New Pricing Game: Are we Equipped for it?

New Pricing Game: Are we Equipped for it?

Skyrocketing prices are affecting many industries everyday in Egypt on different levels. Some may have felt it, while others not yet. Unfortunately, sooner or later the consequences will reach everyone; for now, it’s a matter of who takes the first hit.

 

 We tested those consequences among the most consumed and easily measured categories, food and beverages.

We asked a sample of 150 millennial married women (AB 20%, C1 40%, C2 40%) about their change in spending behaviors. If prices for a certain list of food and beverages increased 10%, would they:

 

  1. Decrease their budget and save money from this category

  2. Maintain budget but reduce consumption from this category

  3. Not be affected by the price increase, and pay the additional 10%

 

Based on the results, we ranked the list on a spectrum from the most to least categories affected by price increases, and divided them under panic alert, warning, and watch out based on their urgency for price management.

PANIC ALERT:

 

Beverages, desserts, snacks, canned foods will be the first categories to shrink due to consumers’ decrease in budget. For these categories, being a price follower is not sufficient. Consumers will easily let go of them if the increase is not managed smartly.

WARNING:

 

Caffeinated beverages, cigarettes, additives such as salsa and herbs, and meat/poultry will soon follow. Such categories fall on a very thin line. Although they are considered necessities for a large segment, there is always the likelihood for shifting to substitutes and cheaper alternatives.

WATCH OUT:

 

Oil/butter/ghee, dairy (milk & Yogurt), cheese, and rice/macaroni may witness the least effect for now, with their nature of being necessities, but they are not so safe either. Planning for price management is as important for these categories as all the others. The only advantage they have for now is the relief of urgency.

The tradeoff between cutting costs to reflecting the increase on the end consumer will always be a constant dilemma, and great risk in pricing decisions.

 

Today’s question is: how to manage the increase in prices, while at least maintaining market share and profitability?

 

With Egypt’s unpredictable economic fluctuations nowadays, such process is required to become a long-term strategy rather than a reactive decision.

 

Accordingly, there is a need for behavior measurement tools that would predict and identify the effect of different price scenarios on consumer purchase decisions. A methodology we specialize in, which allows marketing managers to know how each price scenario reflects on brand revenues and market share.

 

Such behavior measurement tools assists in planning ahead effective price increase strategies, under the different market conditions, while minimizing any loss during the era of economic pressure.

If you would like to know more about our methodologies and how we have helped decision makers manage price increases, Contact Us

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