Focus on the Segments Before Lowering Prices | Strategic Pricing Solutions

Last week there was an article in the Wall Street Journal, So Long, Hamburger Helper: America’s Venerable Food Brands Are Struggling which discussed the declining market shares of some of the largest packaged food companies.  It is not a surprise; the large CPG companies have been losing customers for the past few years on multiple fronts.  Although many companies would interpret declining share as an indictment of their pricing strategy and would lower their prices, doing so would likely make the situation worse.  It is much more important to understand what is happening with each customer segment and tailor their actions to the segments.

There is a large segment of customers who are looking for fresher items with fewer processed ingredients.  Many of those customers now shop at Whole Foods or the organic sections of their regular grocery stores.  While price is an issue, it is certainly not the issue for these customers.  It is hard to imagine that any of the customers in this segment would switch back to packaged food for a price reduction.  Their reason for switching was not to save money, it was to eat healthier.  The only way to get these customers back is to create healthier options for them.

A growing part of the population is comprised of people who would like to cook, but don’t have the time to shop, or don’t feel like they can come up with recipes, or don’t want to buy all the tertiary ingredients like spices, greens, etc.  These customers have migrated to Blue Apron, Fresh Direct, Home Chef and others.  Like the first group of customers, these buyers did not switch to save money.  So, cutting prices to get these customers back would be ineffective.

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Focus on the Segments Before Lowering Prices.