Preventing a damaging price reduction
A South American country management team proposed to increase sales volume on a major spirits brand through a 20% price reduction. The regional team had reservations and asked for an objective expert perspective.
We worked through our defined pricing methodology focusing on consumer, customer and competitor data to assess the immediate and long-term impact of the pricing decision. We undertook a full portfolio review to clarify where all the brands fitted into the competitive environment. A workshop brought together marketing, sales and financial stakeholders to examine the implications.
We concluded that a price reduction would negatively affect brand health in both the short and long term. During the workshop all participants agreed that the reduction should not go ahead. An opportunity was identified to reposition a new brand within the portfolio. The General Manager concluded that the decision not to discount would result in significantly higher profit per annum and prevent long term damage to the brand.
Remember, some decisions that appear beneficial in the near term can have detrimental long term consequences