Strategic Movements – September 2018

Tim J. Smith, PhD
Founder and CEO, Wiglaf Pricing

Published September 29, 2018

Price Hike on Diapers

Procter & Gamble announced price increases for Pampers and Bounty in July 2018. Kimberly-Clark similarly announced price increases for Huggies and Viva in August 2018. Both cite inflationary cost pressures specifically pulp. Monitoring competitive price moves is good business intelligence. Watch out for inflation, 2018.

Price Hike on Chocolate

Hershey Co. announced 2.5% price increases on average in August 2018, citing rising costs. Inflation 2018.

Price Hike on Delivery

United Parcel Service reported higher Q2 2018 revenue driven by higher base pricing and e-commerce demand. Inflation 2018.

Price Hike on Soda

Coca-Cola plans to raise its prices this year, citing rising freight costs and metals (canning) costs. Perhaps with an eye to encourage followership, CEO James Quincey stated, “there is some broad-based push on input costs that have kind of come in, and affect ours and many other industries as well.” Inflation 2018.

Rethinking Airline Wi-Fi

Gogo Inc. and other in-flight Wi-Fi providers are struggling. Too few flight passengers are willing to pay for Wi-Fi to cover the sunken aircraft installation, and fixed operational costs. Results: High debt and no profits. Usage rates have climbed from ~4% in 2012 to ~10% in 2018. Demand growth is likely to continue. For now, investor patience and CEO dexterity in cost control is needed.

Stock Trades Price War Initiated by JP Morgan

JPMorgan offers bank customers at least 100 free stock or exchange-traded-fund trades per year. In the past, they had charged up to $24.95 per online trade. Free is very different than fee. Competitors TD Ameritrade, Schwab, and E*TRADE Financial Corp. will feel price pressures. JPMorgan is moving stock trading from being a profitable business to being part of a larger customer retention and growth strategy. It’s hard to make money when things are free. Was this smart? Need to look at the overall customer profitability to judge.

La-Z-Boy Went to Work

La-Z-boy saw same store sales increase 3.1% alongside price increases in its wholesales segment. Result: earnings for the quarter ending July were up to $18.3 million from 11.7 million a year earlier. Price increases are possible even in competitive industries.

Meat Prices Go Haywire

Retaliatory tariffs on pork and increased capacity should drive prices down. However, increased shipping and freight cost could drive meat prices up. Which one won? Two forces down. One up. Result: Prices are low and Hormel Foods third quarter profit plunged by ~90%. It may not last though. China, which has imposed as high as 70% tariffs on U.S. pork, is at the beginning of an African swine-fever outbreak. If the outbreak grows, large culling of Chinese pigs may alter the political and economic environment. Haywire pricing may get even crazier.

Posted in: Corporate, Pricing
Tagged: ecommerce, Procter & Gamble, tariffs, UPS

About The Author

Tim J. Smith, PhD, is the founder and CEO of Wiglaf Pricing, an Adjunct Professor of Marketing and Economics at DePaul University, and the author of Pricing Done Right (Wiley 2016) and Pricing Strategy (Cengage 2012). At Wiglaf Pricing, Tim leads client engagements. Smith’s popular business book, Pricing Done Right: The Pricing Framework Proven Successful by the World’s Most Profitable Companies, was noted by Dennis Stone, CEO of Overhead Door Corp, as "Essential reading… While many books cover the concepts of pricing, Pricing Done Right goes the additional step of applying the concepts in the real world." Tim’s textbook, Pricing Strategy: Setting Price Levels, Managing Price Discounts, & Establishing Price Structures, has been described by independent reviewers as “the most comprehensive pricing strategy book” on the market. As well as serving as the Academic Advisor to the Professional Pricing Society’s Certified Pricing Professional program, Tim is a member of the American Marketing Association and American Physical Society. He holds a BS in Physics and Chemistry from Southern Methodist University, a BA in Mathematics from Southern Methodist University, a PhD in Physical Chemistry from the University of Chicago, and an MBA with high honors in Strategy and Marketing from the University of Chicago GSB.