OPPORTUNITY/ISSUE
Our client needed strategies for smart pricing to improve margins without losing their competitive advantage.
An international hypermarket chain aimed to refine pricing for thousands of products across the Middle East and Africa, affecting over two billion euros in revenue. They sought to enhance margins while keeping their leading price position.
The main issue was balancing higher margins with maintaining a price leadership position. Considering the complexity of pricing in multiple markets, the goal was to maintain customer trust and accommodate diverse shopping behaviors and preferences.
APPROACH/SOLUTION
Working closely with our client we revamped the hypermarket's pricing strategy on a country-by-country basis, including:
- Adjusting existing pricing methods, rules, tools, and software.
- Introducing a six-category product pricing system based on local shopping trends and item comparability.
- Setting specific pricing rules for comparable and non-comparable items, including rounding and distance rules to factor in competition.
- Establishing limits on price adjustments to preserve customer trust and fairness.
The client tested these new strategies using internal data science teams and simulations.
OUTCOME/RESULT
The implementation of these pricing strategies increased net profit margins.
By approx. 3 percentage points, affirming the retailer's status as a price leader, without losing volume or consumers.
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