Rick Kash, CEO, The Cambridge Group, Jason Green, Principal at The Cambridge Group and Dan Vucovich, Vice President, Global Chief Customer Officer, The Hershey Company presented at Nielsen’s Consumer 360 conference on how oversupply and flattening demand are driving pricing power down, requiring retailers and manufacturers to dig deeper into determining how to attract the right customer. When you have oversupply, you have to know demand better than your competitors.
From post World War II to about 1990, industry supply and aggregate consumption were approximately equal. In this situation, pricing power is strong. However, the impact of globalization, technology and productivity gains has generated a significant oversupply situation – a 25% increase. The impact of this oversupply situation on pricing power has been dramatic, driving pricing power down by 43%.
The traditional supply-driven approach pushes supply into the market. As demand shifts, the push approach can lead to significant misalignment with dynamic demand. Companies with offers that are misaligned with demand end up as commodities that are a “Price Taker.”
Win on Demand
Going forward, successful growth companies will compete on supply, but will win on demand. The “Demand Paradigm” anticipates current, latent and emerging demand and creates pull for its offers. Offers that are in demand create pricing power and the ability to be a “Market Maker.”
The demand chain signifies the arrival of a new level of precision where manufacturers, retailers and media companies look at the consumer through a single integrated lens.
“Life Enrichment” or the “forces and factors” that shape demand, manifests itself across the ways consumers live, learn, work and play. By redefining the market around Life Enrichment, new opportunities for growth are opened.
The Demand Landscape creates a more precise understanding of usage need states and shopping drivers and benefits sought from a retailer. Detailed economics are created for each of these intersections to determine where the most profitable opportunities are found.
Re-Thinking – Not Re-Engineering
The constant companion of change is opportunity. Now is the time to seize the moment to embrace the arc of the growth. A forthcoming book, How Companies Can Win, co-authored by Nielsen CEO David Calhoun and Rick Kash rings the bell of change and defines the strategies of how to create competitive advantage.