Pricing Challenges:Today's Economy and the Savvy Shopper
By John Deputato, Senior Vice President, Advanced Analytics

The soft U.S. economy and changes to shopping habits have made the decision to set retail prices not only more difficult, but more strategically critical for both retailers and manufacturers. Shoppers are now more savvy when spending money. They have new ways of gauging the marketplace – they can compare prices on the Internet while at home or while standing in a brick-and-mortar store with their smartphones. We certainly have moved to a time of calculated consumption for shoppers… and price has come to the forefront of the purchase decision.

How important is the right pricing model?

Manufacturers and retailers recognize that setting the right pricing strategy is a competitive advantage in the marketplace. However, in a recent article published in The Journal of Professional Pricing, 73 percent of pricing managers indicated pricing is more difficult today than it was prior to the recession.

Understanding how a product behaves in the marketplace relative to price change can help you realize higher profits. Our Advanced Analytics team uses our point-of-sale, store-level data to determine the actual prices shoppers pay for items, and then determines whether there is a certain price threshold at which your product would lose significant sales volume. Then our specialists devise strategies to help you deal with that change over time.

Realizing higher profits – can you afford not to know?

Determining the elasticity of a product or change in sales due to change in price provides valuable insights and unlocks the answers to long-term profitability.

Price elasticity research reveals the wide range of potential impact on profits depending on your possible pricing decisions. For example, a power brand of $100 million dollars with 40 percent margin decides to take a 10 percent price increase due to the rising costs of manufacturing. That resulting decision can have a profit range: from a positive profit increase of $12 million dollars to a profit loss of $22 million dollars, based on that brand's elasticity.

Are you doing enough to pinpoint the best prices?

Data integration and using multiple data sources as input are not only important – and possible – but recommended. Our Advanced Analytics team has the expertise to work with all sources of data, from NPD information to third-party data, to your own data.

Determining the right pricing approach can be one of the most important and difficult decisions your company makes. Advanced Analytics solutions can help you pinpoint just the right price for your products, working with you to create a framework and pricing process that meet your organization's needs.

For more information about what sets our Advanced Analytics solutions apart, please contact Charles Camaroto at 866-444-1411 or email contactnpd@npd.com.