Moving from reacting to competitors to understanding and influencing where the market should go
In food retail, market changes can happen quickly that require retailers to react just as swiftly. During 2020, for example, supply chain challenges caused cost increases that retailers were hesitant to move on. It became a game of wait-and-see as to who would move first in the market and take price increases. Data from existing Price Check programs can partially identify these price moves, but this often can take weeks to collect, analyze, and process. What’s needed is immediate identification of market changes to answer urgent questions like:
- Is a competitor making price investments, possibly as a counter-move to another retailer?
- Is a competitor moving retails in reaction to changing commodity prices, i.e. Produce, Meat, etc., and is beginning to pass these cost increases on to their shoppers?
- Is a competitor making changes in reaction to changing market conditions, i.e. wage increases (hero pay), supply shortages, tariffs, etc?
Historical Price Check Programs Are Slow
Historical price check programs are designed to collect data from a set of competitors over a week or two, in order to compare and benchmark items and prices against those of each competitor. Price indexes are calculated, and then decisions are made about any needed price changes, typically to counter and close perceived price gaps. This process works but is slow. It focuses on measuring how competitors are reacting to you as a retailer, and misses the opportunity to understand what your competitors are doing—from their perspective—versus in relation to your items and prices.
The Biggest Opportunities
One of the biggest opportunities for any retailer is to understand:
- What are my competitors really doing in the market?
- What are their strategies?
- What are their key items (KVIs) and how are they pricing these items at a local level?
- How are they executing these tactics and are they using price zones
- How do their price zones correlate to your store locations?
Taking this view of monitoring and understanding the specifics of the competitive market, across key competitors, can quickly transition you from “always reacting to the competition” to being able to know what your competition is doing. It will also inform you of how they are doing it and where, and then being able to use this knowledge to lead in the market.
Competitor Pricing Strategy Monitoring Program
Building an on-going Competitor Strategy Monitoring program leverages current competitor price checks as a foundation. At Engage3, we would then conduct a complete competitor market assessment, to understand and build from the following:
- Competitor Strategy analysis that will include a competitor:
- Price Investment analysis
- Price Zone analysis
- Competitor location correlation analysis to identify coverage gaps and determine the optimum number of stores and competitors to monitor, in relation to your store locations.
Using the above data, we will then structure an on-going Competitor Strategy Monitoring program, that will allow you to quickly identify market moves and changes. This data does not typically flow through the same internal “price check” process, but instead is structured to constantly monitor and alert you to key market changes that when identified can trigger more detailed data gathering. Additionally, this structure allows you to better understand how competitors are reacting to any program changes you may be making, as well as how long it takes competitors to react to your moves. This information and competitor visibility will quickly transition your organization into a place where you’ll know where the market is headed, how it will get there, and how to influence the outcomes you want and need.
A View of a Retailer’s Price Investments Pays Off
A regional food retailer was facing tough competition from a national chain, and was using a traditional approach of monitoring pricing on KVIs, and then matching pricing within a 10% range. These tactics were not producing the desired results within the market. Working with this regional food retailer, Engage3 collected all competitor pricing data from all store locations of the national chain over an eight week period. We then conducted an intensive price pattern analysis, looking at item price variations across categories and locations. This led to the discovery of how this national chain was making price investments in areas that were not previously monitored by competitor price checks. Additionally, price zone variations were uncovered and mapped to the existing zone structure of the regional chain. The data led the regional chain to change course on their specific price investments and how they were executed.
For more information on how to transform your knowledge of competitor strategies and activities, you can set up a 15-minute chat with me HERE.