As the Covid pandemic relents, central banks, as well as global supply chains, start to show signs of exhaustion. In the new inflation cycle that ensued since the second half of 2021, rising consumer prices once again dominate news headlines and dinner table discussions around the world. 75% of the global consumers are concerned that price increase in 2022 will outpace their income growth (Ipsos, Global Advisor Predictions 2022, December 2021). On the other side, leaders in the consumer goods sectors have their innovation pipelines disrupted as they fire-fight emerging priorities such as rising cost of goods, stock shortages, and rapidly shifting consumer sentiments…...
It is a challenging time as innovation leaders face choices to either completely redraw their pipeline, launch inflation resilient innovations, or renovate to reduce pricing vulnerability… even when price increases are inevitable, the choice to directly raise prices, downsize or take other indirect methods still present tough choices to make. At Ipsos, as one of the world leaders in innovation and pricing research, we are eager to share what we have learned from the past that helped our clients navigate through similar difficult periods.
In the 3-part series, we will share with you the Ipsos experience in
Creating an inflation resilient innovation portfolio
How to choose between raising the price, downsizing, or other means to reduce cost
Discerning the pricing landscape for your next innovation
Part 1: Creating an inflation resilient innovation portfolio
Bring differentiation, whether innovating or renovating.
At Ipsos, we evaluate thousands of innovation propositions each year, and the relationship between concept performance and pricing resilience is often examined. One performance KPI continuously stands-out to show a high correlation with price resilience: Differentiation. Innovations that offer distinctive benefits reduce substitutability and consistently outperform competitors in withstanding price increases.
Consider this example. A Brazilian client who owns a stake in the highly homogenised and commoditised instant coffee category searches for innovations that will bring the brand out of severe pricing competition while offering premiumisation. After rounds of development, Ipsos helped the client land on a highly unique proposition for an “Instant Espresso” concept that claims a café-like experience aimed at indulgence occasions. Consumers viewed the proposition as highly differentiated and hence much less substitutable, in the pricing pressure test that followed, this unique proposition is revealed to have only a fraction of the price elasticity vs the category leader in share of choice.