The blanket price increase is a thing of the past, a blunt instrument that leaves account managers exposed to challenge from buyers and is likely to aggravate trading relationships.
So what is surgical pricing?
Winning pricing increases are based upon surgical pricing. This is a price increase proposal that is underpinned by analysis of pricing headroom by pack size and an understanding of the associated consumer volume impact.
How is it defined?
The phenomenon that is surgical pricing is defined according to brand performance, competitive position in the category, and is set by pack based upon psychological price points. The customer rationale is based upon an analysis of business opportunity and realising revenue potential rather than being perceived as a margin grab or opportunistic tactic. Being able to demonstrate the price elasticity of proposed price increases in terms of category volume and margin impact is a much more compelling and winning strategy verses focussing purely on input cost pressures.
So, what are our key learnings from this?
The key message to take from this is to think carefully about your pricing strategy – don’t just implement a blanket price increase without specific rationale.