Pricing Strategy : The Art of Anticipating Trends to Create Value.

On February 27th, I had the honor of participating in a major event organized by FSI (Food Service Institute) and sponsored by PHG (Pearson Ham Group) in Madrid, focusing on Pricing Strategy. This event echoed my interview with Caternews magazine and brought together leaders from the restaurant industry and manufacturers to discuss the crucial role of pricing strategy in the business world.

At the event, Inigo Sanchez from McDonald's Spain shared fascinating insights into how pricing strategy is central to McDonald's, at the intersection of marketing, finance and consumer insights. He explained how this integrated approach enables McDonald's to remain competitive while meeting consumer expectations.

Juan Jardón from Pearson Ham Group presented the key pillars of a successful price transformation. In particular, he shared the example of a Coffee Shop brand in Sweden, that partnered with PHG to optimize pricing through menu architecture evaluation and combo opportunities, to improve the customer's perception of value.

For my part, I had the opportunity to come back to a point in my published article, where I explain that pricing strategy is both a science and an art.

The Science aspect involves data analysis, modeling, and margin optimization—based on measurable and quantifiable facts.

The Art lies in understanding consumer psychology, taking into account consumer needs, social and environmental trends.

The Art of Pricing Strategy: Anticipating to Better Manage Costs

In my talk, I focused on the "Art" aspect of pricing strategy, highlighting the importance of anticipating market trends and, for large companies, influencing them.

It’s crucial to understand that when businesses fail to anticipate regulations and instead endure them, additional costs are almost inevitably passed on to consumers. In such cases, consumers perceive the price increase as a regulatory obligation rather than a value-added service.

Take France as an example.  In January 2023, a law required fast-food restaurants with more than 20 seats to use reusable packaging for dine-in consumption. This regulation has led to significant compliance costs for companies, particularly in terms of logistics, cleaning and inventory management. These costs were often reflected in product prices, partially or fully borne by the consumer. Yet, from the consumer’s perspective, this was a legal mandate rather than a differentiating service compared to competitors.

Anticipating Regulations: A Powerful Strategic Lever

On the other hand, when businesses anticipate new regulations, or even co-write them with the public authorities, the situation becomes totally different.

At the Madrid event, I shared two real-life examples from the fast-food industry where companies chose to act proactively rather than wait for legal constraints.

Starbucks, in 2018, announced the elimination of plastic straws from all its restaurants by 2020. This proactive move positioned Starbucks as an environmental leader, strengthened loyalty among eco-conscious consumers, and had a positive financial impact.

McDonald's France, in 2005, decided to display nutritional information on its packaging, thus anticipating future public debates. This initiative helped shape regulations like the Nutri-Score in 2016 and reinforced McDonald's image as a responsible player.

These examples demonstrate that anticipating regulations can be a powerful strategic lever. By anticipating trends, Starbucks and McDonald's not only influenced their industry and strengthened their brand image but also increased their brand value. This proactive approach allowed them to justify price increases and strengthen their premium positioning, avoiding the costs of rushed compliance while leveraging their pioneer status to stand out from competitors.

Innovation as a Differentiation Factor

Of course, only companies with a strong local presence can influence national policies. However, differentiation can also come from introducing a new service inspired by other industries."

For instance, the grocery sector adopted drive-thru services from fast food, while the restaurant industry incorporated online ordering from retail. More interestingly, there are examples of small businesses borrowing initiatives from other industries to differentiate themselves and grow. Here are a few:

-        Big Mamma, originally a classic Italian restaurant, introduced an exclusive and refined design, inspired by luxury hotels and private clubs between 2015 and 2017. By focusing on a high-end customer experience—from service to decor—they attracted clientele seeking a unique, visually appealing experience, allowing them to increase prices and expand internationally.

• La Fourche, an organic e-commerce site introduced a subscription model in 2018, inspired by platforms such as Amazon or Costco. This strengthened customer loyalty, generated recurring revenue and increased the average baskets size.

  
  

• The Atelier des Papilles, a traditional bakery, introduced a monthly subscription in 2018, allowing customers to receive a curated selection of baked goods each week. This led to high customer retention, increased order volume, and better stock management.

  
  

• Feuillette, a traditional bakery, adopted a hospitality model in 2015, inspired by hotels and cafés. They created comfortable dine-in spaces with table service, significantly enhancing the customer experience and driving additional sales of drinks and pastries.

  
  

• Kilo Shop, a vintage clothing store, innovated in 2012 by introducing a weight-based pricing sales model inspired by the fresh produce industry. Customers select clothes, weigh them, and pay based on the total weight. This boosted brand visibility and helped Kilo Shop expand in France and Belgium, attracting environmentally conscious consumers.

These examples prove that even small businesses can offer differentiating services inspired by other industries, allowing them to improve their financial performance by attracting new customers and increasing spending per customer.

Conclusion: A Justified Price for an Increased Perceived Value

In conclusion, don't hesitate to look at what other industries are offering, what is interesting, what is appealing, and how it could be adapted to your business, brand or establishment.

Remember, price is just one part of the equation. As Warren Buffet wrote, "Price is what you pay, Value is what you get." 

Being proactive in pricing strategy is essential to justify prices and strengthen perceived value. By anticipating trends, innovating in services, and clearly communicating pricing decisions, businesses can not only stand out from competitors but also build a sustainable competitive advantage.

If you’d like to explore these strategies further, discuss implementing a differentiated pricing approach, or see how these trends can apply to your business, feel free to contact me. Together, we can explore tailored solutions to help you navigate an ever-evolving market.