Pricing Strategy for Store Brands

Industry Vertical and the Company:
FMCG Retailer

The Challenge:
Retailers sell, in addition to those from well-known manufacturers, products under their own brands,. These are called Store Brands or Private Labels. Retailers have completed control over their pricing and promotion. However, store brands, with a few exceptions, have a poorer image as compared to large national brands, and have a lower acceptability among customers. This is a major issue for any retailer they stand to earn more store brands.

Our Approach:
We worked on finding ways to increase the market share of store brands without dropping the prices. Therefore, keeping the average price unchanged, we compared two pricing strategies – Hi-Lo and Everyday Low Price (EDLP).These are the most common pricing strategies followed by retailers worldwide.In the first pricing strategy the prices were changed on a weekly basis while for latter strategy the price was kept constant throughout.

Our analysis of customer sentiments showed that if the retailer followed Hi-Lo strategy, constant changing of prices eroded customers’ trust in the retailer as well as in products most closely associated with the company, i.e. the store brands.

The Outcome:
With constant prices under EDLP pricing strategy, retailer was able to increase the acceptance of store brands among customers. This was accomplished while maintain retailer’s profit margin for store brands.

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