The Art and Science of Pricing, ET Retail

5/20/2020 The art and science of pricing - Re-Tales by Anurag Mathur | ET Retail
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The art and science of pricing

Anurag Mathur Dec 04, 2015, 02.09 PM IST
Anurag Mathur
Partner & Leader - Retail & Consumer, PwC
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With extensive competitive pressure and price
transparency, pricing has become the key focus
area for consumer packaged goods (CPG) and
retail companies. As a powerful tool to define
product and brand positioning and as a key
monetising tool, pricing can turn out to be the single
biggest profit lever for CPG and retail
organisations. In fact, the trends catalysing
changes in the retail and consumer goods industry
in India have shown that pricing is the first casualty
in the race to carve out a large slice of the market
share.
Anurag Mathur
Partner & Leader - Retail &
https://retail.economictimes.indiatimes.com/re-tales/the-art-and-science-of-pricing/1070 1/11
Hence, the need of the hour is a comprehensive

pricing strategy which comprises four elements:
a) Infrastructure
b) Operations
c) Analytics Consumer, PwC
d) Strategy
Anurag Mathur has over
15 years of experience in
Infrastructure: It is critical to have excellent Consumer Goods &
systems which include pricing management tools, Retail Industry having
deals management software, and tools for business worked across advisory
services and industry
intelligence and analytics. Further, there is a need
roles with Accenture,
for data systems which can credibly hold PwC and Nestle. He has
transactional data (if possible some tertiary sales Show more..
data for CPG companies), detailed customer data
(a good direct-to-customer strategy can help gather More from Anurag
Mathur
such data), and various market research data.
Delivering competitive
Lastly, a strong operating model, process and advantage and customer
governance around pricing will lay the foundation of loyalty in e-tail
pricing infrastructure. The Pillars of Profitability

in Retail
Future of e- commerce in
Operations: Another important aspect of pricing is emerging markets like
having robust operations, which includes activities India
such as account planning, pricing reviews, contract Direct-to-Consumer: A
management, deal management, trade promotion key strategy for digital
journey
management and strategy, profitability
management, and regulatory and tax effectiveness.
Needless to say, robust operations can help Other Authors
execute a good pricing strategy.
Analytics: In the fast moving consumer goods

(FMCG) segment, chief marketing officers (CMOs)
have been using analytics to develop marketing
strategies. A similar approach can be used in the
case of pricing strategies. The key analytics
activities that can help in developing a pricing
strategy are customer segmentation and pricing
models including price elasticities and cross
elasticities.
Strategy: It’s time to be agile—one should

assesses the current issues, understand the
desired state, and formulate corrective actions such
as pricing models, pricing structure (granularity of
prices, bundling/packaging of products, price

segmentation) and pricing position. It’s a good idea
to start testing the waters with small and effective
pilots and to incorporate feedback for improvement
before finalising and implementing the overall
strategy.
A good pricing analytics approach should model

the customer purchase decision process in such a
way that it complements pricing strategies. At the
same time, a customer-centric view of potential
price actions across all phases of the product life
cycle should be adopted.
View More 
Other Re-Tales
Why going
'Touchless'
should be the
priority for retail
post Covid-19
pandemic
Nitin Chhabra
CEO and Cofounder,
Ace Turtle
Based on the product life cycle, six pricing analytics
approaches can be used: price setting, pricing
Going digital: The
structure, cross-/up-sell, promotional pricing, profit only option for
leakage and markdown. A brief discussion of each Indian luxury
market
of these follows. Dr. Sheetal Jain
Founder & CEO, Luxe
Analytics
Price setting: This approach can be implemented
by building pricing models that use competitive, Post Covid-19
cost and elasticity (and cross elasticity) levers to scenario for
restaurants
establish optimal price ranges. The key Shriram Sanjeevi
applications of price setting are quote optimisation, Vice President, Levista
Coffee
competitive indexing, market share modelling and
capacity modelling. Although price elasticity is a View More 
good method, it needs to be applied in the proper
context or else it may not fetch the desired results.
Pricing structures: This approach is a valuable

one given the increasing focus on direct-to-
customer strategies. A pricing structure helps
optimise customer lifetime value through
adjustments to price structures (i.e. subscription

pricing). The key applications are subscription-
based pricing (a direct-to-customer strategy),
value-based pricing, performing customer lifetime
value analytics, etc.
Cross-/up-sell: This is a must-have strategy for

retailers. It helps identify product strategies related
to more profitable substitute or complementary
product groupings. Further, advanced analytics
techniques, such as singular value decomposition,
can be used to improve the product
recommendation process. The key applications are
assortment optimisation, substitute products, and
bundling and pack sizing.
Promotional pricing: This approach is applicable

to both FMCG companies and retailers. It can help
establish baselines for gauging promotion
effectiveness. The key areas are promotion
optimisation and trade promotion effectiveness.
Profit leakage analytics: This approach helps in

assessing current profitability through metrics
derived from transactional data and in achieving
cost-to-serve modelling and supply chain cost
allocations.
Markdown optimisation: This approach helps in

optimising customer lifetime value through
adjustments to price structures. The key focus
areas are seasonal/fashion markdown optimisation
and clearance pricing for obsolete products.
There are quite a few cases where companies

