Abbott Case: How Price Monitoring Helps Sell Products with a Long Planning Horizon
Learn how price and availability monitoring helps Abbott Nutrition's division to work effectively in a long planning corridor from an interview with the company's E-commerce Head, Denis Boldyrev.
About the Company
Abbott is a company that sells innovative products — diagnostic equipment, medical devices, medicine and baby food that help maintain heart health, eat right at all stages of life, increase mobility and improve a person’s well-being.
The company employs 109,000 people and has operations in more than 160 countries around the world.
The company employs 109,000 people and has operations in more than 160 countries around the world.
The company was founded in 1888 by doctor and pharmacy owner Dr. Wallace Abbott. He put the “innovation gene” into this company by applying a scientific approach to the production of drugs with precisely adjusted dosages to increase the effectiveness of patient therapy. Over the subsequent years of the company's existence, its employees have developed many revolutionary technologies and products in the field of health and nutrition.
One of the company's business units produces baby food. Everyone who has children, of course, knows the brands Similac® and PediaSure®, but not everyone knows that Abbott is the company behind them.
One of the company's business units produces baby food. Everyone who has children, of course, knows the brands Similac® and PediaSure®, but not everyone knows that Abbott is the company behind them.
How price and availability monitoring helps Abbott Nutrition's division to work effectively in a long planning corridor. We talked with the company's E-commerce Head, Denis Boldyrev.
Pricing strategy
The peculiarity of the business is that the entire product line is produced in Europe and America. And this leads to the fact that the operational and logistics processes of commercial divisions based in other countries require rather long planning horizons.
The pricing strategy of Abbott Nutrition's e-commerce division is based on several fundamental points:
1. Pricing is based on the cost of production of a physical product and its logistics. Therefore, the price depends more on the logistics and raw materials market conditions than on the demand for the final product.
2. The product is not sold to end customers, but to business. Retailers themselves set the final shelf price based on the manufacturer's recommendations and their business goals in the form of profitability, turnover and other things.
3. Selling prices for selling customers are based on a channel strategy with an understanding of the business goals in each channel. This strategy depends on long-term agreements reached in the framework of negotiations and fixed in annual contracts with B2B clients.
The pricing strategy of Abbott Nutrition's e-commerce division is based on several fundamental points:
1. Pricing is based on the cost of production of a physical product and its logistics. Therefore, the price depends more on the logistics and raw materials market conditions than on the demand for the final product.
2. The product is not sold to end customers, but to business. Retailers themselves set the final shelf price based on the manufacturer's recommendations and their business goals in the form of profitability, turnover and other things.
3. Selling prices for selling customers are based on a channel strategy with an understanding of the business goals in each channel. This strategy depends on long-term agreements reached in the framework of negotiations and fixed in annual contracts with B2B clients.
Denis Boldyrev:
"Our pricing system is based on cost and marginality. We cannot afford to work at a loss simply because prices for raw materials, logistics and production have increased. If it becomes more expensive for us to produce a product and ship it online, we revise our pricing policy."
"Our pricing system is based on cost and marginality. We cannot afford to work at a loss simply because prices for raw materials, logistics and production have increased. If it becomes more expensive for us to produce a product and ship it online, we revise our pricing policy."
There are three main factors influencing the pricing of Abbott Nutrition's e-commerce division:
1.Exchange rate
Since all of the company's production facilities are located in Europe and America, an increase in the exchange rate affects the growth of the cost of production for other countries' markets.
2. Cost of raw materials
If there are any changes in the cost of raw materials, this also has a strong impact on the final price of the product.
3. The cost of logistics
Over the past two years, prices for logistics services have been in constant tangible growth.
1.Exchange rate
Since all of the company's production facilities are located in Europe and America, an increase in the exchange rate affects the growth of the cost of production for other countries' markets.
2. Cost of raw materials
If there are any changes in the cost of raw materials, this also has a strong impact on the final price of the product.
3. The cost of logistics
Over the past two years, prices for logistics services have been in constant tangible growth.
Denis Boldyrev:
"Since the market is currently turbulent, there is a constant increase in the cost of raw materials and logistics expenses, prices have to be revised 1-2 times a year."
"Since the market is currently turbulent, there is a constant increase in the cost of raw materials and logistics expenses, prices have to be revised 1-2 times a year."
