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HomeOur WorkCase StudiesIdentifying the right price point for a new line of premium products increased sales and profit margins

Identifying the right price point for a new line of premium products increased sales and profit margins

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Enabled our client to understand and predict the optimal price point for each premium product in every country where the product was sold

The Business Challenge

This global CPG company had created a new line of products at premium price points within one of their family care categories. They wanted to drive higher profit margins with a minimal loss to sales volume.

However, soon after the new line launched, this client was not experiencing the sales they had expected. They asked Fractal Analytics to help them better understand the price points at which they could encourage consumers to purchase the premium line over their basic product line.

The Solution

Fractal developed a framework by which our client could use data from multiple countries to determine the optimal price to offer their premium product line and drive more sales. Fractal’s framework:

  • Identified the scenarios where a consumer would be likely to purchase a premium product.
  • Determined, through regression modeling, the threshold price point through interactions between the premium vs. base product.
  • Recommended the right price value equation for each product.

The Results

Fractal developed a model by which our client could determine the optimal price to offer their premium product line and drive more sales. The model takes into consideration country-specific consumer behaviors and purchasing decisions.

Insight

The company had not given consumers enough opportunities to purchase the premium products at a similar price point to its basic products, preventing the premium products’ sales from gaining traction.

  • The premium and basic product lines may seem similar to consumers who would be confused about product differences.
  • Typically, the high price of a premium product is a barrier to consumers for trying a new product.

Impact

Our solution enabled this client to predict higher profit margins on their new line of premium products.

Innovation

  • Fractal created a framework, scorecard, and defined step-by-step processes that can be utilized to identify the right pricing strategy for each premium product in every country where it is sold.
  • Although Fractal’s analysis was done using only seven markets, our process can be replicated across all markets where this client operates.