Range & Portfolio, Channel Execution, Knowledge Bank Blog, Pricing & Promotions

Winning in 2017

Can you adapt to the changing environment?

So, it’s another New Year.

You’ve probably all been bombarded with predictions for 2017.  What will Trump do once he is in office?  Who will win the French election in April?  Will Corbyn survive another year?  Will May call an election?

You will all have seen or read loads of these over the last couple of weeks.  The problem is that these predictions miss one big thing.  We are all pretty rubbish at making predictions.

The irony is that despite this, we think we are good at making them.  Behavioural Economists call this the ‘overconfidence effect’.  Tests consistently show that when you ask people how confident they are in a specific belief or answer they provide, their confidence nearly always exceeds their accuracy.

People are more confident than they deserve to be.  And the more that you know about a subject the more over confident you typically are.  Indeed other studies have shown that experts are often no better at predicting outcomes than a group of ordinary people.  The only difference – experts are more confident in the, often wrong, predictions that they make.

And if you don’t believe the science that we are not good at making predictions, just take a look back at the photo of Boris Johnson and Michael Gove with the ‘WTF have we done look’ on the morning of 24th June after they had ‘won’.

So, we are staying away from predictions for 2017.  We can’t predict outcomes.  But, what we can do is identify some things that we think will be important in 2017.  Things that are already happening in the market and that we think will have a big influence on winning or losing this year (and beyond).

Here are 3 of them.

Value will be key to winning.  Not price, value.  Prices are likely to rise, significantly in some cases, this year.  Input costs are rising so something will have to give.  You can’t sell what you sold before at the price you sold it before.  It is how you respond to this that is key.

Do you try to hide it?  For instance, less crisps in the bag, smaller bottle sizes, bigger gaps between the triangles of chocolate.  It may look good on paper, but it is not going to look good to shoppers.  Do you take the price increase, but then deal it back in promotions?  It might keep the topline number looking OK, but is not going to do much for the bottom line.  Worse, it will just encourage shoppers to buy your brand only when it is on deal.  You will have even less sales at the new, higher base price than you did at the previous base price.

Or do you back your products and brands?  Give shoppers a clear reason to buy at the price you are charging – even if that price has increased a few %.  If shoppers are confident your product is good enough, then enough of them will buy it.  In our industry we tend to equate value with low prices – ‘value retailers’ are ‘low priced’ retailers.  But value means value for money not just low price.  Don’t just think about how you can get price increases through, think about how you can demonstrate value for money to shoppers.  And it might just help you get price increases through.

Selling solutions will be key to winning.  Not just products, solutions.  For many products and categories, particularly in food and drink, the competitive set is widening.  This is both an opportunity and a threat.  Opportunity = a bigger pie to go after.  Threat = predators circling wanting a slice of your current pie.

It is becoming less about what product you make or which ‘category’ you are in and more about the need or occasion that you are fulfilling.  If you want to win in breakfast, your product is competing against a range of products that could be consumed for breakfast.  To win, you need to be the best breakfast solution.  The same is true of any of the other key meal or snacking occasions.  You still want to have a great product.  But that product needs to be the best solution or be part of the best solution (‘great with chicken’, ‘perfect with coffee’ can be pretty powerful).

Channel adaptation will be key to winning.  Adapting, not replicating.  The retail channel mix continues to change.  There has been a movement away from bigger box stores to discount and value retailers, to e-commerce, to convenience.  And shoppers have different needs in these channels.  So, selling what you normally sell, in the way that you normally sell it, is not going to work.

Many of the growth opportunities in the market are likely to come from selling different products – different versions (sizes, formats) not flavours.  And selling them in different ways – how you sell most effectively online is very different to how you sell in a convenience environment or in discounters.  Innovation is as much about how you sell as what you sell.

There is no need to predict the future.  And actually there is little point, because we are not very good at it.  As Yogi Berra said “it’s tough to make predictions, especially about the future”.

Winning is not about being able to predict, it is about being able to adapt.

Feel free to forward.  Have a great weekend and speak to you next week.