23%. Furthermore, the solutions helped the client to enhance customer experience and keep their customer base stable.

The competitive pricing analysis solution also provided benefits that helped the client:

  • Fine tune their pricing strategies and profitably price their products.
  • Develop robust competitive pricing strategies
  • Compare the prices of the competitors and identify opportunities to differentiate their products and services

CaptureWhat is competitive pricing analysis?

Competitive pricing refers to pricing the products or services relative to competitors’ prices for similar products/services. Competitive analysis empowers businesses to regulate the competition by preventing loss of consumers and market share to the competitors. By employing a competitive pricing strategy, businesses can competitively set prices for their products/services according to the market demand. Furthermore, it helps companies to dynamically adapt to competitors pricing strategy and gain a leading edge in the market.

What are the four types of pricing strategies?

Let’s have a look at some of the major pricing strategies implemented by organizations:

  • Competitive pricing – setting a price based on what the competition charges
  • Value-based pricing – setting a price based on how much the customer believes what you’re selling is worth
  • Price skimming – setting a high price and lowering it as the market evolves
  • Penetration pricing – setting a low price to enter a competitive market and raising it later
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