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Another challenge
manufacturers face is that
of managing price across
a brand/pack portfolio. An
anonymized analysis from a
soft drinks study illustrates
the example of a portfolio
comprising a variety of
brands and packs. In this
example, the manufacturer
has a portfolio of three
brands. Brand A is sold
in plastic, glass and can
packaging. The plastic
variant is also available in
two options – as single and
multiple packs.
Within the portfolio, each brand
is likely to be under similar
pressure:
- The internal pressures to grow
volume/value sales, increase
market share and be profitable
- Pressure from Retailers to promote
or participate in EDLP (Every Day
Low Pricing)
- Consumer pressure in terms of
demand for VFM (Value For Money).
In such a scenario, price
elasticities can help identify a
price strategy for the portfolio
that will optimise sales/profit, in
a manner that recognizes these
demands.
By observing the reaction to
alterations in the promotional and
regular price elasticities of brands,
a strategic recommendation can be
made.
Taking the example of Brand A, we
can plot four different scenarios that
juxtapose the outcome of changes
in promotional activity and regular
price on sales. (Figure 2)
- When sales change significantly as
Brand A (single/multi-pack, plastic
format) promotes, and change
minimally when the pack changes
regular price, a strategy of high
price and frequent promotions (“Hi – Lo”) is recommended.
- When sales change significantly
as Brand A (multi-pack, can
format) promotes and when the
pack changes regular price, then
one should review brand and
promotion cost structure and
harvest price for profit.
- When sales of Brand A (single
pack, glass format) hardly change
when the pack promotes and
changes regular price, a strategy
of high price and low, or no
promotions (“Hi-No”), will suit the
brand.
- When sales of Brand A (single
pack, can format) hardly change
when pack promotes, but change
significantly with change of regular
price, then a marketing strategy of
EDLP should be adopted.
Drilling down into which
promotions are most
successful for each pack, further differentiations on the
promotional strategies can
be provided within the same
framework. (Figure 3)
For example, take the packs that
respond to promotions:
- Brand A plastic form, multi-packshould use price promotions and
singles should apply multi-buys
(e.g. where you buy one and get
the other at half price).
- Brand A cans, multi-packs should
price promote or offer free volume
(e.g. where two cans are included for
free), but should not use multi-buy.
Figure 2
Figure 3
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