Our client is an FMCG major that sells its products across many large and small retailers. The client is facing pressure from one such large retailer to cut prices across brands and categories. The client is therefore losing money on several products. Our client would like to use analytics to bring in some science into the pricing decision. Our analysis should help the client decide what pricing strategies should be applied to each product. How would you approach this analysis? The data available is weekly price and volume data for all client brands at the retailer for a period of 2 years.

1. Transaction pricing in a
recessionary economy
Submitted by -
Deepankar Boro

2. Contents
 Problem Statement
 Available Data
 Retailer’s point of view
 Logical Assumptions made
 Category Analysis
 Brand Analysis
 Pricing Strategy
 Suggestions
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3. Problem Statement
Our client is an FMCG major that sells its products
across many large and small retailers. The client is
facing pressure from one such large retailer to cut
prices across brands and categories. The client is
therefore losing money on several products. Our
client would like to use analytics to bring in some
science into the pricing decision. Our analysis should
help the client decide what pricing strategies should
be applied to each product.
3

4. Available Data
Weekly Price and Volume data for all client brands
for a period of 2 years, i.e. weekly price and volume
data of all FMCG vendors supplying to the retailer
4

5. Retailer’s point of view
 Scenario 1 – Client Product Demand/Pricing Related
 Is the demand for client’s products low?
 Are the price of client’s products higher than other
competitor products?
 Scenario II – Product Category Demand/Pricing
Related
 Is the demand for particular categories low?
 Scenario III - Client’s competition related
 Are there other competitors offering better pricing
and promotions than the client’s products?
 Is the retailer cutting price cut for client’s
competitor products?5

6. Retailer’s point of view
 Scenario IV – Retailer’s competition related
 Is the retailer facing competition from other nearby
retailers and thereby losing sales?
 One-off situations/environmental factors
 Is there any ongoing festivities, for which the
retailer wants to offer discounts to consumers?
 Is the retailer having huge inventory of the client’s
products?
 Is the retailer having promotional events at its
outlet/outlets?
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7. Logical Assumptions made
 Client Product Overall Demand
 The client has an overall positive growth in a recessionary
economy
 The client has positive sales via other retailers in the same
regions/districts where the current retailer operates
 Sales Via Retailer
 The retailer provides quite a quantifiable chunk of revenues to
the client
 Client‘s products sales via retailer’s outlets has decreased in
one region/district/outlet
 Service Related
 During 2 years, there was no issue associated with transport
logistics for end products from the client
 Retailer is getting better credit terms/policy from competitors
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8. Category Analysis
 For each category with the retailer
 Client’s brands YTD Vs PYTD – Will allow to
analyze the demand fluctuations and growth of the
Client’s brands with the retailer
 Client’s brands YTD Vs PYTD Vs Competitor
brands YTD Vs PYTD – Will allow to analyze the
client’s brands growth/decline with respect to
competitor brands with the retailer
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9. Category Analysis
 For each category of all retailers
 Client’s brands YTD Vs PYTD – Will allow to
analyze the demand fluctuations and growth of the
Client’s brands across all retailers, retailer
growth/decline for each client’s brand
 Client’s brands YTD Vs PYTD Vs Competitor
brands YTD Vs PYTD – Will allow to analyze the
demand fluctuations and growth of Client’s brands
with respect to competitor brands, retailer
growth/decline for each client’s brand with respect
to competitor brands
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10. Category Analysis
 Sort categories according to the Y-O-Y volume
growth
 Revenue growth shouldn’t be considered since in any
category, prices of brands might be increased/decreased
in 2 years and hence, it will not show the actual picture
 For each category, sort the various brands according
to the Y-O-Y volume growth
 The sorting of categories would help us analyze the
fastest growing categories with the retailer
 Analyze the categories which has the client’s brands
and shortlist those categories
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11. Category Analysis
 For each of the shortlisted categories
 Analyze the sales performance of the client’s brands for
YTD and PYTD
 Analyze the margins and revenue achieved by the retailer
for competitor brands
 Certain categories tend to have stagnant sales or
decline sales in a recessionary economy
 The data given to us by the client would help us to
know which categories are growing and which aren’t
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12. Brand Analysis
 Based on the volume data provided to us and the
sorted data of brands and categories, segregate the
client brands according to volume growth(YTD Vs
PYTD)
 Scenario I – Positive volume growth
 Provide customer based promotion activities, instead of a
price cut to increase sales
 Scenario II – Stagnant or negative volume growth
 Analyze competitor brands with positive growth
and pricing, promotion, positioning strategies
implemented by competitor brands. Eg. Aggressive
promotions, shopper marketing activities, price
undercut, new product extension12

13. Brand Analysis
 For brands with declining sales growth, it is
necessary to understand the growth of the category
as well as competitor brands
 If a category growth is negative, the retailer should
focus on all the brands in the category and try to
revive the category by understanding the reason
behind it
 Is it that the category is diminishing only for the retailer or
for all competitor retailers? This would basically allow us
to understand shift in consumer trends from one category
to another
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14. Pricing Strategy
 Before we come up with a pricing strategy for
different categories, its important to understand the
demand and usage frequency of perishable and non-
perishable items. For eg. The frequency of consumer
consumption of items such as Milk, Bread is more
than the frequency of consumer consumption of skin
care items or hair care items
 It is also important to analyze the demand and usage
pattern for different SKUs of the same brands
 Our client might have different brands coming under
the same category and priced differently according
to premium advantage. For eg. Tide and Ariel is
manufactured by P&G, but are priced differently
14

15. Pricing Strategy
 Client’s products would come in any of the quadrants
as shown in the below (sales/volume) matrix
15
High
Margin,
Low
Volume
High
Margin,
High
Volume
Low
Margin,
Low
Volume
Low
Margin,
High
Volume

16. Pricing Strategy
 For each of the client brands, a combination chart
can be plotted having weekly price, weekly sales
volume, and week as its parameters as shown
below. This would allow us to analyze the sales
pattern based on pricing, and the consumer buying
pattern for each of the brands
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0
5
10
15
20
25
0
50
100
150
200
250
300
Week1 Week2 Week3 Week4
Average Price
Volume Sales

17. Pricing Strategy
 The timeline in the combination chart can be further
extended into month, quarter, half-yearly and yearly,
allowing the client to analyze its brands and
consumer consumption pattern in detail as well as in
a broader spectrum
 Based on the sales/volume matrix and the
combination chart, pricing strategies can be decided
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18. Suggestions
 A price cut, would help to drive sales only to a
certain period of time, until the competitor comes up
with their pricing strategy, which ultimately would
create a price war
 A better option to price cut would be to increase the
visibility of consumer brands, through In-Store
activities, POSM (Point of Sale Materials),
promotional activities, etc.
 The retailer could be offered logistic rebate, shelf-
share rebate, brand visibility rebate, POSM rebate,
etc.
 Consumer-oriented promotions could be offered to
benefit the end consumers
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19. Thank You