Optimizing pricing in CPG: Leveraging Visualfabriq for seamless adjustments
Agreeing pricing with retail partners is one of the most important challenges a consumer packaged goods manufacturer faces. But the hard work doesn’t quite stop there.
In an ideal world, you will have deployed your full range of expertise and tooling to work out a deal that meets your organization’s targets, while also delivering value to the retailer.
You could be forgiven for breathing a sigh of relief, before focusing on how results are playing out in the short term, and ways in which pricing and programs can be optimized. Then, in time, you begin to think about next year’s negotiations and how to continue evolving a more holistic pricing strategy in CPG.
But are you sure the deals you’ve struck have been fully approved, and all the implications have been worked through? And is the data accurately reflected in the ERP system which sits at the heart of your organization?
In this blog we’ll examine the aftercare a CPG should have in place post negotiations, highlighting the potential traps that could throw your plans off course. And we’ll show how an integrated platform can ensure pricing information is approved and shared, adjustments are made accurately and swiftly, and the implications are fully understood by all stakeholders.
Strategic Pricing in CPG: From negotiation to implementation
Pricing negotiations in CPG can be intense. Senior management and finance will have set the overall financial targets for the company. But it is account managers and other frontline professionals who will have pored over historic data, analyzed current market and economic conditions, and evolved a range of forecasts to prepare a bulletproof pricing strategy in CPG ahead of sitting down with retailers for negotiations.
They will also have taken into account the needs of their individual retail partners to ensure that they are delivering value to all stakeholders.
Unsurprisingly, these negotiations can run right to the wire. But when they’re done, they’re done. The frontline team will probably enjoy a brief respite before turning their attention to the next round of negotiations.
It’s all too easy to feel that once a deal in principle is agreed with a retailer, the hard work is done. But those adjustments still need to cascade through the company, so that all stakeholders are aware of them and their potential impact.
Adjustments and discounts will need to be calculated for each account and each product. And these must all be tracked, approved, and signed off.
Ultimately, they need to be reflected in the organization’s ERP system. Accurately and precisely.
After the rush of the planning and negotiation phase, this pricing adjustment in CPG phase can feel like an afterthought. But until it is carried out, and the relevant details are in the ERP system, the manufacturer cannot begin invoicing. And other frontline staffers cannot begin planning for the year ahead – and the year after that.
It’s tempting to think this is purely an administrative process. What could possibly go wrong?
Overcoming Pricing challenges in CPG
A lot depends on the platforms CPG professionals rely on.
If the teams negotiating with retailers still rely on bespoke models based on spreadsheets or other disconnected tools, data might need to be transferred and adjustments might need to be made by hand. Vital information could even be dispersed through multiple email chains.
And that’s before we consider the ERP system itself. The agreed pricing in CPG has to end up here. Simply issuing invoices and taking orders becomes impossible otherwise, never mind the broader impact on supply chain management.
But legacy systems can be a problem if they offer limited, or no, connectivity to other platforms in the organization. Somehow, that vital pricing information must jump this airgap. This can mean more manual or semi-manual work, meaning more delay and, potentially, more mistakes.
But this is just one of the challenges.
Wherever they are, those price structures, discounts, and deals, have to be approved. Again, with manual or semi-manual systems, this could mean spreadsheets or other documents being shunted around the organization. Each move, query, or check is another possibility for delay or loss. Every edit or recalculation is a chance for an error to find its way in. Workflows and chains of approval become impossible to track.
Only when those deals have been approved, can the information be added to the ERP system.
For an organization with many products and partners, that is an awful lot more keying in. Each digit presents another opportunity for a typo or transposition or a miscalculation.
And that raises the prospect of mistakes being replicated throughout the supply chain. An individual item price could be attached to a box, or a pallet, for example.
Such mistakes can cause friction between CPGs and their stakeholders. While a good relationship between manufacturer and retailer will help smooth things over, this still reduces the amount of time and goodwill available to collaborate on optimizing programs and planning for a more mutually beneficial future.
Simplifying pricing adjustments in CPG
Mutual trust is crucial in CPG. As we’ve seen, a good relationship between partners, backed up by clear contractual terms, can resolve the occasional pricing mistake without too much drama.
But it is clearly far, far better to simply not run into this sort of problem in the first place. And that is a question of governance, visibility, and workflows.
When different teams are using different, unconnected tools, sharing information becomes difficult before, during, and after a presentation.
A common platform that connects multiple teams and ensures they are working on the same version of the truth can also allow a CPG organization to tie them into clear workflows and chains of responsibility.
So, when frontline teams reach an agreement with their retail counterparts, the appropriate prices and discounts can be seamlessly shared with the appropriate supervisors for approval. No need for batch transfers of cut and pasted information or, even worse, keying in data by hand.
And once it has been approved, that information doesn’t have to leap a virtual or even physical airgap into the ERP system. Rather, it is reflected there and cascades into the systems of other relevant departments, including finance and the C-suite. Any changes – and any mistakes – can be identified and tracked. The entire organization can have far more confidence in the numbers they are seeing and in governance overall.
The data is also immediately available for teams planning for the next period, providing fuel for AI-powered forecasting tools. Forecasters and planners can be confident they are working with accurate, up to date data, and do not have to constantly second guess themselves.
Equally importantly, the close relationship between CPG and retailer is no longer the thing that ensures occasional mistakes can be ironed out. It becomes the basis for collaborating on optimizing current plans and developing new, more innovative programs for the future.
How Does Visualfabriq Help with Pricing in CPG?
Visualfabriq’s Trade Spend Master pulls together the full array of data and tooling that CPG teams need to establish accurate forecasts, build trade spend and promotion plans, and plan marketing programs.
But that same integrated platform which allows companies to evolve and collaborate on a single version of the truth, also allows them to build tailored workflows to share data and approve plans, before, during and after negotiations.
As well as setting approval chains, notifications for key stakeholders can be set and enforced, removing the possibility of delays. And once approved, the data can flow effortlessly into your ERP system. No manual work, no mistakes.
So, instead of pricing adjustments in CPG being at best an afterthought, at worst a chore, they become just another seamless, auditable workflow.
The result is that following a successful negotiation, price adjustments are approved and distributed, swiftly and accurately, highlighting current performance, and providing a solid foundation for planning for the future.
Pricing adjustments and approval processes are an inescapable part of doing business for CPGs. The sooner they are reflected in company systems, particularly ERP systems, the sooner the organization can get on with business.
But too often they are treated as a chore, after the excitement of pricing negotiations. This can be complicated by siloed and legacy systems, which cause delays and raise the possibility of errors.
Visualfabriq’s software helps CPG professionals prepare for pricing negotiations and, once they are concluded, smooths the path to approving and updating prices quickly and accurately. This means that sales professionals and other CPG specialists can get back to business quickly. But it also means that they are working with exact, up to date information as they prepare for future negotiations.
To discuss how Visualfabriq can help your organization develop a sustainable, holistic pricing strategy into the future, get in touch to arrange a demo.