In this blog series, we’re investigating the four pillars brands need to get right to boost retailer performance.
When retailers succeed, brands flourish. But you can’t just push a button or pull a lever to increase retail sales. You need to meticulously build a strong foundation for growth.
The right data can empower you to optimize your retailer channels.
In this installment, we’ll discuss pricing, competitiveness and profitability — why you can’t ignore them and what you can do to proactively influence them for your benefit.
Why does pricing matter?
Pricing matters because, at a high-level view, margins matter. Lowered prices narrow margins, and when prices from one source are pushed significantly lower for a period time, sales across the rest of the market can begin to suffer, setting off a potential downward spiral in which all players have to discount as well.
However, pricing is not just about margins. This core element of any marketing mix influences many areas, from brand image to market positioning, consumer awareness, listing traffic, sales and more.
While in most regions, you cannot legally dictate what prices your retailers should use, it doesn’t mean you cannot do anything about prices. Productive and creative pricing strategies can protect many of the intangible assets to your brand, and are often far easier to initiate and support than the effort required to identify, resolve and follow-up on a pricing issue.
Why monitor promotions?
Intelligent strategies yield successful results. And to give your brand insights that will strengthen your future, you need coherent data.
First, you will want to find out which retail players tend to create disruptive promotions, which ones act to undercut prices the deepest or most frequently. Even if you can’t always act on this information, it will help you build a long-term perspective and construct responses to market activities down the road.
You also want to access a clear and accurate view of the overall market, its recent history and trending prices — and how you and your competitors fit within it. You can’t develop targeted plans or take specific actions to improve your product’s position without this broader context.
Even if you organize and even subsidize promotions for your retailers, you need to keep an eye on what actually happens during those events. When promotions are synchronized, it’s critical for retailers to follow the campaign schedule. If any retailers deviate from the established program, other retailers may take notice. Retailer relationships and partnerships can become strained unless the brand demonstrates awareness and is prepared to respond.
What happens if pricing isn’t a priority?
When retailers undermine each other in an attempt to gain market share, you may think it’s their problem. Let them cut back on their own margin and take the loss. However, as additional retailers join the game to attempt to capture more sales, the market can quickly begin to slide into heavily discounted prices. Then, more retailers either have to follow the price trend — or risk losing all sales. Either way, they’ll earn less from selling your products than they’d hoped. And the entire experience could cause them to devalue their investment in your brand, or demand better wholesale prices from you. In addition, other retailers who are considering your products may feel hesitant to come aboard your network if they feel their margins will be underwhelming. It’s a temporary game in which all parties lose in the end.
How can brands monitor and improve pricing and promotions?
Find and correct accidental pricing mistakes. Human error and glitches happen. Everyone makes mistakes — but in the case of pricing, you’ll want to quickly assess whether a steep discount is the result of a careless error or an intentional act. Monitoring prices frequently gives you the chance to spot these mistakes and alert your retail partner before losses begin to accumulate.
Understand price-matching dynamics within your market. Price imitation is sometimes necessary for retailers to stay relevant when their customers use price comparators. As a brand, understanding price-matching dynamics in your vertical is a must. You’ll want to know why and when each retailer tends to initiate discounts or price-match other retailers. This insight lets you build better price lists, make more informed negotiations, proactively communicate with your network — and improve margins in the long run.
Plan, execute and monitor coordinated promotions. Well-timed promotions are especially efficient at boosting sales and brand recognition if you coordinate them with your retailers. Plan temporary, limited promotions that make the most sense for your target buyers and your business climate — and offer your retailers the opportunity to opt-in.
Win sales from competitors. You may find that a competitor is gaining an edge by having similar products offered at a slightly lower price. If you are aware of this difference and are in the habit of regular, open communication with your retailers, you may be able to work together to identify a mutually beneficial arrangement that increases your market share for a reasonable cost. This action can be especially effective in retail spaces in which buyers do not exhibit strong brand preferences and can easily compare product characteristics.
Benchmark competitive pricing patterns. If a retailer is discounting your products to drive traffic to their site, you want to first recognize that activity and you want to determine why it is happening. Comparing pricing patterns within and among your retailers can yield valuable information. For example, if you find that a retailer is consistently discounting your products but never those of your competitors, you’ll want to keep a note for the next time that retailer attempts to negotiate a better wholesale price.
Maintaining awareness of trends and retailer activity in pricing and promotions does not require a significant time commitment. We recommend setting up alerts on a regular basis — both daily and other set periods — to strategically review areas such as the following:
- Significant price drops
- Chain reactions due to price drops
- Prices below MAP, if you have a MAP policy (US market only)
- Adherence to dates within coordinated promotions
- MSRP delta
Pricing isn’t the only domain brands need to examine for opportunity and risk — but it is the most visible factor that can influence brand perception among buyers. Actively tracking pricing movements, especially in relation to your products that are in the beginning or middle of their life cycles, can strengthen your brand’s stance and generate greater profits.