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Report: Pricing for penetration | Bain & Company

Pricing has long been one of the most vexing challenges for consumer goods companies.

Many face ballooning trade rates with collapsing ROIs, volatile commodity prices pressuring gross margins, contentious customer negotiations and sticky retail price points. Now, with mounting evidence that household penetration is the most important factor for growing brands, more consumer goods executives are taking a serious new look at their pricing strategies (see below, “Why penetration matters so much”). They know pricing can be used to increase penetration (defined as the percentage of households in a market buying a particular brand in a given year). The trouble is, they often don’t know the best approach—or even where to start.

When executives look internally, they often find an organization that seems to be working against itself. At many companies, the key constituents involved in price decisions rarely share a common view of pricing’s role. Finance wants to increase prices to boost top-line growth or profits—and to cover costs and stay ahead of inflation. Sales wants to win share through discounting to retailers. Marketing wants to rely on prices to build brand loyalty, tap into new occasions or fuel marketing investment. With almost zero alignment on the ultimate pricing objective, it’s no wonder so few executives are satisfied with their pricing efforts. In fact, a Bain & Company study found that only 12% of consumer brands have winning price strategies (see Figure 1).

Get the report here:

Pricing for penetration.

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  1. Pricing News Daily > 9/12/14 : Pricing News | 2014/09/12

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