How to Optimize Your Brand Price Architecture

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An effective brand price architecture is important in the FMCG industry because it can help companies appeal to a wider range of consumers and increase sales. By offering products at different price points, companies can target consumers with different budgets and preferences. It can also help companies to differentiate their products and avoid cannibalizing their own sales by offering too many similar products at similar price points.

But what does it really mean? And much more importantly, what happens when one tries to “appeal to a wider range of consumers and increase sales”?

Can appealing to wide range really drive sales? Is the solution to the constant need of getting higher and higher volumes a wide / vast portfolio? In our humble opinion — no it isn’t. And this is where a proper application of Brand Price Architecture comes in, especially for the FMCG industry.

Firstly, it is not always good to want to win in all price bands. I really can’t think of any FCMG Brand that plays across Super Premium / Premium / Value for Money / Affordable and Cheap. Secondly, having a vast range of flavours, pack sizes, etc. do not necessarily drive Incremental Volumes. Yet, a walk down any Supermarket aisle will show you a plethora of examples of brands wanting to “appeal to a wider range of consumers and increase sales”.

To add muscle to our argument, let us give an example of a FMCG Category that has always been a particular favourite of ours when we think of Brand Price Architecture. It is the Carbonated Soft Drinks Category. You will find a limited number of flavours and SKUs. Yes, they also introduce limited time launches — but this is done after careful consideration to drive excitement in an already established category. The Price variation for the same product is truly astonishing — simply take all the SKUs and calculate the Average Price Per Unit and you will be amazed. The much sought for Premiumization is achieved then and there!

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So, the next time there is a discussion on adding more sub-variants to “appeal to a wider range of consumers and increase sales”, ask one simple question — Will this bring Incremental Buyers? If yes, go ahead. If not, we suggest you proceed with caution.

If you found this interesting, please do reach out to us to see how we can help you drive data driven business growth.

  1. Understand Your Market and Audience: Before diving into pricing strategies, it’s crucial to thoroughly understand your target market and audience preferences. Conduct market research to gather insights into consumer behavior, competitor pricing, and industry trends. Identify your target demographic’s willingness to pay and their perception of value associated with your brand.
  2. Segment Your Product Portfolio: Not all products are created equal, and each may cater to different consumer segments. Segment your product portfolio based on factors such as functionality, quality, and target audience. This allows you to adopt a tailored pricing approach for each product category, maximizing revenue potential while catering to diverse consumer needs.
  3. Implement Value-Based Pricing: Value-based pricing revolves around aligning your prices with the perceived value of your products or services in the eyes of the consumer. Instead of solely focusing on production costs, consider factors such as brand reputation, product uniqueness, and customer benefits. Highlighting the value proposition through effective marketing messaging can justify premium pricing and enhance customer willingness to pay.
  4. Utilize Pricing Tiers and Bundling: Offering multiple pricing tiers or bundles provides consumers with options that cater to varying needs and budgets. This strategy allows you to capture a wider range of customers while encouraging upselling and cross-selling opportunities. Ensure that each tier or bundle offers clear differentiation in features or benefits to justify price discrepancies effectively.
  5. Monitor and Adjust Pricing Dynamically: The pricing landscape is dynamic, influenced by factors such as market demand, competitor actions, and economic conditions. Implementing dynamic pricing strategies, supported by data analytics and pricing optimization tools, enables you to adapt swiftly to changing market dynamics. Regularly monitor key performance indicators and consumer feedback to fine-tune your pricing strategies for optimal results.
  6. Communicate Transparently: Transparency builds trust and credibility with consumers. Clearly communicate your pricing rationale and any changes to your pricing strategy. Provide transparent information regarding product value, pricing tiers, and any discounts or promotions. Transparency fosters positive consumer perceptions and reduces the likelihood of price-related objections or dissatisfaction.
  7. Continuously Innovate and Experiment: The pursuit of optimization is an ongoing process. Embrace a culture of innovation and experimentation within your organization to uncover new pricing strategies and opportunities. Test different pricing models, promotional tactics, and product configurations to gauge their effectiveness. Analyze results and iterate accordingly to stay ahead of the competition and meet evolving consumer expectations.

In conclusion, optimizing your brand price architecture requires a strategic approach that considers market dynamics, consumer preferences, and value perception. By segmenting your product portfolio, embracing value-based pricing, and leveraging dynamic pricing strategies, you can enhance your brand’s competitiveness and profitability. Transparent communication and a commitment to continuous innovation are key pillars in achieving long-term success in price optimization. Embrace these principles, and empower your brand to thrive in today’s dynamic marketplace.

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