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How do you know if you are setting the right prices?

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Price Elasticity study increases total sales in eight different categories

The Business Challenge

It was a puzzling dilemma. Even though these marketing tactics had succeeded in the past, this client had rolled-out and launched multiple large-sized SKUs to complement current products that were not attaining the targeted market share.

The client invited Fractal Analytics to help determine the right pricing strategy for the SKUs across eight different product categories.

The Solution

First, our team of analysts partnered with the client to comprehensively assess and quantify pricing influences for various SKUs. We deployed a range of econometric modeling techniques and competitive analysis to model the effect of relative price on market share.

Using weekly point-of-sale (POS) data by SKUs volume, price and promotions, our scientists analyzed each Health & Beauty category to determine which products drove volume and which were likely being used for price comparisons.

Relative prices were developed for large SKUs versus reference SKUs to model volume and market share, and predictive models assessed structural breaks in pricing and thresholds. With iterations, we found the functional relationship between price and market share to create a means of rationalizing large SKUs.

Drop in vol Share

The Results

Based on Fractal Analytics' recommendation, the client was able to establish the right level of unit price discounts needed to influence shoppers to purchase more expensive large SKUs and increase total sales for these product categories.

Through our insights, the client invested heavily in high growth categories such as cosmetics, hair care, bar/liquid soaps, and shower products.