Getting Pricing and Ingredients Right: The Key to Consumer Goods Success

Success with food and beverage consumer products hinges on understanding and meeting consumer preferences. Companies are tasked with deciphering these preferences, with a primary focus on two critical elements: pricing and ingredients. From a consumer perspective, these two factors can make or break a product's appeal.

Getting Pricing Right

Consumers are highly sensitive to price changes, and a slight deviation can lead to significant shifts in purchasing behavior—especially if your competitors are constantly updating their prices. According to a survey by Nielsen, 60% of consumers cite price as the primary factor influencing their purchase decisions.

Although large companies have the luxury of employing sophisticated algorithms and models to determine the optimal price point for a product, it’s highly beneficial to companies of all sizes to understand not only the cost of production and desired profit margins but also the perceived value of the product by the target market.

General Mills, for example, was able to predict the optimal price of Honey Nut Cheerios cereal based on a large sample consumer insights survey. The below graph shows a Price Gap Analysis and Revenue Optimization study conducted for General Mills, highlighting that 18% of consumers will leave Honey Nut Cheerios for a private label competitor when any price difference exists in the Morning Foods category.

Price Elasticity Modeling: By understanding how sensitive consumer demand is to changes in price, companies can predict the impact of price changes on sales volume and revenue.

Conjoint Analysis: By evaluating the trade-offs consumers make between different product attributes, companies can significantly enhance their understanding of consumer preferences. It involves presenting consumers with a set of products that vary systematically in their attributes and analyzing their choices to determine the value placed on each attribute.

By simulating these different pricing scenarios with The Jenny Project, General Mills could predict consumer responses to price changes and confidently exercise a strategy to maximize both revenue and market share.

The Role of Ingredients

Ingredients are another vital aspect that significantly influence consumer preferences. In these times, where consumers are increasingly health-conscious and environmentally aware, the ingredients list can greatly impact a product's success. According to Mintel, 75% of consumers read ingredient lists before making a purchase decision, and the demand for healthier options continues to rise.

Companies must work hard to stay ahead of trends in consumer ingredient and flavor preferences, whether that’s a shift towards natural and organic components that provide additional health benefits, or ensuring your packaging label stands out amongst your competitors.

A notable example is the success of Dr. Pepper. By focusing on healthier ingredients and innovative flavors, Dr. Pepper was able to overtake PepsiCo in market share in certain segments.

This achievement underscores the importance of aligning product formulations with evolving consumer preferences.

Another example is Carbliss, who simulated flavor and label scenarios with The Jenny Project. By conducting experiments against recognized competitors like Truly, Carbliss was able to identify a preferred flavor among consumers. This strategic focus on targeted consumer flavor preferences allows Carbliss to refine their product offerings, ultimately leading to increased market penetration and consumer loyalty.

The insights gathered in the graph below from the flavor tests showed a clear consumer preference for natural and bold flavors, which Carbliss incorporates into their product line.

Sensory Evaluation Techniques: These include discrimination testing to determine if there are perceptible differences between products, descriptive analysis to quantify the intensity of sensory attributes, and consumer testing to gauge consumer preferences and acceptability.

Carbliss employed a mix of sensory testing and consumer preference mapping with The Jenny Project to pinpoint specific flavor profiles that resonated most with their target audience.

Using Data to Forecast Retail Expansion

By combining pricing and ingredient consumer data with market trends and external factors such as seasonal changes and economic conditions (inflation), companies can significantly enhance future demand forecasts with greater accuracy.

This type of demand forecasting is essential to ensure that sufficient product is available to meet consumer demand without leading to overproduction and wastage. This enables them to plan production schedules, manage inventory with retailers, and ensure that the right products are available at the right time.

Carbliss also excelled in this area with regional category demand forecasting. This allowed them to know precisely which retail locaitons to send limited inventory, ensuring that the most popular flavors were always available in the right markets.

Retail Optimization Techniques: By integrating their sales data with retail networks, they could dynamically adjust their inventory to meet regional demands effectively.

Real-time data analytics can provide visibility into sales performance, helping companies negotiate volume, pricing, and placement with retailers, ensuring that inventory levels are optimized across the board.

Conclusion

Pricing and ingredients are critical in capturing consumer interest and driving initial sales. Customers are smarter than ever, and companies must play an increasingly pivotal role to understand what drives purchasing behavior and remain competitive.

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