Price Point Optimization
A leading consumer goods manufacturer
optimizes pricing into the retail channel
The Company
A $1 billion-plus annual revenue branded trend and gift marketer with a leading national brand. Sells through more than 50,000 locations of major U.S. retailers such as Wal-Mart, Target and K-mart.
The Challenge
The client was facing significant pricing pressure in a major product category. Key retail partners were increasingly demanding lower prices in order to compete with dollar stores and discount chains marketing non-branded alternatives. Concerned that the introduction of lower price points would erode overall revenues as customers replaced more expensive purchases with value product, the client was unsure how to proceed.
In response to this challenge, the client turned to the APT Suite and designed and executed a series of tests, involving a range of prices, promotions, and product placements.
The Solution
The client used the APT Suite to evaluate a range of alternatives:
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Differing price points through varying discount levels;
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Larger-size bundled product offers;
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Discounted promotional offers (e.g., two for one);
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Alternative display space concepts (mix of existing and add-on displays); and
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Alternative product / price mixes achieved through merchandizing.
Using the APT Suite, the client created a targeted distribution plan that selected the optimal price point / placement / offer combination for each door in the network -- a level of optimization not previously possible, and made practical only by the combination of sophisticated algorithms and automated workflow embedded in the APT Suite.
Outputs and charts generated by the APT Suite facilitated the communication of the plan, its logic, and its benefits to the client's retail partners. This greatly facilitated achieving channel buy-in — an essential requirement for success.
Results
Had the client simply responded to channel pressure by providing a lower price product across all
stores, the company would have experienced a revenue loss of over $10M per year. In contrast, the targeted APT Suite-driven strategy is expected to increase annual revenues by as much as $10 million while still meeting the core competitive threats of concerned channel partners (approximately $10-20 million per year in revenue impact).
The work has also helped the client deepen relationships with its retail partners by providing innovative, data-driven strategies for improving their bottom lines.
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