In today’s food and beverage industry, international competition is growing, margins are thinning and the price of commodities is constantly changing. All together, these factors put added pressure on food and beverage companies to achieve increased growth targets and revenue. While companies across the industry take a forward-thinking approach to data and technology as it applies to food science and manufacturing, this same strategic thinking is not being applied to pricing strategies.
Why a Shift to Modern Commerce is Needed
It’s time for food and beverage companies to move away from their conservative approach to sales if they want to enhance the customer experience. Taking a modern commerce approach to pricing is vital for the food and beverage industry, as commodity cost fluctuations can be crippling. Take, for instance, the constant change in dairy markets and how this affects a host of food manufacturers throughout the food supply chain. Whole milk powder prices are extremely volatile due to major global factors that no one could have predicted including:
- EU milk quotas were lifted, allowing European dairy farmers to sell as much milk as they could produce.
- Russia boycotted all Western dairy imports.
- China’s demand remains far below expectations that had been tracking in the high double-digits year over year.
When market fluctuations impact availability and cost, today’s manually intense mode for pricing and quoting does not allow food and beverage manufacturers to keep pace with commodity pricing in real-time. Without the ability to proactively and nimbly address these changes at the moment they occur, companies feel the effects, over time, of revenue and margin leaks.
Finding the Right Ingredients to Drive Revenue and Profitability
Dynamic pricing science is one of the technologies propelling businesses toward more strategic decision-making. It can help pinpoint buying patterns so precisely and accurately that customers become a so-called “segment of one.” A trend that was once thought to be available only in B2C organizations has become pervasive in B2B companies, driven in large measure by the “Amazon effect.” Food and beverage manufacturers need to adopt a new modern commerce mindset that leverages dynamic pricing strategies so they can better prepare for the inevitable bumps in the road:
- Understand the cost of the status quo: Go beyond manual pricing and gut instincts, and leverage machine learning to analyze real-time data. By doing so, food and beverage companies can discover a customer’s willingness-to-pay, which provides the sales team with real-time guidance on pricing.
- Get the real value for your product: Segment your customers, products and service attributes across markets at a micro-level. This segmentation, paired with machine learning, creates a dynamic pricing model based on data science. Instead of overpricing or reacting to non-optimized competitive pressures, you’ll know at what price point customers are willing to pay.
- Develop a modern commerce strategy: Modern commerce is more than just being able to price in real-time. It’s important to conduct an overall assessment of corporate readiness including people, processes, technologies and profit. You’ll be able to help executives communicate expectations and realize the benefits of creating a frictionless, cross-channel experience.
- Create a personalized customer experience: Machine learning, combined with transactional data, allows food and beverage companies to cross-sell appropriate products to match their customers’ desires, resulting in increased revenue.
Modern commerce is emerging as the key strategy to meet and exceed customer expectations. By embracing dynamic pricing science as a foundation of how the food and beverage industry sells, companies can synchronize their pricing strategies across channels in real-time and present the right price to the right customer at the right time. The cost of maintaining status-quo selling processes is too high to ignore, and the uneven pace by which companies rise to this challenge will disrupt the food and beverage industry. The time to embrace modern commerce is now — before customer dissatisfaction, lost revenue and margins, and downward price pressures affect business vitality and long-term viability.