The FINANCIAL -- Amazon's objectives are to know what to sell, where to sell it best and at which price. When you come to think of it, knowing the answers to these three questions is a dream-come-true of every retailer across the world.
We are the only consulting company with several years of experience in retail store check for FMCG, DIY and Toy products in Georgia and in this issue Experto shall focus on the pricing policy. At this point no one disputes the marketing mix is a very important concept of marketing that involves the four main elements i.e. people, promotion, place and price. However, the second most important factor in the marketing mix after product is the type of pricing being used as the type of pricing can alter the distribution and the promotion mix as well.
Before diving into talking about price monitoring and its importance, please be reminded that marketing currently acknowledges the following types of pricing strategies: premium pricing, penetration pricing, economy pricing, skimming pricing, psychological pricing, neutral pricing, captive product pricing, optional product pricing, bundling pricing, promotional pricing, and geographical pricing. There are several factors that need be taken into consideration before setting up prices, and they in turn are influenced by current market supply and demand, competition levels as well as other political and economic impacts.
During the price planning process, the seller’s main focus should lie in finding the right price point where one can maximize sales and profits. This point usually depends on entity’s individual marketing goals and objectives, taking into account what competitors are doing for the given market.
Price monitoring tools are designed to help sellers answer the third question asked at the beginning of the editorial. With the right and timely information retailers can in fact grow sales and boost margins through accurate and real-time pricing and product assortment optimization, using different types of competitive intelligence tools.
The process of monitoring competitor prices affects sales and profits and that is why it must be done right. Everyone can see how their competition prices the products and make changes that will prevent loss of sales. Retailers use competitor price tracking in order to understand the market. Some do this in-house, others outsource it to professionals and sometimes, even to amateurs. Either way, it is impossible to perform a thorough market research without knowing what prices are being offered by competition for similar or related products. Retailing is very competitive and the savvy business people who take time to look into the right price points are always going to make the most profit from sales.
It is particularly hard to track prices in Georgia, most entities do not like / are not used to disclosing the pricing information. Even the international companies in Georgia that do release information in the western European countries, in Sakartvelo they turn into suspicious preys to any open inquiry. Is it because of the oblivious Georgian employees that they hire? Or because of the concept “When in Rome do as the Romans do”? Most likely both.
We have approached around twenty retailers operating in Georgia, outside our clientele, and asked them about the methods and techniques they use when obtaining pricing information of their competitors as well as when pricing their own products. One thing that was clearly readable in between the lines of most answers we received is that they clearly have no idea what benefits the competitor pricing monitoring brings to the retailers.
Add to this the fact that some retailers in Georgia do indicate prices on their websites but end up charging you a different amount at the check-out in stores. Sometimes it is because of a certain promotion they are executing at that particular moment, but mostly because they forgot to update the information across all their channels.
It is not all that bad as it seems. Some companies were very forthcoming respondents, the Director of Gaamot LTD, Mr. Irakli Talakhadze was one of them. Gaamot has been operating on the Georgian market since year 2012 and their main focus is the production and sales of meat and other semi-finished products. According to Mr. Talakhadze, the entity regularly conducts market research and analysis of their target consumer segments: “Our company uses own resources and competent personnel to systematically study the market prices and check upon our competitors. We want to know which player/s dominate the market at a given time, what prices are acceptable to the consumers and we also try to find out what might be the cause of bad sales of a certain product. All this gathered intelligence helps us to correctly conduct our pricing policy and choose more or less most effective price to quality combination. Sometimes we price the products for profit, sometimes for sell-out. Gaamot tries to obtain and keep the image of a stable pricing policy company and avoid major price fluctuations, sometimes even preferring to tolerate reasonable profit margin reductions for this sake.”
SAGA, having 22 years of experience in the field of selling cooling and heating systems, has over 400 dealers nationwide. For prices surveys they use both internal resources, as well as outsourcing to different research organizations. Marketing Manager of SAGA, Ms. Natalia Noghaideli revealed to Experto Consulting that “the pricing policy of SAGA is fully adapted to the Georgian market realities. Given that 90% of our products are imported mainly from Italy, France, USA, Turkey, Ukraine, China, and Spain, naturally, the exchange rate fluctuations do influence our pricing policy. We try to constantly offer promotional pricing to our customers. We also actively use cross-marketing, i.e. when a consumer buys a certain product, we either offer a free installation, or a free product part, etc.” Ms. Noghaideli also stated that SAGA plans to expand the network, and offer more innovative products and introduce energy efficient equipment in their chain. Their aim is to increase the number of loyal customers by offering adequate pricing policy.
LTD Shaba is the leading distribution company in Georgia. They officially carry many well-known FMCG brands such as Nivea, Aquafresh, Rubella, Dona Vera, and Soft, as well as a Georgian brand - Rcheuli tea of Gurieli. The pricing policy for a given product is determined by reaching an agreement between Shaba and the relevant partner organization. Prices are regulated by taking into account the dynamic changes in the business environment, be it the exchange rate fluctuations or country's overall economic situation. “Before defining the price of a product for the Georgian market, we use our internal staff to research the prices of related products our competitors offer. Those clients that have been working with us intensively for a long time, enjoy loyalty based pricing conditions, indicated in the contract itself.” stated Giorgi Odishelidze, Brand Manager of Shaba.
As for LTD Mandarin Cosmetics Georgia, the official representative of L'Oréal in Georgia, they have been distributing L'Oréal hair care products on the given market since year 2008. Ms. Milena Mesropyan, the representative of Mandarin Cosmetics, has noticed price increase tendencies over the past few years, mainly caused by the exchange rate fluctuations: “To combat the increased prices, we often try to utilize different types of discounted pricing policies to make the products more affordable. For instance, we also use promo bundling pricing, i.e. +1 product offerings.” The company uses own employees to conduct prices surveys to check on competition as well as determine acceptable pricing policy for their own products.
In conclusion, it should be stated that right now, the most accurate way of obtaining competition prices in Georgia is applying mystery shopping techniques. Retail players in Georgia are still far from utilizing the benefits of competitor prices survey to the fullest. More work for companies like us.