Global beauty company seeking more profitable pricing

Challenge

This case involved a multi-billion dollar beauty company that manufactured and sold thousands of products in more than 100 countries. Product offerings encompassed beauty, fashion jewelry, and apparel and were marketed through both direct and retail channels. The client felt they had an unfavorable spending mix heavy on promotional discounts and light on brand-building activities. They sought to reverse this trend through higher price realization and rebalancing of promotional vs. brand spending.

Solution

Marketing Analytics provided price and promotion response models using detailed client sales data as well as inputs from government and third party sources. Key inputs included unit sales and revenue by item, # representatives, # brochures distributed, % pages by product, promotion offers, special events, competitive activity, and selected macroeconomic variables. The effort had broad scope, covering thousands of items and more than twenty countries.  

A key finding was that the U.S. product portfolio was more price-sensitive than those of many other countries. In fact, the models indicated these items were more price-sensitive than competitors sold in retail channels. This was attributed to heavy reliance on promotional discounts and fewer brand-building initiatives. Products sold outside the U.S. were somewhat less responsive but still price-elastic (1% price increase causes sales to fall more than 1%).

We recommended that the client reduce discounting on some key lines in the U.S. market while pursuing selected, short-term price increase opportunities internationally. The company acted on those recommendations and has also begun setting price strategies based on our model outputs.