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Soaring prices of goods require innovation from African marketers
By our News Team | 2023
Innovative leaders must completely redraw their pipeline, launch inflation-resilient innovations, or remodel to reduce pricing vulnerability.
As African consumers devise new ways to keep pace with the soaring cost of goods due to inflation, brands are facing disruption to their innovation pipelines as they firefight emerging priorities like stock shortages and rapidly shifting consumer priorities.
In a recent blog post, Ipsos in Kenya Managing Director, Chris Githaiga, notes that innovation leaders face choices to completely redraw their pipeline, launch inflation-resilient innovations, or remodel to reduce pricing vulnerability.
Chris Githaiga, Managing Director at Ipsos in Kenya. Photo credit: Ipsos
Even when price increases are inevitable, whether to directly raise prices, downsize or use other indirect methods still present marketers with tough choices to make.
Innovating during inflationary times is tough, but successful leaders have followed a disciplined approach empowered by strong research tools to navigate through the challenging times,” Githaiga says.
“Successful marketers start by understanding the pricing landscape and decoding the driving forces that determine the magnitude of impact their category and segment will face. They map out cross-elasticity across existing offers in their space to find the best competitive position to innovate in.”
Marketers must bring differentiation to the space
According to Githaiga, to build an inflation-resilient innovation portfolio, marketers must bring differentiation to the space to reduce ‘substitutability’. Overlaying claims beyond the category’s core cost-of-entry has proved effective overall, but the key is choosing the right claims that offer superior ‘permissibility to pay’ and choosing brands with the right equity to carry those claims.
Marketers must also constantly adapt their pipeline based on changing consumer behaviour and attitudes, while balancing value and premium innovations to protect profitability.
When a price increase is inevitable, whether to increase price directly, or indirectly using discreet approaches like downsizing and cost reduction, is a delicate choice. To be successful marketers must balance short-term gain and long-term risks.
“At Ipsos in Kenya, we evaluate thousands of innovations propositions each year and the relationship between concept performance and pricing resilience are often examined,” Githaiga states.
He adds that one performance which continuously stands out as showing high correlation with price resilience is differentiation. Innovations that offer distinctive benefits reduce substitutability and consistently outperform competitors when it comes to withstanding price increases.
“During inflationary times, as consumers diligently seek value for money, overlaying claims beyond basic efficacy claims often provide the justification [that] consumers need to pay a little more than the absolute minimum to get the job done.”
You can read the full blog post here.
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