Three ways to achieve the ideal price that protects profits and grows distribution
Finding the optimal price is imperative for pet product manufacturers, whether they’re introducing new products or selling into new retailers. Setting a price too low makes it hard to profit on each unit sold. Price too high, and consumers might choose a competitor’s product instead.
An effective pricing strategy must also account for the price of comparable and competing products in the category, segment, or subcategory, and within a retailer’s assortment. Add promotional pricing to the mix, and it becomes an imposing set of variables to consider. With profitability at stake, your pricing can’t be left to trial and error.
While value is a crucial driver of sales growth, manufacturers must maintain their margins, too. Accurate data and predictive modeling can help you find the right balance. Here are three ways to enhance your pricing strategy and determine the best price point for your pet products:
1. Expand your inputs
Too often, pet-product pricing is based solely on internal considerations; for example, cost per unit or target margin. While those factors are important, they’re only part of the equation. You need to analyze external data to find a price that works in the market—a price that’s attractive to consumers and competitive relative to other brands, but that still offers a path to profitability. Sales data can help you determine how to price products in your category and remain competitive.
PET PRO ADVICE: An analysis of competitors’ pricing based on Retail Measurement Sales (RMS) data can help you understand how differently priced comparable products perform across retailers and channels. This insight, combined with your internal margin requirements, allows you to identify the price that will generate a healthy sell-through rate as well as a viable per-unit margin.
2. Define your tipping points
At what price point will sales volume decline? And at what price will consumers choose a competing product? A pricing model that analyzes POS data and the competitive landscape to determine price elasticity and promotional lift can help you spot those tipping points and avoid them.
PET PRO ADVICE: Revenue management optimization tools can provide a comprehensive understanding of the dynamics that affect sales volume. This includes identifying at which price points consumers will switch out of a category or segment, or where the increased margins delivered by higher prices are negated by declining volume.
3. Utilize predictive modeling
Seeing into the future is impossible, but leveraging the most current data available can help you make the most informed and accurate pricing decisions. Predictive pricing models use the state of the market today, based on a variety of data inputs, to project what demand levels and the competitive landscape will be like in the future. With this insight, you can set your pet product’s price to perform better today, and months from now.
PET PRO ADVICE: Once you’ve consulted external sales data and identified your tipping points, the next step is projecting future market conditions. With the right data and analytics, you can make pricing decisions that improve your product’s chances for success no matter how the market may shift.
How NielsenIQ can help you find the right price for your pet products
NielsenIQ’s data, tools, and insights can be valuable resources for pet product manufacturers trying to formulate high-growth pricing strategies. RMS data drawn straight from retailers’ POS systems offer the most current and comprehensive snapshot of retail performance available. Revenue Management Optimization (RMO) suite provides advanced analytics and predictive modeling to get the most return from your pricing strategy.
A suite of products that help get your pricing right
- RMS: Delivers comprehensive and current data on market shares and competitive sales volumes, and insights into distribution, pricing, merchandising, and promotions
- RMO: Provides the analytics needed to improve pricing decisions, enhance the efficiency of trade spending, and ensure product availability