Too often brands define their competitive set as products within their physical category at retail. Unfortunately, this approach is disconnected from how decisions are made along the consumer journey and misses choices being made among a broader set of products. Narrowly defining the competitive set misses opportunities to capitalize on whitespaces that may exist in adjacent categories. For example, broadening the frame of reference from ‘Pretzels’ (~$1 billion in sales) to ‘Total Salty Snacks’ (~$28 billion in sales) unlocks opportunities for a brand to compete for incremental demand and dollars.

Within a broader frame of reference it is critical to build solutions for consumers grounded in a deep understanding of the needs that drive product selection. Traditional price and package optimization often has a narrow focus on identifying gaps within a category’s current range of package sizes and prices.

However, this often limits growth to stealing share from within the category or subsidizing sales from a brand’s current product range. Re-orienting to start with broader consumer needs allows for brands to identify incremental demand spaces that are under-served and utilize package innovation to access incremental profit pools.

For example, understanding that a consumer is looking for an interesting, on-the-go snack to alleviate boredom on their commute, rather than a small bag of chips, establishes a whole new foundation to inspire package innovation.

Defining a unique role for each product at the customer level – and the specific needs of shoppers in those customers – are key inputs into package innovation and pricing. The result is an omnichannel product portfolio that delights customers and shoppers and is naturally differentiated across points of distribution.

As online retailers shepherd in the age of Radical Price Transparency (see our growthpaper ‘Radical Price Transparency’), manufacturers increasingly need ways to manage cross channel price matching. Channel specific package innovation provides the dual benefit of better meeting customer needs and minimizing pricing conflicts.

A product’s packaging plays a key role in addressing expanded consumer, customer and shopper needs. In order to access incremental demand spaces, innovation must incorporate package design elements required to win occasions from competitive products.

Vying for a quick-fuel, on-the-go occasion highlights that a package must have portable, quick to eat, no mess (e.g., one handed) elements in order to win a consumer’s dollars. In order to be successful, package innovation needs the same focus, investment and attention as product innovation.

Radical Price Transparency

The Seurat Group believes this alarming trend – what we call “Radical Price Transparency” – is at a critical inflection point and manufacturers need to reorient how they think about trade and price architecture. While many manufacturers still feel insulated from the impact of ecommerce – given that online CPG US dollar sales hover around 2% – we believe the impact of these models extends beyond share of category. The share of price influence and perception driven by online platforms far exceeds today’s dollar share. Brands need to prepare for the continued shift of both dollar and price influence share online.

Batteries eCommerce Brand Share ($)

This issue of “Radical Price Transparency” is highlighted in the case of Batteries. The commoditization of the category online has been driven by practices of online retailers like Amazon. Scraping data across channels and exploiting imperfections in price architecture, Amazon Basics (Amazon’s PL line) catapulted to the #1 battery brand online while reducing total category price per unit across channels. This highlights the ability of Amazon to expose architecture imperfections and commoditize categories by effectively leveraging pricing data.

We believe the best-in-class approach to trade management programs is outcomes-based: a program where funds are tied to achieving specific targets (product distribution, share of shelf, etc.). This allows for manufacturers to build stronger partnerships with retailers by ensuring incremental funds are earned only when specific category and brand goals are achieved. Today, only 2 in 10 manufacturers surveyed are executing an outcomes-based program, leaving a significant opportunity on the table for many manufacturers².

Companies are over-investing in online, but need to confront deal-scraping as a reality in today’s – and tomorrow’s – CPG world. While manufacturers flag market places for going below MAP, there is still little leverage to fully prevent the practice from occurring. Investing in vehicles-such as deal bundling (see figure) – limits the deal-price visibility an online algorithm can detect. This retains the value of the deal and avoids transferring it across channels.

The life blood of price-scraping is the imperfections that exist in company’s price architectures today. Offering a customer or channel specific deal no longer occurs in a vacuum, but instead can easily cause a domino effect of price matching and a “race to the bottom” that drives profit out of the category. Manufacturers need to structure price & pack offerings that are specific to the needs of a channel and its customers to avoid triggering price competition across channels.