Price Optimization: A Case Study on How a Leading Consumer Goods and Electronics Manufacturer and Retailer in Europe

The consumer goods industrys growth over the past few years has been nothing short of exhilarating as companies operating in this industry space have launched innovative products to meet an ever-increasing array of human needs and desires. Additionally, these companies have expanded rapidly into the booming consumer markets of the developing world. And to make this stellar growth possible and profitable, they have aggressively built global scale across the value chain.

The consumer goods industry is mainly divided into four groups: food, beverages, small appliances, toiletries, and cosmetics. Moreover, the consumer goods industry is the foundation of the modern consumer economy. It not only generates an enormous portion of the gross domestic product but also drives massive amounts of money into other industries, notably retail and advertising.

Our pricing analytics experts have helped several clients spanning multiple industries to develop and deploy advanced price optimization solutions for quality control, performance measurement, and profit maximization. Get in touch to gain detailed insights into our pricing analytics engagements.

Lets take a look at some of the fundamental factors that will influence the growth prospects of the consumer goods industry in the coming years.

Changing Consumer Demands

Consumer goods companies need to be consumer-focused and dynamic as the demand from the consumers tends to fluctuate rapidly. For instance, consumer preferences have significantly transformed in recent years as demand shifts toward sustainable and healthier options. Subsequently, manufacturing success is closely related to time-to-market and new product introduction capabilities. Moreover, the success and profitability of any organization in the consumer goods industry space are heavily dependent on how they address the changing needs and demands of the consumers in a cost-effective manner.

Shrinking Operating Margins

Lately, consumer goods companies have started facing the challenge of meeting global price points owing to the competition. This creates additional pressure, as companies need to ensure the distribution of high-quality products while finding innovative ways to cut costs. Additionally, companies also need to take into consideration the fluctuations in factors such as oil prices and their effect on transportation costs. In such cases, adopting comprehensive price optimization solutions can assist companies in managing margins more effectively by dynamically adjusting prices based on real-time cost inputs and market trends

Such factors are forcing companies in the consumer goods space to leverage solutions like price optimization. Price optimization help companies resolve inconsistencies in prices and discounts across geographies for customer segments. These solutions also provide pricing information on comparable deals for better pricing and quote management to ensure the distribution of high-quality products, while findinginnovative ways to cut costs.

CPG Price Optimization Challenge

A leading consumer goods retailer, specializing in electronics manufacturing, wanted a solution for dynamic price setting and discounting to allow sales representatives to close deals much faster for their B2B clients. The consumer goods manufacturer was facing challenges in optimizing prices due to time-consuming multi-tier (account manager, pricing, and sales managers) approvals and negotiation process to ensure that the proposed costs met the internal guidelines.

The ancillary objective of the client was to monitor the prices of deals across different product and customer segments as well as geographies and ensure data accuracy by accessing internal data from their sales, invoicing CRM, and ERP systems. Furthermore, the consumer goods manufacturer wanted to develop a holistic price and discount management solution to ensure pricing integrity and streamline the process of price quotes.

Quantzig’s Approach

Data used, models applied, and the dashboard themes that we developed.

To help the consumer goods client deal with specific business challenges, the industry experts built a data dictionary for sales, account, product and promotions data. Some of the assumptions and exclusion criteria applied for data cleansing were: missing values for product ID and sales, outliers in deal quotes and excluding rows with zero sales values, etc. Furthermore, the industry experts integrated multiple data sets at Sales ID, Account ID, and Date-time stamp level.

Additionally, to meet the clients specific requirements, the price optimization solutions experts:

Segmented Customers:

We applied clustering methods to define customer segments based on key demand drivers, customer type, product attributes, and historical pricing data. This allowed for highly tailored pricing strategies aligned with each segments value perception.

Developed Market Response Models:

Our experts built models to determine offer prices and discounts. These models also calculated expected profit margins based on associated costs, which enabled more informed pricing decisions. This modeling formed the backbone of our price optimization solutions, allowing for precision in strategy development.

• Arrive at the offer price and discounts
• Calculate profits based on costs

The price optimization experts at Quantzig also created a real-time tracking dashboard integrated with the pricing models.

We adopt a holistic approach to price optimization that helps our clients to transform data into insights that can increase both the top and bottom-line results. Request a FREE solution demo to gain comprehensive insights into our analytics platforms.

CPG Price Optimization Insights and Business Benefits for the Client

Strategies that we recommended based on our analysis to drive higher sales based on optimal price setting.

Improved Organizational Visibility:

We enabled complete visibility into product prices, discounts, sales data, and customer segments. This transparency extended across the organizational hierarchy, tailored according to role and designation, supporting more informed decisions throughout the company.

Enhanced Pricing Transparency:

Our team helped streamline the entire quote-to-order process. By doing so, the client achieved clearer and more consistent pricing across various geographic regions and customer categories, thanks to our advanced price optimization solutions.

Eliminated Pricing Inconsistencies:

Through the use of price optimization solutions, we resolved long-standing inconsistencies in pricing and discounting for similar customer segments across different markets. This ensured fairness, improved client trust, and reduced revenue leakage.

Strengthened Deal Management:

We provided accurate pricing data on similar deals, facilitating stronger pricing and quote management strategies. Sales teams could now rely on historical and comparative data to craft winning proposals faster.

Aligned Inventory with Pricing Strategy:

Our price optimization solutions integrated inventory insights, allowing sales representatives to align their pricing strategies with capacity and order planning. This minimized stockouts and optimized customer satisfaction.

Our solutions also helped the consumer goods client to overcome several other challenges including:

• Data consistency and accuracy
• Effective segmentation of customers
• Real-time tracking of prices across customer segments and geographies

Additional Benefits of the Solution Offered

The implementation of our price optimization solutions yielded several additional benefits:

Increased Deal Closures:

Sales representatives experienced improved success rates in deal closures due to streamlined pricing and discount processes.

Dynamic Pricing Capabilities:

The system allowed for real-time dynamic pricing and discounting based on customer segmentation, enabling the client to remain agile in a competitive market.

Furthermore, the pricing analytics experts determined the optimal price that maximizes contribution by simulating sales and revenues based on customer segments, price, product, etc.