• Florence Evans

The key reasons why a structured pricing framework is crucial for FMCGs

Implementing a structure to your pricing has the power to inform better negotiations, deliver ROI and reduce risk.

What is structured pricing?

Structured pricing is a clearly defined, recommended pricing structure for customers. This includes a defined list price aligned across customers, giving the base from which you can begin negotiations.

What’s the ideal?

The ideal structure to your pricing recognizes the market positions and the value that your product holds within the market. It includes a defined list price, aligned across customers, giving you the base which you can begin for negotiations. It establishes a consistent set of trade terms across the business driven by strategic business goals, allowing you to give the flexibility needed to drive specific strategies you have in mind. To reduce risk and drive profitable growth, you must remove indefensible pricing structures and unconditional trade terms.

Why is structuring your pricing important?

It informs better negotiations

Having a structured pricing and trade terms framework provides you with the flexibility to negotiate with customers and drive your business strategy. As well as the power to negotiate, it allows you to protect your margin and set defined boundaries in which you can operate. It also ensures that you achieve a consistent ROI, which is particularly important in the midst of the current Covid context. You’re in a better place to negotiate as your pricing affects your brand’s long term value perception, and through a structured framework you can be sure you are not over charging or under charging.

Pricing as a growth lever

Pricing is a great indicator of value, and acts as a signal, attracting the right customers to the right brands. Pricing sensitivity has been growing in the market, meaning it’s crucial to get this right in order to drive growth in the optimal brands and pack mix that you want.

Reducing risk

Mergers and acquisitions continue to occur between retailers, however, lack of pricing visibility is a common problem for manufacturers. More and more, retailers are able to get their hands on pricing data from various sources and there’s increased visibility from the data out there. Therefore, brands need to be more cautious about terms of conditionality. Structuring your pricing can be hugely advantageous, meaning you’re not only resistant to mergers and acquisitions but also have some defensibility within your pricing.

If you're interested in the work we do around structured pricing, check out this client story:

To find out more about our work in this area, get in contact with the Acumen team here

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