Abbott Nutrition product sales structure and data sources for planning
Abbott Nutrition product sales structure and data sources for planning
The company's business unit does not have its own online store. The products are sold through a network of distributors and large customers (federal networks). Abbott Nutrition baby food brands are represented on large marketplaces and online retailers. Through them, the company sells its products to end customers.
Denis Boldyrev:
"We need to know how much product we’ll need to maintain production for at least three months, ideally – for five to six months."
"We need to know how much product we’ll need to maintain production for at least three months, ideally – for five to six months."
In order to carry out the planning correctly, three data sources are used in the division:
1. Data provided by retail-customers.
2. Manual monitoring, when employees simply visit customer sites and collect the necessary information.
3. Monitoring using a technical solution.
1. Data provided by retail-customers.
2. Manual monitoring, when employees simply visit customer sites and collect the necessary information.
3. Monitoring using a technical solution.
Denis Boldyrev:
"In order to ensure the uninterrupted availability of the product for our customers, it is necessary to understand what place our product occupies on the shelf in e-commerce.
To do this, we need different data sources. We combine them because each of our clients has its own specifics.
If we talk specifically about monitoring, and not receiving data from the client, then automation allows you to significantly save resources and provides better accuracy, removing the usual human factor entirely. Therefore, for 40% of our tasks, the optimal method of collecting information is an automated solution."
"In order to ensure the uninterrupted availability of the product for our customers, it is necessary to understand what place our product occupies on the shelf in e-commerce.
To do this, we need different data sources. We combine them because each of our clients has its own specifics.
If we talk specifically about monitoring, and not receiving data from the client, then automation allows you to significantly save resources and provides better accuracy, removing the usual human factor entirely. Therefore, for 40% of our tasks, the optimal method of collecting information is an automated solution."
How a Price Monitoring Service was Chosen
Denis joined the company about a year ago.
Denis Boldyrev:
"At the time of my joining the company, the team already knew about Priceva. This service was recommended by one of our business partners who has already had experience using it.
For verification purposes, we designed a test cabinet in order to obtain a small part of the data that was needed. And once we realized we needed even more data, we started looking for someone who could help us see the whole situation on the shelves of online retail."
"At the time of my joining the company, the team already knew about Priceva. This service was recommended by one of our business partners who has already had experience using it.
For verification purposes, we designed a test cabinet in order to obtain a small part of the data that was needed. And once we realized we needed even more data, we started looking for someone who could help us see the whole situation on the shelves of online retail."
In June 2021, a selection process was organized for a suitable contractor who could provide automated monitoring that meets all the requests of the division.
The candidates were chosen in a classic manner. Denis, as an experienced professional who has been working in the market for a long time, was aware of the pool of possible applicants who can provide such a service. Each company from the list of potential contractors was sent a request to provide us with the terms of reference.
The winner was chosen based on the following parameters:
1. How extensively they met the company's data collection needs. It was necessary to find out which of the applicants can only partially cover our needs, and who has the capacity to do it to the fullest.
2. Cost. A universal business approach – the search for the optimal balance of quality and price.
3. Speed and flexibility. Is the supplier ready to flexibly adapt to the needs of the company and how quickly they are ready to respond.
Initially, about 10 companies participated in the pitch. Each one was assessed according to how they handled the technical task. Several companies that passed the initial trial were then given demo access to personal accounts.
Although other solutions were also initially considered, in the end, the Priceva service managed to outperform the other competitors in all three parameters. And as it turned out, just at that moment Priceva expanded its functionality, supplementing it with assortment analysis.
In order to finally make sure that the capabilities the Priceva service claimed to have were based in reality, a demo project was launched.
The trial period was needed to test the contractor’s:
The candidates were chosen in a classic manner. Denis, as an experienced professional who has been working in the market for a long time, was aware of the pool of possible applicants who can provide such a service. Each company from the list of potential contractors was sent a request to provide us with the terms of reference.
The winner was chosen based on the following parameters:
1. How extensively they met the company's data collection needs. It was necessary to find out which of the applicants can only partially cover our needs, and who has the capacity to do it to the fullest.
2. Cost. A universal business approach – the search for the optimal balance of quality and price.
3. Speed and flexibility. Is the supplier ready to flexibly adapt to the needs of the company and how quickly they are ready to respond.
Initially, about 10 companies participated in the pitch. Each one was assessed according to how they handled the technical task. Several companies that passed the initial trial were then given demo access to personal accounts.
