We were tasked with the development of an analytical model to determine the ideal price for our client’s globally recognized beverage brand.
Brandscapes Brew Insights:
- Hypothesis: We initiated our process with a hypothesis that escalating prices could result in a decrease in market share. However, we believed there existed a pricing spectrum where brands could continue to be profitable, command a premium, and not sacrifice their market share.
- Market Research: We scrutinized historical data from over 30 markets, each with varying levels of economic and category maturity. This examination allowed us to understand how price variations impacted market share performance. Our past work had provided us with the crucial metrics that drove market share.
- Analytical Model: We utilized correlation and factor analysis to craft a model that incorporated a new metric—our client’s brand’s Ability to Charge Premium (ABCP).
- Model Validation: We generated a One Number Score (ONS) for each market and compared these scores over the previous four years. This comparison helped validate our model against past price increases. The model accurately predicted changes in market share based on modifications in the price index and ABCP Score.
Following our analysis, we offered strategic recommendations for managing the client’s brand across markets:
- Right-priced markets: Maintain the existing pricing strategy.
- Overpriced markets: Improve Equity, Execution, or manage price.
- Underpriced markets: We identified a potential for a premium increase.
The ABCP ONS model has since become a critical tool in long-range planning, aligning price with the brand’s inherent performance. Our strategic approach and comprehensive analysis enabled our client to make informed decisions that significantly improved their pricing effectiveness.