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From Cost-Based to Value-Based Pricing: how CPG data analytics can drive the Shift in Global CPG Industry

Make data-driven decisions with CPG data analytics: here is how CPG data companies like Tredence can help you level up your pricing strategy.

Why companies should be using CPG data analytics to support pricing strategies

While AI solutions for businesses are gaining more and more interest and investments in the sector keep rising, the CPG industry has somewhat stayed behind. But many recent studies suggest that the application of AI solutions to CPG data analytics could open up infinite possibilities to drive growth and create value. Just to mention one, McKinsey’s Global Survey found out that 27% of businesses report a 5% EBITDA increase due to AI. 

When it comes to pricing, CPG data insights can support management during all the necessary steps to develop an efficient strategy, like data collection, research, analysis and decision-making. Unlocking the power of consumer packaged goods analytics will allow your company to accurately forecast demand for both your and your competitors’ products, segment audiences by categories, channels, and regions, and support you in optimizing pricing and promotion strategies.

The current state of CPG data insights in today’s complex scenario: where are we?

With global inflation rising, both consumers and companies are seeking new ways to cut costs. Consumers are changing their buying behavior: they are looking for promotions, cutting unnecessary spending, comparing prices online more often and, when it comes to CPG, they are switching to cheaper alternatives, like private labels. A Bizrate Insights survey found out that nearly 80% of adults in the US were purchasing, or willing to purchase, private labels for hygiene, personal care, apparel, and pantry products. And this trend is found in Europe as well, with private label value sales increasing by 10.4% in 2022.

This complex scenario poses a difficult challenge to companies. How can businesses protect their margins and achieve revenue growth while dealing with income-constrained consumers?

The majority of businesses in the CPG industry are sticking to a cost-based pricing model and are trying to protect margins by increasing prices while simultaneously shrinking package sizes. In this way, they hope to keep covering rising production costs. But cost-based pricing strategies present several issues:

  • They don’t take into account competitors’ pricing or consumer demand.
  • they don’t recognize a product’s perceived value;
  • they risk missing out on pricing opportunities given by a high perceived value.

In short, this approach is not the most effective. The switch to a value-based pricing strategy, however, is far from simple. It requires a lot of research and data analysis as well as the correct communication strategy. So, how can companies design efficient pricing and promotion strategies to increase profit?

How to switch pricing strategy with customer analytics consulting

Let’s have a look at the steps companies must follow in order to set up an effective value-based pricing strategy.

  1. Understand value-drivers. Each product or service can be broken down into its different characteristics; identifying the one (or ones) consumers attribute more value to allows us to get a clearer picture of our product’s perceived value.
  2. Once value-drivers are identified, companies must research the market to understand both demand and competition.
  3. Get an accurate estimate of how much consumers are willing to pay for the product. By collecting and analyzing consumers’ feedback businesses can identify price ranges that maximize profit but do not exceed customers’ WTP (willingness to pay).
  4. Monitor the efficiency of the pricing strategy and adjust it accordingly to changes in consumers’ demand, market situation and perceived value.

It is clear that completing all these steps requires a lot of analysis and data processing.

How CPG data analysis can benefit from AI

Effective revenue growth management cannot overlook pricing and promotion strategies. As we have seen, switching to value-based pricing strategy can open up more opportunities and be more resilient than cost-based pricing, and can therefore be very profitable for businesses. It all comes down to scenario planning and having access to the right customer insights: customer analytics consulting is the process of CPG data analysis to gain exactly these insights. It involves data collection from various sources (customer feedback, customer sentiment, sales and operations, trade promotion analytics, etc) to understand needs, behaviors and demand in order to make data-driven decisions.

CPG data insights on customers’ behavior and preferences are extremely valuable when it comes to making informed decisions. Here are the benefits of CPG analytics that your company can obtain by integrating CPG business analytics solutions into its processes.

Adopting a holistic approach to data collection

It is still common practice for businesses to see different departments as siloes, and not integrate data obtained from different sources. Taking into account all data is much more complex, but it allows to have a holistic view to make more informed decisions. A comprehensive AI-powered system can collect, store, process, and analyze available data from all your WordPress Development Company functions and departments, like sales, support, and marketing.

Understand customers’ sentiment

Sentiment evaluation is a delicate and complex type of data analysis. This is due to the fact that it combines qualitative and quantitative analysis and usually requires natural language processing (NLP) programs and machine learning. Despite its complexity, it proves extremely valuable in gaining customer insights and understanding WIP and perceived value.

Running simulations and making predictions

Simulating different scenarios allows businesses to both anticipate consumers’ responses to different pricing strategies and understand the impact of various factors, such as changes in market conditions or competitors’ moves. Applying AI to simulation modeling can not only optimize simulations, but open the door to more complex simulations taking into account multiple factors at once, as explained by BCG.

Act quickly to adjust to market changes

As we have seen, today’s scenario is challenging and ever-changing. With rising inflations, geopolitical issues, and consumer behavior shifting rapidly, businesses must be ready to monitor and update their strategies in real time. CPG analytics solutions monitor the market and customers’ response and measure pricing and promotion effectiveness. By always monitoring and updating the strategy, AI-powered CPG analytics services allow companies to act at the pace of change to always stay at the top of the game.

The opportunities offered by AI and CPG data analytics are clear and well-studied and can benefit all business processes. Pricing in particular has a lot to gain from the adoption of AI-powered tools and solutions, allowing companies to process large amounts of data to gain insights, run simulations, identify opportunities, and optimize strategies. CPG data insights haven’t fully taken hold in the industry yet, but other industries are moving way faster toward a data-driven approach: will you stay behind, or are you ready to make the right investment?


In today’s competitive business landscape, data-driven decisions are vital for success, and the CPG industry is no exception. Leveraging CPG data analytics can significantly impact pricing strategies, enabling companies to stay ahead and drive growth. While AI solutions have gained traction across various sectors, the CPG industry is now recognizing the immense potential of applying AI to data analytics.

By utilizing CPG data insights, companies can accurately forecast demand, segment audiences, and optimize pricing and promotion strategies. In the face of rising global inflation and changing consumer behaviors, a shift from cost-based pricing to value-based pricing becomes crucial. However, executing a value-based strategy requires meticulous research, data analysis, and effective communication.

Sanobar K

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