Whatever you do as a brand, the retailers do their own thing. The shelf neighbors do too.
Promotions scramble customer price perception upside down. No surprise that there are no perfect solutions for pricing.
It is a tricky trade-off: If the price is too high you do not sell, if it is too low you do not earn.
You can not control retailers. You can not control competition. What you can control is
1. the recommended retail price,
2. your net price, and
3. the way you nudge retail to make the right price decisions.
Old wisdom says: if you know how consumers respond to a price point, everything else becomes easier. This insight is your Northstar of price management.
Jordi became the new CMO of Gimcat and Gimdog. As the former marketing director of Warsteiner, he knew the pricing game. He realized “we don’t have a clue on how consumers respond to prices”.
This became clear being involved in some new product launches. “Should we use Conjoint?” was the elephant in the room.
With dozens of new products in a handful of markets, Conjoint is not going to be cheap. On top of this, conjoint is not perfect. Jordi listed two key drawbacks: artificial decision situations and an unknown stated-behavior bias. This can jeopardize our launches, he said.
Jordi invited Frank who explained: “Consumers have instant opinions about a price. Always. We use Neuroscience to measure this attitude. It is the underlying driver of the price responses”
Frank showed a case study where they priced SONOS speakers. “Mmm interesting”. Most interesting the costs were much lower than conjoint. Results would be available even in a matter of days.
And indeed, they made sense. The team launched the new products and they sold well. The team even raised the price for a few existing products. The predicted market responses were spot on. The result: +25% revenue by raising prices
Since then Gimcat are using PRICING OPTIMIZER every year. This speaks for itself.
Pricing is hard. Even Supra is not a silver bullet. It takes all the muscles of a marketing leader.
Understanding how consumers respond to prices can become your guiding information. Easiest is to start with your new product launches.
Neuroscience methods claim to unearth the unconscious drivers of price decisions. Supra uses and calibrates them. It uses causal machine learning to optimize for predicting in-market performance.
Let’s assume it works … somehow. What would be the impact on your business?
Let’s assume it can raise your prices by 1% without impact on sales. This alone elevates your profits by 10% (assuming a contribution margin of 10%)
Not only do price increases bring more profit, but even if prices are decreased, profit can be much higher if sales volume overcompensates margin loss.
Is the impact on your business then worth trying PRICING OPTIMIZER?
Let me know what you think!
