Price Promotion Optimization

Price Promotion Optimization

BA_Pricing_Solution_500x281.jpgWhat we do

Since pricing is one of the key marketing levers for almost all brands, Management Science Associates, Inc. (MSA) works with clients to help them better understand the effects of different price promotion strategies on brand sales.  These studies typically focus on multiple geographical levels: nationwide, by region, by state, by county, etc.  The resulting analysis leads to the implementation of optimal price promo strategies that maximize sales. 
 

How we do it

MSA implements a three-phased approach to achieve clients’ promotional pricing goals:

  • Phase 1: Develop price elasticity models to measure a brand’s sensitivity to changes in price at various geographical levels.  These models determine which geographic areas are more sensitive to price changes.  They also help gauge future sales impacts to significant price changes.
  • Phase 2: Develop price threshold models to understand at which prices do significant sales volume changes occur.  In addition, there is distinction made between Base price elasticity (i.e., longer-term pricing impact) and Promoted price elasticity, which pertains to the impact of temporary price reductions.
  • Phase 3: Using the Phase 2 price threshold elasticities, develop an optimization model to determine the most efficient spend (maximized volume while minimizing spend).  Optimization is determined by using a simulation tool that MSA has created which applies this model by calculating the expected brand volume impacts of different discounted price values.  Typical final output is optimal promotional price points for various geographical levels: nationwide, by region, by state, by county, etc.


What data is required?

This methodology uses POS Retail data. 
For more information, contact Joe Reddy (jreddy@msa.com), Vice President http://www.msa.com/getattachment/ba/Solutions/Retail-Analytics/Reddy_Joe_100px.jpg