More than half (54%) of retailers said that pricing is their top customer value proposition, according to a Revionics 2020 survey. The top external pricing challenge is increased competitor pricing aggressiveness, with 64%of retailers reporting they face it, followed by changing consumer price sensitivities (40%) and consumer demand for personalized prices (34%).
According to The Wall Street Journal, many major food companies, including Mondelez International, General Mills, and Campbell Soup Company, plan to increase prices this year. However, this strategy may be missing the mark, as many shoppers are turning to cheaper alternatives as inflation continues.
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While retail sales jumped partly due to higher prices — not more purchases, wages are rising, pay bumps haven’t kept up with inflation.
- Consumers are feeling it — especially low-income Americans. Food prices are up 7% from a year ago, and gas is up 40%. Walmart, the consumer bellwether, says shoppers are on edge about grocery bills. Meanwhile, consumer sentiment is at a decade low.
- Companies are passing on rising costs to consumers, as inflation starts to dent profits. Still: Profit at the 500 largest companies were up 50% last year as consumers proved willingto pay more. Coke, Pepsi, and Procter & Gamble reported strong sales despite upping prices.
Take your marketing plan and throw it out the window
Too many companies spend weeks and months developing marketing plans that are moot now. The brand equity they thought they had is being replaced by consumers willing to trade brands for lower prices.
While oil companies are buying back billions of stock and some CPG companies report record profits, consumers have had enough.
As one buyer told me, “we’re seeing a significant slowdown in premium-priced products while other (less expensive) brands are starting to move off the shelf.” When I asked him why his response echoed what consumers are saying “too many brands believe that consumers have a lot of money, and they want their share.”
Starbucks increased prices on the beverages while awarding their CEO a $10 million raise. P&G will raise prices again on some of their best-selling products because they think customers will pay more. It’s a huge mistake.
There is no “favorite brand” for many consumers when it comes to higher prices.
