Increasing Promo Profitability with Nucleus Scenario Planner
A large household appliance CPG struggled to understand how to manage varying promo prices for their multi-tier flagship product, and when faced with rising costs they were divided on the right price point. Management was pushing an MSRP increase, but the team was afraid they’d miss their sales goals. They didn’t understand the true price elasticity of demand, given the confounding effects of seasonality, ad spend, and word of mouth.
The Product Marketing team for a large household appliance CPG was tasked with evaluating potential MSRP increases to accommodate rising supply chain costs. At the same time, they needed to put together a recommendation for the promo strategy across all major products. This effort took weeks of manpower from resources who were already oversubscribed to evaluate price elasticity and quantify the impact of a small number of scenarios underpinned by best guess assumptions. Not only were they limited by the manpower required to execute, but they were operating at the risk of unintentional bias associated with their assumptions.
Using Nucleus, they not only saw price elasticity by product and retailer, they examined the quantified effect of other sales drivers like seasonality, ads, and Covid, each disentangled from others. The team could finally settle long-standing questions and long-standing bets. They built, compared and iterated on competing promo strategies across multi-generational product platforms that supported their expert opinions. Nucleus allowed them to visualize the performance of each strategy in a comparative view, understand why repeating last year’s strategy was a loser because holiday ads are higher, and push the winning strategy into their operational forecast.
Prices and Promos that Drive Profits
- Gave the team a dynamically updated price elasticity curve for each product family at each retailer, isolated from other effects
- Allowed users to build and automatically compare pricing scenarios that consider cost and revenue, decreasing hands-on-keyboard time by 43%
- Confidently executed an MSRP increase based on scenario analysis that increased total gross margins by 16%