Price Pack Architecture: A Proven Strategy for Sustainable and Profitable Innovation

Executive Summary

Keep Growth in the Crosshairs

Driving growth in today’s low-growth marketplace is challenging, and beefing up the bottom line has become a critical growth strategy.

  • The stability of the consumer packaged goods (CPG) market provides some protection against steep declines during times of market duress, but it also makes finding sizable and sustainable growth more challenging
  • Innovation helps drive growth, but it is not reasonable to rely solely on new products for growth
  • Cost-cutting can only go so far

Giving “Outside-the-Box” Innovation New Meaning Will Drive 2 to 5 Percent Jump in Profit and Increasing Revenues

Margins are under pressure in the face of climbing commodity prices and conservative purchase patterns. Innovation, particularly premium-tier innovation, has been well received, but it is not enough by itself.

  • CPGs must provide consumers what they want, when and where they want it, at a price point that enhances, rather than detracts from, their overall perception of value
  • Price pack innovation, such as bundling or alternative pack sizes, can legitimately drive shopper willingness to pay a higher price point
  • Recent price pack innovations have yielded premiums ranging from 84 percent to more than 200 percent

Disconnects Between Price and Innovation Disciplines Are Threatening Growth Opportunities

Done right, price pack architecture ensures consumers can find a viable selection of products that meet their needs at the price points they are willing to pay, driving portfolio growth and enhancing a brand’s overall value proposition.

  • Consumers’ desires and price sensitivity vary based on many complex factors
  • In today’s world, pricing and innovation are often viewed as completely separate issues and addressed by very different resources
  • To get it right, price and innovation teams must synch up

Framework to Win: Ensuring Price Pack Architecture Success

Maximizing price realization in a way that builds true and sustainable bottom-line growth will require price and innovation disciplines to align against three key principles:

  • Knowing the consumer at a granular level
  • Understanding the full value case
  • Mapping out the path to commercialization

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