In this paper, Ipsos explores some of the trade-offs Canadians are making as inflation realities hit their pocketbooks, as well as offer tips for marketers. Ipsos has created a three-step strategy to help brands drive growth.
Step 1: Discern the Current Pricing Landscape
Large category drops in demand during an inflationary period is a dreaded scenario for brand managers planning innovations or renovations. However, not all categories react to inflation in the same way; some are more resilient than the others.
To understand where your category might land on the wide spectrum of category elasticity and how much that will impact your innovation’s size of prize, it’s important to understand the driving forces behind such disparity including:
- Elasticity of the category demand
- Substitutability of demand
- Inflationary relativity
Step 2: An Innovation Pipeline, Resilient to Inflation
Armed with the knowledge of category and segment elasticity and having understood desired positioning in a competitive pricing landscape, brand managers can focus on making the most inflation-resilient product propositions for their innovation and renovations. But what makes an inflation-resilient innovation pipeline?
- Bring differentiation, whether innovating or renovating
- Boost pricing resilience by overlaying claims that create a meaningful benefit with permissibility to charge more
- Shift the consumer frame of reference with innovations that offer a lower price alternative to products in a higher price ring
Again, not all categories will be hit the same. Often you need to get to the sub-category level to truly understand a brand/product’s/services inflation resilience. In fact, in inflationary times high margin, premium and super-premium products can offer much-needed balance to profit-drought brand portfolios and should not be dismissed by marketing leaders.
Step 3: Raise Price, Downsize, or Other Means to Reduce Cost
When price increases are inevitable, marketers still face the choice to directly increase, or alter value propositions through other tactics such as changing size or modifying products to lower costs. Keep in mind that:
- Downsizing, or a combination of downsizing and price change offer effective ways to prevent short-term user alienation compared to direct price increases. Such short-term effect can be confirmed with consumer research
- Downsizing also offers marketers an opportunity to add new news to further conceal price increases in a full brand renovation
To view the full article, visit the IPSOS website.
Source: Ipsos
