Pulse Report: Connect the Dots for Maximum Activation

Dr. Krishnakumar (KK) S. Davey
President, IRI Strategic Analytics,

The CPG industry is in a precarious position: Volume growth is virtually non-existent and marketers are funneling more and more resources into trade to increase promotional intensity and spur purchase behavior. All the while, lift from trade activity is eroding. This is happening across CPG aisles and channels.

Merchandising that is supporting a price pack architecture that is not aligned to category and consumer needs has been and likely will continue to become increasingly inefficient. During the past year alone, 58 percent of CPG categories saw lift from merchandising support decline. The net effect: substantial sums of money are being left on the table across CPG aisles.

Continuing along this path is not a viable option. It is time for change and that change must start at the very beginning.

To be competitive in today's complex and fast-paced environment, CPG marketers must begin their price and promotional efforts by creating a solid price pack architecture (PPA). This PPA will serve as the foundation for surgical price and promotion strategies that will bring a 1 to 2 percent improvement in sales (worth up to $12 billion for the industry overall), while improving margins, building customer loyalty and delivering a lasting competitive advantage.

Promotional intensity is escalating across tactics and channels, with food and beverage relying more heavily on price actions and non-food turning more to display activity.

Percent of Categories with Increased Merchandising Activity,
by Merchandising Tactic & CPG Sector, Multi-Outlet
Price Pack Architecture: the basic pricing structure of a brand portfolio
Source: IRI Market Advantage™, 52 weeks ending 5/17/15

A successful pricing architecture provides consumers a viable selection of products that meet their needs at the price points they are willing to pay, driving portfolio growth and enhancing a brand's overall value proposition.

Despite increasing investment in merchandising, lift has been on the decline for several years, and there are clear indications of continued erosion.
Average Merchandising Lift by Channel 2012 & 2015

Source: IRI Market Advantage™, 52 weeks ending 5/17/15
Effective promotional strategies must consider price pack architecture and all of the elements that influence it. Marketers that embrace this more comprehensive approach to promotional planning will enjoy higher lift, stronger loyalty and top-line growth of 1 to 2 percent.

Everyday Price/Promo Responsiveness Quadrants

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