HRCP Case Study:
Leveraging an overlooked growth factor: Pricing

Situation

A major over-the-counter drug client had not taken a broad pricing action on the majority of their portfolio for more than eight years. During that time, new products had been launched introducing new list price points, creating inconsistent price/value relationships. Client management believed they did not have pricing leverage and the topic was emotionally charged.

Challenge

Henry Rak Consulting Partners was tasked with proving that pricing leverage existed and providing a cohesive strategy with specific recommendations for near-term and longer-term pricing opportunities. The goal was to drive profitability to reinvest in the business and be the category thought leaders with regard to pricing.

HRCP Advantage

Using our Competitive Frame analysis, brand roles, competitive situation, and business objectives, Henry Rak Consulting Partners developed a comprehensive pricing strategy that:

• Identified pricing leverage by brand to assess the impact of a price increase on the total brand and portfolio, not just the individual SKUs.
• Strategically aligned the brand offerings into consistent price tiers that reflected the price/value relationship to the consumer based on the Competitive Frame and benefits offered, simplifying retail price points and the consumer shopping experience.
• Provided spend back recommendations to protect volume of key growth brands in the portfolio.
• Analyzed the competitive situation to assess existing competitive price relationships and how they would change after a price increase, including the anticipated reaction from branded and private label competitors.
• Created recommendations for optimizing promotional pricing to maximize effectiveness and efficiency after the price increase.
• Quantified the impact of the price increase to assess revenue, profit and volume changes with recommended scenario and alternatives.

Results

HRCP developed a price increase strategy that drove $35MM in revenue and $23MM in profit.

• Identified ways to spend back $12MM against advertising, consumer and trade to protect volume without significantly negatively impacting profitability delivery.
• Simplified the pricing structure by eliminating many different price points to create 4 distinct tiers of pricing based on the product and brand offering value proposition.
• Created consistency between tiers and pack sizes allowing for the execution of 2 promoted brand group bundles that increased effectiveness and efficiencies of promotional activities.
• Provided a game plan that allowed one brand to break a paradigm of low list price, high retail price that created a pathway for generating more volume and revenue.
• Identified upside opportunity of "right sizing" large size products to offer them at a consistent price point that optimized the price/value equation.