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and tools must be leveraged across all five . As brands settle into the ‘ new normal ’ of significantly higher shelf prices , there are unanswered questions about current pricing and if it ’ s the right price point to optimize sales and profit . There are three main RGM levers to help with strategic pricing , including a pricing landscape assessment , consumer willingness to pay research , and price elasticity modeling . It ’ s imperative that brands understand what has happened with their pricing in the past few years . Just because a certain price increase was passed to the retailer doesn ’ t mean that it was reflected at shelf . Some brands have found that while they may not have implemented a price increase , the retailer increased shelf prices when category competition moved first . Others see higher or lower than expected price increases at shelf .
To make the analysis more manageable , we recommend focusing on the top ten retailers that make up 85 percent of your trade dollars . Once you understand your pricing , price gaps to competition , and your performance at each of these retailers , then you can conduct consumer research around willingness to pay . We recommend leveraging AI / ML in your pricing research to combine the three main techniques : Gabor Granger , Van Westendorp , and Newton Miller Smith . Once the consumer answers the iterative series of questions , the output consists of optimal price / quantity revenue curves to help understand psychological price cliffs and price levels where a brand would see various levels of unit declines .
Understanding the pricing landscape
We conducted a study for a premium brand concerned about their price gap with competition . They needed to increase prices to account for significant raw material cost increases but didn ’ t know how the consumer would react . Their ‘ willingness to pay ’ study showed that a line price increase would not be the best strategy . Instead , it was better to increase the smaller item and hold the larger item flat . On the left , the smaller priced item had plenty of room to increase price in the
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