Marcia Webb, Vice President of Retail at Nielsen, cited Nielsen research that found that only 10 items in a store drive 50% of retailers’ price image. Will retailers of the future use demand pricing, one-to-one pricing, or another type of pricing? Watch Ken and Marcia present their differing opinions about the future of price and health personalization in grocery. This is Part 2 of 3 videos of Ken Ouimet’s conversation with Marcia Webb, VP of Retail at Nielsen, at GroceryShop in September, 2019.
Below is the transcript of their conversation:
Ken: You made a point in your presentation yesterday that 10 items drive 50% of the consumers’ price image.
Marcia: That’s unbelievable, isn’t it? So many retailers are focused on–and obviously, 10 items across millions of shoppers is a couple thousand items–but too many retailers are focused on just price comparison versus the competition and what should they do about it. And they really need to be focused on what are their consumers’ price perception. They really can narrow that focus by understanding, by shopper group, what are those 10 items? Consumers buy thousands of items over the year, but by focusing on those 10 items, those 10 known value items that they’re buying in the market, they can really narrow the focus on the pricing decisions that they need to make in order to raise margin.
Ken: How did you determine that, that there’s 10 items that drive the price image?
Marcia: Well Nielsen obviously tracks the market level, what they buy in the market level. It’s a great partnership that we have with Engage3 in that you all price known competitor pricing, and we track market level pricing. And so together, we’re able to provide a complete package to our retailers where they can scale and make pricing decisions very quickly. We have market level data for food, drug, dollar, club, the environment out there–what are they buying in the market? And then since you track named competitors, it’s just a great unison. Both are very important, but together we’re able to provide them a scalable pricing image package.
Ken: How do most retailers think about price image?
Marcia: Yeah, I think it varies by retailer. I think in general, retailers get the concept of price image, but I think a lot of them are really focused on just how does their price compare versus the competition. How does their price compare versus the total market? And I think they’ve really got to get the concept of–it’s in the consumer’s mind. I mean we talked about the Whole Foods ad and I think in general Whole Foods has an image of high price. I think in general Walmart has that price image of low price, but there’s so many retailers in between and I think they’ve really got to get the concept of price image is how consumers view their pricing. And so we come back to what we talked about KVIs, known value pricing. You’ve really got to focus on what are those 10 items that consumers know that they buy on a regularity within the market. And so if you focus on that, those are the items that every retailer has to get completely right. If they can get those items right, it’s going to improve their price image in the market.
Ken: Yeah, that’s consistent with what we’re seeing. We see the retailers comparing their prices to their competitors and most of them are using rules to be within some gap in the competitor, but not focusing or investing on those core items.
Marcia: Right. And if they focus on that, just the price gap versus all of the items, I mean, they’re going to be leaving money on the table. They’re going to lower prices when they don’t necessarily need to because perhaps the consumer doesn’t really know what that price is, and they’re going to raise prices when they absolutely should not be raising prices. So that concept of price image is just so important. And together Nielsen and Engage3 can really master that and provide a scalable, fast solution to retailers.
Ken: Yeah. That’s an area that I’m really excited about with our partnership with Nielsen is the ability to combine our data sets and analytics, to go and measure the price image and help. What we’ve been doing is developing a behavioral model that predicts how people will perceive and remember prices. And what we’re seeing is that model, when put it into price optimization, it’s very selective in what products to invest in, those key KVIs. It’d be very disruptive in those price zones.
Marcia: Yes, I agree. And not only what products should they invest in, but Nielsen’s invested a lot in delivering for our retailers localized pricing much quicker and faster. And then we’ve invested in algorithms and artificial intelligence to tell the retailer where should they move by item and fast and where should you prioritize? Should you move up on which items, where should you move down? So I think together our investments really will be a win-win for the retailers.
Ken: Yeah, I mean, you mentioned the 10 items that drive each consumer’s price image. It got me thinking about personalization and the ability to manage a KVI list for each consumer, which I think would be really powerful. What we’re doing working with retailers today is dynamic KVI lists, so we can help them manage a dynamic KVI list. It could be store level or zone level. Personalization is where I see a huge opportunity.
Marcia: You mentioned personal motivation on an individual basis for consumers. Do you really think the industry’s moving, though, to one-on-one pricing? That’s an interesting concept and I personally think that we’re a way away, but do you think that personalized one-to-one pricing is in the short-term future?
Ken: I believe it’s inevitable. And the reason I believe that is, you know, Marketing 101, the more you can segment your market, more pricing power you have. So the ultimate in that is personalized pricing and we don’t believe it’s going to be the price that’s personalized, it’s the discount. Everybody else will see the same shelf price but the discount would be personalized.
Marcia: I guess we do have a difference of opinion here Ken. I mean, I’ll be honest, have you ever been in line behind a consumer that maybe doesn’t have their frequent shopper card with them and the cashier wants to give them the regular price? And have you ever been behind them in line where the customer raises a fit? I just think, you know, that level of personalization on price could cause a lot of problems where customers feel like they’re treated unfairly. I see more, in my role as specialty retail, I have both restaurants and I have traditional retail, I have emerging channels for Nielsen DIY, et cetera. And if you notice in the hotel environment, they do a lot of demand pricing on certain holidays or certain events they have. So I would see the industry moving more towards demand pricing. Maybe certain occasions are higher and lower, but I think personalized one-on-one pricing would cause a lot of problems and just would be very hard to manage. So I guess we do have a little bit of a difference in opinion.
Ken: Well, I agree with you on the challenges, but I think there’s solutions to those. But I look at the airlines when they implemented their different pricing by how close it is to a flight. I don’t think they did it right, but even though the consumers were really frustrated by it, the pricing was so powerful that it’s still there. I think there’s a way in retail where you don’t have that aftershock, if it’s marketed right, that consumers realize it’s helping them.
Marcia: Yeah, that’s true. It gets back to how complex, really, today’s environment is. And the pricing is complex, but you’re right, the right retailers, I think, have a great opportunity to really create a nice personalized experience for their customers.
Stay tuned for Part 3 of this conversation. You can also watch Part 1 of this series, where Marcia talks about how health has become a differentiator for retailers. Ken’s conversation with Jon Springer, Executive Editor of Winsight Grocery, about brand loyalty erosion, privacy vs. personalization, and how Aldi’s efficiencies are keeping Walmart and Amazon on their toes is here.