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Case Studies

Create a pricing strategy that drives sales lift without negative margin impact

Smarter Pricing Strategies Lift Sales

A company desperately needed insight into its customer base. Its pricing strategy was to simply maintain the cheapest prices on its high-selling lines, but had no idea who was buying the products, or why. So they reached out to dunnhumby to find out what customers want, where they want it, and how much they’re willing to pay for it.

The insight

A dunnhumby analysis segmented the customers into three types: price-sensitive, mid-market, and high end. Next they identified the products most important to price-sensitive customers and compared the retailer’s prices to those of its competitors. Overall, the retailer was 4% cheaper than the competition, but dunnhumby wanted to optimize the customers’ price perception.

The action

Based on the customer analysis and subsequent insights, a pricing strategy was devised and tested:

  • Prices were reduced for 61 products that were higher than competition’s (without negatively impacting margin)
  • Changes were implemented in five test stores (out of 31 total stores)
  • Results were measured to compare uplift in trial vs. control and vs. previous year

The results

The pricing strategy had a positive impact on sales:

  • 18% sales uplift (on 61 trial products) on target group (price-sensitive customers)
  • 28% sales uplift (on 61 trial products) on the loyal subset of our target group
  • 3% sales uplift on total basket spend on the loyal subset of the target group