RMS Academy-Pricing (en)

Pricing Introduction

Welcome

Learning Objectives

This session will teach the importance of price in impacting sales at retail and ensure learners are able to: 

  • Understand volume/value sales relationships to pricing.
  • Analyze pricing measure impact on volume and value sales.

Frequently Asked Questions

Pricing questions include...

  • How is my price positioning against the competition?
  • Is the pricing relationship of the items in my portfolio structured best?
  • Is the price gap to competition affecting my performance? Should I act?
  • Has the change in price affected my performance?
  • How am I performing within specific price segments?

Price Interpretation & Application

Collecting Price Facts

Different collection methodology based on type of trade: 

Price Watch-outs:

  • Price recorded reflects promotions.
  • Analyze lowest level available: Item level vs. Brand Level, Channel or Retailer level vs. Regional or National level, Monthly data vs. Annual data.

Price Facts

Price facts are used to evaluate average retail selling price.

Price per Pack = Value Sales 
                              Unit Sales

Price per Converted Volume = Value Sales 
                                                        Volume Sales

Price Index = Your Price   x 100
                        Competitor's average price

Average Price

Average price can include prices that are similar or prices with a wide variance. 

Price

Definition: Price (as reported in Nielsen RMS) is an average weighted price of all stores selling product.

Following steps demonstrate how Price is calculated in Retail Index databases.

Step 1: Value is calculated  per store using calculation: Value = Volume x Price 

Step 2: Totals are generated. Value and Volume are each summed together across all stores in universe. 

Step 3: Weighted Price is calculated. Weighted price across all stores in the universe = Total Value 
                                                                                                                                                          Total Volume Within the example: Average (weighted) price is 1.24

Price Index

Price Index is ​Your Price as Compared to the Average of the Competitors.

What is the Price Index of Modern Man, using the other items as the Competitive set?

Price Index Calculation = Your Price x 100
                                              Avg. Competitor Price

 


Price Index of Modern Man = 2.10 x 100 = 98
                                                     2.15

                                                         

Modern Man Case Study

Overview

Background:

After several new item introductions in the Men’s Moisturizer category, Modern Modern Man needs to proactively review category and item pricing to evaluate if price changes would help sales of their products.

Objective:

Modern Man must assess how their pricing strategy is impacting sales and if it should be modified to help business.

Consider the following questions:

  • How is Modern Man’s price positioning against competition?
  • How are the respective price segments (tiers) performing?
  • When Modern Man’s price changes how does this impact performance?
  • And when competition’s price changes how does this impact performance?
  • How has the price gap changed over time?

Price per Unit

  • In general Modern Man is priced less than competition.
  • The three lower priced tiers posted strong growth while the high-price tier has declined.
  • The lowest priced tier has the largest contribution to sales.

Price Per Unit allows comparison of price against competition providing answers to:
How is Modern Man’s price positioning against competition? How are the respective price segments (tiers) performing?  
 

Interpretation: 
Products priced between 169-187 make up 54% of Basic Care value sales and have increased in sales 51% vs. year ago. The price tier includes Nature's Potion and other items.

 

 

 

Select the true statements interpreting data from the chart above.

Price Impact to Sales Performance

Price, Distribution and Velocity (SPPD or sales per point of distribution can also be called velocity) can be analysed to understand the relationship they have with product performance. 

These measures answer: When price changes how does this impact performance?

When Modern Man’s price changes does this impact performance? 
Select true/false for each statement. 

 

  1. Price decreased 17% Oct 12 vs Sept 12 resulting in velocity increase of 38%.  
  2. When price increased velocity increased as well.  
  3. During the latest periods price and velocity have been relatively steady.  

Price Impact to Competition

  • April 2013
  • April 2011
  • January 2012
Assessing not only the brand of interest, but competition provides rich details about the cause-effect relationships or price on product performance.
This addresses: When Competitions price changes, how does this impact performance?  

 

Which period should demonstrate the most concern for Modern Man?

Average Price Comparisons

  • Price gap is widening
  • Price is becoming more aligned

A comparison table between competitors provides the ability to assess pricing differences between brands.
Answers question: How has the price gap changed over time? 

How has the price gap changed in the latest periods?

Modern Man Case Study Summary

Executive Summary

Modern Man has a premium price compared to the largest competitor, Nature's Potion. In the latest periods the price gap was widening. Modern Man had the most success increasing velocity when having short price decreases.