Portfolio managers and pricing researchers face a dilemma: how to balance tactical COVID-related decisions with long-term strategic ones. We’re all learning as we go, and by now certain assumptions can be made about whether and which consumer behaviours are permanent or temporary. It’s tempting to base these decisions on historical data and experience. However, looking back will only get you so far. Therefore, it’s important to add recent data points wherever possible to formulate valid insights. Where should these recent data points come from?
Start with what you do know
In times of uncertainty, “what if” and competitive scenarios should be overlaid with as many data sources as possible. A wide data set, such as sales data, brand trackers, marketing mix models, expert views, and consumer insights will give you the most reliable insights during times when everything in reach seems unreliable.
COVID-19 presents us with a situation where consumer purchasing habits have been disrupted and sales data alone is unreliable fodder for forecasting-models, thanks to activities such as hoarding and disrupted shopping frequencies. We’re more often operating outside of known parameters and thus face more uncertainty.
For example, in “normal” times”, trended sales data combined with information on promotional pressure can provide a robust indication of what to expect from pricing changes in-store or online. When known parameters get blown up, it helps to supplement existing data with shopper research into triggers such as an innovation, new promotions or new prices.
3 tips for making better-informed pricing decisions during COVID-19
Here are three experience-based recommendations for conducting better pricing research now:
1. Collect information from a variety of “experts.”
A variety of external sources should inform the pricing scenarios you are considering. Collect insights from consulting houses, trade organizations, and industry experts to establish a solid contextual foundation.
2. Zoom in on unexplained model variations.
Determine which variations in your models are understood, and seek to understand unexplained variations. Consider reaching out to shoppers directly to get a better understanding of their behaviour in this new context. You can keep it as simple as doing interviews with a few customers or set up more extensive research.
3. Keep feeding your scenarios with data.
Before COVID-19, you could safely base decisions on sales data supplemented with a single piece of pricing research to fill the knowledge gaps, but as consumer preferences continue to shift, the shelf life of old pricing research is changing. Consumer consumption and their “willingness to pay” for certain products and services are changing from one day to the next depending on lockdown restrictions, travel bans, news, and economic conditions.
Economic volatility is also making it harder to justify investments in pricing or portfolio research. SKIM recently conducted a re-run of pre-COVID pricing research to determine the differences in consumer preferences and price sensitivities before and during the crisis. We re-fielded large pricing studies in Europe and the United States. Our research shows that, in most cases, consumer preferences and purchase behaviours have remained fairly consistent before and during COVID-19. Results are available for download at www.skimgroup.com/covid.
While it may be tempting to avoid investing in primary research right now, new research can reveal valuable and critical insights that are useful in the current environment. For example, the combination of increased home-bound consumption and widespread economic insecurity has big implications for manufacturers, such as those that don’t offer large pack sizes.
Key takeaway for pricing professionals
Now, more than ever, brands that are maintaining a competitive edge have adopted an agile approach to pricing research. They have shifted their insights strategy to keep a finger on the pulse of consumer behaviour now and in the near future.
In many cases, they are re-running the same pricing study in multiple waves. By comparing the same conjoint analysis conducted during COVID and again in three and nine months, we can track changes and adapt a pricing strategy for our dynamic and uncertain market.
