Case study : Price pack architecture solution for a leading global

CPG company
Background
Client witnessed an exceptional growth in the first year (March 11). 2012 saw a slowdown with the actual growth of 85% vs. target of
120%. The slowdown was primarily attributed to
Price increase through absolute price increase or pack downsizing
Cannibalization by the launch of more expensive in one of the variant variant
Client was thus planning to develop a new pricing strategy to manage consumer value as well as profitability

Objective
Absolutdata recommended based pack price architecture solution with following objectives to address the business problem
Price Change Impact:
Price sensitivity analysis
Optimal price points for biscuit packs
Estimate gain/loss to biscuit portfolio due to price change
Pack downsizing impact:
Pack size sensitivity analysis
Impact of de-grammage on volume, value and transactions
New pack introduction impact
Estimate the gain/loss to portfolio with new pack introduction
Optimal new pack dynamics (price, pack size, flavor) for introduction
Portfolio Optimization
Build an optimal portfolio

Impact
Devised a new portfolio for client by introducing new packs and modifying the existing ones (in terms of number of cookies and price)
The new portfolio helped to gain market share as well as increase consumption of existing biscuit consumers
Optimal pricing and offering price incentive in larger packs helped boost volume sales

Absolutdata 2014 Proprietary and Confidential

Case study : Absolutdatas price pack architecture solution

Price Pack Architecture is a powerful solution which enables you to create a market advantage through redesigning your product portfolio to fit with market needs

Business Objective

Business Solution

Price Pack Architecture

Technique
Conjoint (choice based conjoint) +
Calibration through Market Mix Modeling

Built a pricing based

strategy to increase
revenues and
profitability of biscuit
portfolio

1. Increase price of the

SKUs
2. Reduce the pack size
for the SKUs with
price constant
3. Introduce a new SKU
in the portfolio

1.

New SKU Introduction Analysis Measures the

impact of new SKU at various price points on
portfolio

2.

Price/Grammage sensitivity Analysis Assess any

leverage points in terms of price and grammage
vis--vis competition brands

3.

Competitive Strategy Impact Analysis Assess the

impact of changes made my competition on the
portfolio

4.

What-if Analysis Conduct what-if analysis

leading to the optimal portfolio such as the impact
of price change vs. pack size and new SKU
introduction

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Case study : Conjoint design - Translating design into a shelf display

Out of the 10 packs that you plan to purchase in the next grocery shopping trips, please distribute them amongst the
following cream biscuits or cookies product options. You can buy more or less than 10 packs if you feel that is what you
would want to do in a given scenario, if the prices and products available seem attractive to you.
Brand 1

Brand 2

Brand 2

Brand 3

Brand 4

Brand 5

Brand 6

Brand 7

Brand 8

Brand 9

Brand 10

Brand 11

Brand 12

Brand 13

Brand 14

Respondents were able to fill in the number of

cookie packs they will buy for each brand

Absolutdata 2014 Proprietary and Confidential

Hovering on a certain
product enlarges the image
and product details (price,
pack size etc)

None: Would reserve these purchases for

another time or at other store

Case study : Sample key findings - Hierarchy of decision making by

the consumers
The hierarchy of decision making for the cream biscuits and cookie category shows that price is not the most
powerful lever to influence the consumers purchase decision

Order of attributes that buyers look at while purchasing a cream/cookie biscuits

Brand & Flavor
Pack Size
Price

Absolutdata 2014 Proprietary and Confidential

Case study : Absolutdata resolution - Calibration of conjoint results

using MMM
Calibration of results was done using actual MMM data. MMM data along with other control
variables was used to build a model and its price elasticity value was used as a reference point
Conjoint analysis, which gave us the flexibility to estimate demand at prices which are currently
not offered in the market were then calibrated
Calibration was done using common price points and getting a calibration factor

Calibrated model

Elasticity derived from conjoint data

Pc1
Pc2
Demand

Pc3

Ps1
Ps2

Ps3

Demand

Elasticity derived from

true sales data

Price

Price

Absolutdata 2014 Proprietary and Confidential

Case study: Sample key findings - Price impact on individual SKU

and biscuit portfolio

Base price

Base price

Vanilla 6 cookie SKU has high price sensitivity as well

as the highest price elasticity in the portfolio

For Vanilla 6 cookie SKU, a decrease in price leads to

gain in transactions and volume share in the portfolio
but does not lead to any gain in revenue share

An SKU level analysis was done in terms of looking at the

impact of price increase decrease on SKU volumes and
revenue.

A portfolio level analysis was done in terms of looking at

the impact on revenue, transaction and volumes of
portfolio due to price change of an SKU

Similarly, grammage elasticity were also analyzed to understand their impact on volume, packs and value. This
enabled us to decide the product attributes that could be altered to get increased volumes/revenue

Absolutdata 2014 Proprietary and Confidential

Case study: What changes needs to done to portfolio?

Current Portfolio
2 cookies

New Scenario

Rs 5

6 cookies Rs 12
12 cookies Rs 25

6 cookies Rs 15

4 cookies

Rs 10
A workshop was conducted
with the client team to try out
different scenarios and to
measure its impact on
portfolio.

12 cookies Rs 30

The portfolio mix with an addition of small pack (4 cookie) in Choco Crme leads to an
overall 6% and 4% growth in volume and revenue respectively of the biscuit portfolio

These scenarios were created

using the excel based simulator
and a recommendation was
made based on feasibility of
the portfolio existence and its
impact on the portfolio

Absolutdata 2014 Proprietary and Confidential

Case study: Using simulator for price sensitivity measurement

analysis
Price Sensitivity
Price elasticity curve for Brand
60%

Demand

50%
40%
30%
20%
10%
0%
Base - 5

Base - 2

Base
Price

Base + 2

Banse + 5

Demand curves helped measure the price sensitivity of different packages

In this case, we could calculate the impact of per unit increase/decrease in the package cost on the preference
shares
This helped client understand the optimum pricing curve/accepted price range

Absolutdata 2014 Proprietary and Confidential

Case study: Impact

Current Portfolio
v
2 cookies
a
n
6 cookies
i
l
l 12 cookies
a
6 cookies

Recommended Portfolio
2 cookies

25

15%

10

10 cookies

10%

20

15 cookies

27

15
6 cookies

12 cookies

Growth due to increased consumption

Growth drawn from competition

5 cookies

12

30

Growth over Current Portfolio

5%

15
0%

15 cookies

30

SKUs in the current portfolio

11%
3%
2%

3%

2%

Packs

Volume

Revenue

SKUs different from the current portfolio

The
recommended
scenario shows
a 14% volume
growth and 5%
revenue
growth over
the current
portfolio

Relatively low
cannibalization
as a significant
proportion of
volume growth
is driven by
increased
consumption

client is doing quite well & did see a significant spike post new pricing, so you guys were quite right !
AVP Marketing

Absolutdata 2014 Proprietary and Confidential