With the fragile global economic recovery, companies continue to review the impact to customer demand from the volatility observed by changing COVID restrictions. Sectors like travel and hospitality are currently at 44% recovery compared to last year, as measured by Skift Global Recovery Index. Below, eClerx Digital highlights the multiple ways in which companies need to develop “pricing actions” and “competitive intelligence” as part of their response strategy to ensure that can maximize business performance.
1. Re-establish a Baseline to Analyse Your Data
The implementation of furloughs and other staff reduction measures in the initial months of COVID left ‘competition monitoring” at a bare minimum. In many cases, prices were not refreshed, as there was no view of demand (due to changes in customer buying behavior) and inventory (due to a dependency on suppliers). What this means is that there is a huge gap in ‘competitive positioning.” Typically, market volatility is analyzed to take advantage of price competitiveness (such as Tesco’s ASDA price match offers) and is applicable across industries. The cadence is different across industries – Travel (once a day), Retail (once a week), and MRO/B2B (once a month) – which provides insights to make strategic pricing decisions. However, the fact is that, post–COVID, the baseline has changed, and there is less trust in analytical models due to this data disruption. Therefore, it is critical to establish the new baseline for your data by revisiting the requirement for various use-cases through the pricing, product and marketing functions. The new baseline should be able to drive actions on:
- Assortment/Range selection through data driven management
- Enable improved brand mix (private, challenger, premium)
- Re-position & change placement to influence customer journey
- Incorporate demand indicators (like popularity of products, own demand traffic keywords and external search data) in business strategy
- Utilize competitors and products to focus on for benchmarking and identifying opportunities
2. Know Your New Customer
The second important aspect is to understand and analyse your consumer behaviour patterns – to get a jumpstart on understanding these patterns, you can read our blog ‘Consumer Behavior shifts during COVID – Is there a new normal?’ As the pandemic progressed globally, consumer behaviour shifted dramatically influencing the mix in terms of product, region, customer, deal type, etc. discovered, browsed and purchased. Companies need to invest in understanding the drivers of change in purchase patterns. Is there a decline in average order value? Are more bargain hunters showing intent to purchase? There are two main dimensions here for this price volatility – inventory shortages and longer lead times due to shipping delays. Is your competition doing something drastically different in terms of promotions or campaigns to cater to “new” consumer behaviour? Looking at the Travel industry, the motivations of consumers have changed from booking to exploration, so content and marketing should align with this behaviour. As an example, OTAs now promote more hotels that are refundable or with book-safe tags to give confidence for last-minute changes in travel schedule. Some industries continued to have strong demand in the market as the primary sector like construction remained open during both lockdowns. For them, the focused remained on increasing stock levels pre-lockdown on KVI categories, encouraged sales team into cross-sell & up-sell, and designed marketing promotions to support expanded product selections catering to the “new” customer.
3. Right Pricing
One of the patterns we have observed is for changes in average order value across industries. For example: consumers were initially buying only essentials with lower AOV and trying to keep their cash in hand, which later moved to DIY & Entertainment spending increasing AOV. In response to this consumer behavior, should companies position competitively priced products by category, or should they provide deeper discounts on key products? These discounts can be on the “driver” products from KVI categories, versus “complementary” or “independent” products from “Also Buy” categories. Before making the decision, consider whether or not you can afford to dilute your brand image by adopting deep discounting. What implications will it have – both in the short-term and the long-term? We recommend testing and learning from different pricing strategies and using cross-selling and up selling strategies for significant impacts to business KPIs. The focus needs to be on competitive pricing of KVI categories and invest margins in “Also Buy” categories. In addition, pair these tactics with a rebound strategy and align them with the overall goals of your company.
4. Be Creative with Packages and Promotions
Now is the time to explore creative product bundles and clever promotions. For example, you can provide an option for flat shipping rates to reduce overall cost and increase order value. Also, you can provide “discount alternatives” like extended payment terms and free premium support to make sure you showcase value. Another option is to position bundles prominently – either by dynamically combining products based on market basket analysis, or by combining products and services with experiences (such as experiential hotels). Strong examples of these strategies include WFH technology bundles by Lenovo [Lenovo’s Universal Home Office bundle or even Adidas’ ready for sports campaign and specialized packages targeting family reunions, corporate retreats, etc- to reduce pressure on pricing & deals and more focus on time-saving and bundling.
5. Explore Strategic Partnerships and Positioning
Right now, there are many interesting partnerships that build off the strengths of each party. For example, Amazon Prime’s two-hour delivery partnership with Morrisons, and Marks and Spencers’ delivery partnership with Deliveroo have been notably fruitful. This can be a clear cost advantage as customers prefer stress-free online deliveries and are more focused on the ease of delivery rather than the added costs it brings. Companies should revisit standard operating policies, like commitments, and policies for key customer segments or strategic accounts, which may lead to changes in their business model (for example, XaaS – subscription, consumption, or output-based).
6. Rethink Marketing/Sales Channel Strategy
From a marketing and sales point of view, perform a detailed analysis of your acquisition channels. It is important to understand the current changes in demand and conversion rates across channels, as well as to take actions, such as ‘divert PPC spend,’ where you have a competitive advantage, like product availability, promotion, etc. It will also be beneficial to evaluate your Google ad rankings and see how you stack up to the competition. Do not stop there, though. Other types of analysis, such as calculating the proportion of sales by owner site vs. platform, need to be performed to fully grasp where you stand. Make sure to also assess the share of voice, ratings & review and customer feedback, and monitor the actions of your competitors. Are there any spikes in brand mentions/interesting campaigns that they have launched? Lastly identify how customers are responding differently across channels and scale back or push aggressively in best performing channels.
7. Revisit Technology Stack
Take advantage of the current downtime to also review your technology stack and understand the gaps and capabilities that need to be in place for the long term. Recalibrating systems and eliminating the majority of manual processes through Intelligent Process Automation (RPA + AI/ML) will provide a huge leap forward. A great example of this is moving away from managing items through Excel files, and instead deploying an end-to-end price management system with consumption and processing of real-time internal/market data . To ease implementation, rather than make big upfront investments, some capabilities operate as a plug and play to align with your existing technology stack.
As companies press reset post-COVID, it is essential to adapt to the myriad of changes and look out for beneficial opportunities that may not be immediately evident. The way ahead will need to revolve around buying patterns like the rise in “homebody” goods, digital shopping habits forged by consumers during the lockdowns. This will require companies to plan their spending on high visit-high revenue and low visit-high revenue portfolios and capitalize on changing user behaviour through personalized messaging while making sure early adoption of new tech drives cost reduction.
Pricing & Competitive Intelligence will continue to be an essential tool for you to leverage to gain a competitive advantage. Contact us today to learn how to integrate with your response strategy.