Although other solutions were also initially considered, in the end, the Priceva service managed to outperform the other competitors in all three parameters. And as it turned out, just at that moment Priceva expanded its functionality, supplementing it with assortment analysis.
In order to finally make sure that the capabilities the Priceva service claimed to have were based in reality, a demo project was launched.
The trial period was needed to test the contractor’s:
- level of interaction;
- reaction speed;
- the quality of the data provided.
Denis Boldyrev:
"The pilot was designed for three months. We didn't have enough time, so we extended it to five months. In November 2021, I made the final decision that the service suits us, and we switched to a permanent operation mode."
"The pilot was designed for three months. We didn't have enough time, so we extended it to five months. In November 2021, I made the final decision that the service suits us, and we switched to a permanent operation mode."
How the Service was Launched
The setup of the project took about three weeks in total. There were no technical difficulties in the launch process, but there were still communication troubles at the start.
Denis Boldyrev:
"The only difficulty we faced when launching the project was to teach the service provider to think using business indicators instead of technical solutions.
To be honest, as a customer, I don't care at all how exactly the data is collected — by a robot, by a human, or just out of thin air or whatever. What I care about are the business aspects:
1. How reliable is this data?
2. To what extent does this data meet our business objectives?
And at these moments, at the start, there were some rough edges in the dialogue between us as a buyer and Priceva as a service provider. At first, our account manager and I spoke in different languages. I explained our business needs, and they answered me in technical terms. This difference in approaches was a bump at first. But during the trial period, we figured out how to get our points across to each other.
While working on setting up the service, we explained what our business process looks like, what we then do with this data, and why we formulate our task the way we do. We discussed why a specific technical solution is not important to us and why we need data in some specific form, and also how we plan to continue using it.
As a result, the manager was able to understand the task correctly, and the Priceva team was able to implement it in the right way and deliver the expected result."
"The only difficulty we faced when launching the project was to teach the service provider to think using business indicators instead of technical solutions.
To be honest, as a customer, I don't care at all how exactly the data is collected — by a robot, by a human, or just out of thin air or whatever. What I care about are the business aspects:
1. How reliable is this data?
2. To what extent does this data meet our business objectives?
And at these moments, at the start, there were some rough edges in the dialogue between us as a buyer and Priceva as a service provider. At first, our account manager and I spoke in different languages. I explained our business needs, and they answered me in technical terms. This difference in approaches was a bump at first. But during the trial period, we figured out how to get our points across to each other.
While working on setting up the service, we explained what our business process looks like, what we then do with this data, and why we formulate our task the way we do. We discussed why a specific technical solution is not important to us and why we need data in some specific form, and also how we plan to continue using it.
As a result, the manager was able to understand the task correctly, and the Priceva team was able to implement it in the right way and deliver the expected result."
What Services does Priceva Provide
At the moment, they are price monitoring and assortment analysis.
Currently, they are monitoring the prices of the entire baby food lineup, as well as analog products of our key competitors. The assortment analysis uses data on availability and prices.
Currently, they are monitoring the prices of the entire baby food lineup, as well as analog products of our key competitors. The assortment analysis uses data on availability and prices.
Denis Boldyrev:
"In fact, the Priceva service provides lots of data. But the key task of the business is not to receive data, but to use it correctly. It is important to us how this data affects daily, weekly and monthly decisions.
And despite the fact that there is a lot of data in the assortment analysis, we are still actively using only two blocks: availability and prices. These are two key parameters that are critical for us. We’re still learning how to properly handle the rest of the data."
"In fact, the Priceva service provides lots of data. But the key task of the business is not to receive data, but to use it correctly. It is important to us how this data affects daily, weekly and monthly decisions.
And despite the fact that there is a lot of data in the assortment analysis, we are still actively using only two blocks: availability and prices. These are two key parameters that are critical for us. We’re still learning how to properly handle the rest of the data."
What is Being Monitored and Where
As for, 50 positions of two brands (Similac® and PediaSure®) are monitored, that is, the entire assortment of baby food.
As well as a number of competitors' positions. The main sites we’re monitoring are marketplaces and huge retail networks.
The main purpose of monitoring is to predict the demand for the division providing services in the field of B2B in order to cover the needs of retail-customers in a timely manner.
As well as a number of competitors' positions. The main sites we’re monitoring are marketplaces and huge retail networks.
The main purpose of monitoring is to predict the demand for the division providing services in the field of B2B in order to cover the needs of retail-customers in a timely manner.
