In consumer goods, the pet category can often be impervious to macroeconomic events that cause consumers to tighten their wallets.
This sentiment proved true during the pandemic when, despite economic and supply chain turmoil, the pet supplies and food categories boomed. The U.S. Bureau of Labor Statistics reported that the pet category saw more than $100 billion in spending in 2021, well above the sales of alcohol.
However, after a long period of inflation over the last few years, pet owners now want lower prices in the category, reducing how much they spend on pet food, treats and toys.
So how can pet brands meet pricing demands and maintain profits? Predictive analytics can assist brands with developing long-term pricing strategies.
Buying Pet Products Adds Financial Stress
A USA Today study found that more than a quarter of dog owners are spending almost $250 a month on their animal. The study added that a 25% rise in the price of pet food and an 11% rise in the cost of vet care is causing concern among consumers.
A similar study looking at all pet owners finds the average American spends nearly $1,200 annually on pet food and $828 on vet bills. The study adds that a third of pet owners buy more products for their pets than for themselves.
The desire to spend more on pets may partially be due to their humanization. With the growth of remote work, pets are around the family more often, and they are subsequently seen as a part of the family to a much larger degree. This enhanced relationship – alongside a rise in ecommerce shopping – inspires further spending. It is all too easy to come across a new toy for the furry family member and add it to a virtual cart.
That said, according to the same study above, 43% of pet owners say they’re experiencing financial stress in the pet category. There’s no doubt that dogs, cats, lizards, birds — all pets! — keep consumers happy, but economic times are dampening the mood.
As for shopping behavior shifts, pet owners are exploring new strategies to reduce their overall spend. Two popular tactics include:
- Trading down from premium foods to more value-based or private-label brands.
- Buying fewer pet toys, treats and items for pet entertainment.
To maintain growth when pet owners are looking to save money, pet brands can leverage AI and predictive analytics to identify precise tactics that will optimize pricing, pinpoint successful promotions, refine assortments and maximize revenue.
Enhancing Pet Pricing and Promotions With AI
There are many ways pet brands can leverage advanced analytics to construct forward-looking strategies for their product lines — and to do so at a granular, store-by-store level.
The benefit of AI is that it enables models to read through a range of data, from product sales to macroeconomic insights, and automate strategic recommendations. Without the technology, brand teams wade through historical data and spreadsheets to make an educated guess on how to manage pricing and assortment decisions.
Looking at trends in the pet category specifically, here are a few examples of where brands can leverage AI to elevate decision making:
Identify price-sensitive items inside the portfolio. Consider a dog food brand that needs to reduce prices to keep its loyal consumers happy. That dog food brand can start by learning which formulations inside its lineup would benefit most from a price drop and at which stores. For instance, AI models leverage retailer sales, shopper data and trends in ingredient costs that help spot products that will underperform unless they go on sale. At the same time, AI helps identify products that consumers will buy no matter the cost.
Test the impacts of price drops. Brands should be testing endless scenarios until they see the results they think are best for their brand and retailer partner. A cat treats brand can evaluate how a high-priced cat treat might perform during tight times. The AI can review multiple pricing scenarios to see how specific pricing changes could impact the business tomorrow, next week, next month and beyond. The data shows how changes impact profits at a store level, too, arming the cat treat company with granular data to fully optimize profits. Ultimately, AI helps pet brands make decisions on specific products at the store level with ease, and it can quantify – in dollars and volumes – exactly how demand will shift as a result of pricing changes.
Build smarter promotions. Just as a pet brand can run scenarios on prices, brands can run several scenarios to see how certain promotions might impact sales. A dog and cat accessories brand can test not only certain types of promotions, like “buy one get one free,” but also can see which type of marketing promotion will resonate most over time with price-sensitive consumers. Maybe the ideal marketing is a buy-one-get-one offer in a digital ad, or maybe it’s a 25% off coupon in a local, printed circular. AI can identify which strategies are most effective for brand teams during these tough times.
Save valuable time. The analyses above once required days or even weeks to complete and act upon. Now, with AI, brand teams can execute planning tasks in just minutes or hours, freeing up time to tackle more strategic companywide initiatives.
Perfecting pricing strategies doesn’t just benefit a brand. These data-backed insights can be delivered to a pet brand’s retailer partner and elevate that relationship. Pet stores are looking to lower prices in the best way possible; pet partners that bring them insight-rich promotions and pricing strategies will stand out and be considered invaluable partners long term.
Pet Brands Have Work To Do on Price
Pet owners love their pets, but they shouldn’t have to break the bank to care for them.
Brands that leverage predictive analytics and machine learning to refine pricing can win over consumers while maintaining growth. AI supports brand teams and their analysts by recommending pricing and promotions that work down to a store level, by item, by day, week and month.
Pricing strategies can be optimized going forward, too, not just as a stopgap during tough economic times. Advanced analytics can guide decisions and strengthen relationships with pet stores and pet owners.
Philip Freehling, formerly VP of Merchandising for Walmart’s pet business and now advisory council member at Insite AI, spent nearly 30 years at Walmart in various prominent leadership roles. Freehling has experience across operations, pricing, planning, modular development and sourcing in health and wellness, sporting goods, pets and more.
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