How to determine the optimal pricing and portfolio strategy to drive sales and be competitive
The client’s question
To regain a leading market position, Claudia, our client working at a distributor of razor and blade systems wished to identify opportunities in pricing, promotion, and products to close the gap with her main competitor and (re-)gain volume shares. Her overall objective was to determine the portfolio and pricing strategy that would maximize volume share and sales value for her portfolio. This included testing scenarios in which the following parameters could change:
- Price: What is the optimal system price to encourage people to stay or switch from a competitor brand?
- Promotion: Should promotions be offered on all systems, and what type of promotion should be used?
- New product introduction: Should an addition to entry-level systems be introduced and if so, at what price?
- Overall portfolio composition: What is the optimal portfolio to drive sales and be competitive?
To answer Claudia’s questions, we used Choice Based Conjoint. Consumers go through a series of virtual shopping trips, making trade-offs between different products on screen, which helped us to assess their sensitivities to the different product attributes (brand, product, price, promotion type and depth). Based on these sensitivities, we created a simulation model to predict consumers’ choices in different situations, which allowed us to design the optimal pricing and portfolio strategy.
We were able to provide Claudia with recommendations on how to build her optimal portfolio and pricing strategy, answering questions like: “what if we decrease our prices?”, “what if competition follows?”, and “what if we replace an underperforming product by an upgraded version?”.
By using this more elaborate approach, we provide our clients with insights regarding price elasticity for brands and individual products, what (combination of) promotions has the largest positive impact on shares, and how to build the optimal portfolio to maximize volume or value share in an easy-to-understand story format. Additionally, we provide you with our user-friendly simulator, which allows you to further play with the data and look at every possible scenario within the tested realms.