Denis Boldyrev:
"Everything is quite simple here, we monitor the availability of the product on the shelf, and based on this we estimate what sort of order the retailer will place with us next time.
Then we take into account the data obtained with the help of monitoring in the pull and push processes. Since there are situations when a retailer cannot predict their need for a product exactly, and we, taking note of the market signals, can advise them. And, accordingly, we initiate the process of purchasing the product."
"Everything is quite simple here, we monitor the availability of the product on the shelf, and based on this we estimate what sort of order the retailer will place with us next time.
Then we take into account the data obtained with the help of monitoring in the pull and push processes. Since there are situations when a retailer cannot predict their need for a product exactly, and we, taking note of the market signals, can advise them. And, accordingly, we initiate the process of purchasing the product."
Push strategy is a method of promoting a product to the end consumer, in which the responsibility for the implementation falls entirely on the shoulders of the intermediary.
Pull strategy is a method of product promotion when a company delivers its message directly to the end user through advertising and brand promotion.
The company cannot manage prices on the market, it is prohibited by law. But it forms an understanding of what prices can be considered optimal from the point of view of brand positioning. And it recommends these prices to its clients.
Who Uses the Priceva service and How
At the moment, six division employees use the price and availability monitoring service. Basically, these are managers that work with key clients. They need this data most of all. Also, the information of the service is used by marketers when they want to see some operational data.
And of course, it is used by the person who brought in Priceva , the head of the e-commerce division of the company, Denis Boldyrev.
Price monitoring is carried out once a week. There’s no point to look for fresh figures every day, the market is not so volatile. A weekly cross-section of the market situation allows the commercial division to stay on top of things and make accurate forecasts.
And of course, it is used by the person who brought in Priceva , the head of the e-commerce division of the company, Denis Boldyrev.
Price monitoring is carried out once a week. There’s no point to look for fresh figures every day, the market is not so volatile. A weekly cross-section of the market situation allows the commercial division to stay on top of things and make accurate forecasts.
The Role of the Priceva service in the Business Processes of the Division
Priceva helps study the entire supply chain to see and predict the necessary actions in advance.
Denis Boldyrev:
"Priceva is our eyes. We use this service to assess the e-commerce market. It is important for us to see prices, to find connections in how these prices are set, and how they shape the market. This data helps us make informed business decisions."
"Priceva is our eyes. We use this service to assess the e-commerce market. It is important for us to see prices, to find connections in how these prices are set, and how they shape the market. This data helps us make informed business decisions."
Potential for Project Development
When we asked Denis: "What potential do you see in the development of demand analysis and forecasting? And what else can the service be used for," his was his answer:
"The question is not how much data we collect, the question is how to use this data correctly.
I see that the potential no longer lies in collecting as much data as possible, but in how deeply, correctly and accurately we can manage the data we receive and use it in making daily decisions. But this is a separate business task.
At the moment we are thinking about API integration, this is probably our next step. Our mission is to automate the moment of unloading and integrating data from various sources into internal systems and finally get rid of manual tasks."
"The question is not how much data we collect, the question is how to use this data correctly.
- Firstly, there is a need to visualize the data that already exists. The possibility of creating dashboards more flexibly.
- Secondly, the question is how to download this data more efficiently from the platform and further consolidate it so that it can then be properly given to cross-departments for subsequent analysis.
- Thirdly, how to organically consolidate and integrate data from the service with data from other sources and systems.
I see that the potential no longer lies in collecting as much data as possible, but in how deeply, correctly and accurately we can manage the data we receive and use it in making daily decisions. But this is a separate business task.
At the moment we are thinking about API integration, this is probably our next step. Our mission is to automate the moment of unloading and integrating data from various sources into internal systems and finally get rid of manual tasks."
Conclusion
Informed business decisions are made based on accurate, up-to-date and reliable data. And in order for your company to be able to receive this data, it is necessary to choose the optimal tool for obtaining reliable information.
The Abbott Nutrition e-commerce team found such a tool. As a result of the activities of the Priceva service, it managed to increase sales by 3-6% due to a quick and accurate response to the situation with the availability of the product on the shelf of online retailers.
The Abbott Nutrition e-commerce team found such a tool. As a result of the activities of the Priceva service, it managed to increase sales by 3-6% due to a quick and accurate response to the situation with the availability of the product on the shelf of online retailers.
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