Price Wars for Snacks

Pricing scenarios in competitive markets
In a market where price competition is fierce, manufacturers need to better understand consumer reactions to falling prices. Our client, a savoury snack manufacturer, wanted to identify the most profitable pricing strategy, and explore scenarios when under price attack as well as initiating aggressive pricing tactics.

Consumer reactions to falling prices
Traditional approaches to pricing research do not fully simulate what happens in price war situations.  Questions arise as to whether one should react to a price attack by lowering the price (and by how much), or whether the brand can sustain the attack at its current price.  Our approach, ‘brand price-decrease scenarios’ was developed specifically to understand how the mind of the consumer works during price wars.

Our client owned a leading brand in a very price sensitive market, where price dealing was a regular market tactic. However, the client was reluctant to fully engage in an all-out price war, as it feared this would undermine its overall brand equity, so we conducted a study for the brand which provided a range of prices for the brand under different scenarios.

Competitor pricing does not always mean price reductions
As a result of our study, the client obtained a better understanding of acceptable price range for its brand, and determined that, under certain competitive price attack scenarios, it was not necessary to respond with price cuts in order to sustain market share.