have smartly used pricing to improve the top or
bottom line. For instance, a leading electronic
retailer used price elasticity and bundling in
combination to improve its top line by more than
7%.
It’s time that FMCG companies collaborate with

retailers to gather relevant data and create a
symbiotic ecosystem wherein analytics can help

not just in developing a pricing strategy but also in
customer engagement. Further, pricing strategy is a
long and engaging journey, and hence, it’s
important to have a holistic picture in mind and to
adopt an agile approach so that organisations
achieve the desired benefits more quickly.
Rajat Mathur (Associate Director, PwC India) has

also contributed to this blog.
DISCLAIMER: The views expressed are solely of

the author and ETRetail.com does not necessarily
subscribe to it. ETRetail.com shall not be
responsible for any damage caused to any
person/organisation directly or indirectly.
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Why going 'Touchless' should be

the priority for retail post Covid-
19 pandemic
Customer expectation from stores have changed post eCommerce and this has
transformed more rapidly post the current Covid-19 crisis. Apart from Ease of
Product Discovery, Availability of Product and wider assortment, customers in
the current situation will also seek deeper Product information and Contactless
buying options that includes contactless discovery, flexible payment and
flexible delivery as well.
Nitin Chhabra May 14, 2020, 02.14 PM IST
Nitin Chhabra
CEO and Cofounder, Ace Turtle
 Click Here to Read This Story
Going digital: The only option for

Indian luxury market
The task of creating unique, magical and unparalleled shopping experience
online for luxury brands is a long, challenging path that luxury brands in India
must navigate in order to remain afloat during these troubled times.
Dr. Sheetal Jain Apr 28, 2020, 01.30 PM IST
Dr. Sheetal Jain

Founder & CEO, Luxe Analytics
Post Covid-19 scenario for

restaurants
Restaurants operating in malls will probably take the biggest hit – on one side,
fewer people are expected to visit malls anyway in the short-term; two, those
who are visiting are probably going to demand higher hygiene standards than
ever before, be it the cooks wearing headgear and masks on their mouth to an
extreme situation of CCTV inside the kitchen which beams in the seating area.
Shriram Sanjeevi Apr 20, 2020, 11.59 AM IST
Shriram Sanjeevi
Vice President, Levista Coffee
Will India's retail industry survive

the COVID-19 lockdown?
The losses for the retail industry alone have crossed $30 billion in the fortnight,
and the number is only rising. Given the current scenario, the industry will take
at least 6 months to get back on track in terms of cash inflows; but how many
companies can actually survive this downfall for the next 6 months?
Sanjay Vakharia Apr 06, 2020, 02.15 PM IST
Sanjay Vakharia
CEO, Spykar Lifestyle
Covid-19: Opportunities in crisis

for Indian luxury market
According to the recent report by Bain & Company, global luxury sales could
drop up to 35% by the end of 2020. With the key luxury markets across the globe
now affected, the pandemic poses serious threat to the sector.
Dr. Sheetal Jain Mar 31, 2020, 12.35 PM IST
Dr. Sheetal Jain

Founder & CEO, Luxe Analytics
Impact of COVID-19 on online

shopping in India
Amazon – one of the leading ecommerce players in the country, and the world,
has announced on its site that the customers are relying on them like never
before in their social distancing and self-quarantine efforts.
Dr. Deepak Halan Mar 25, 2020, 01.08 PM IST
Dr. Deepak Halan

Associate Professor, School of Management Sciences, Apeejay Stya University
The instant generation &

changing trends
Are Brands losing relevance and becoming more commodity? Are Advertising
and Creative geniuses losing sheen unable to cope with the Instant Generation?
Is there an air of indifference among discerning consumers that they’re not
being taken care of by the brands they love and are being loyal to?
Shriram Sanjeevi Mar 14, 2020, 12.11 PM IST
Shriram Sanjeevi
Luxury brand's tryst with online

retail
The evolvement of millennial customer is demonstrating their inclination
towards purchasing online, even when it comes to luxury brands. The
transformation has come in terms of customer’s shopping behaviour as they
now are equally comfortable in shopping online as they were while shopping in
a store environment.
Berry Singh Feb 24, 2020, 12.18 PM IST
Berry Singh
Co-founder & COO, Ace Turtle
The journey of deals and

discounts
Things in the world of discounts, deals and offers got truly interesting after the
advent of the internet as eCommerce boomed. Nearly all big players have now
either built their own eCommerce website or are selling their products/services
on popular eCommerce platforms.
Rohan Bhargava Feb 13, 2020, 03.51 PM IST
Rohan Bhargava
Co-founder, Cashkaro.com
Traffic Congestion - The Retail

Opportunity
Thanks to an insanely high amount of time spent inside Cars (mostly), E-
commerce gains the most in my opinion. From ordering Books to Pantry items,
Electronic Gadgets to reading on Magzter or Kindle, all forms of E-Commerce
products and services have huge potential (And is clearly displayed with the
number of deliveries made by E-Commerce companies daily in the city).
Shriram Sanjeevi Feb 10, 2020, 03.12 PM IST
Shriram Sanjeevi
Budget 2020 : Promoting

entrepreneurship and augmenting
consumer spending is key!
The FM’s acknowledgement in the budget of “data is the new oil” reiterates the
focus on the digital ecosystem which would be crucial for the retail sector which
is increasingly relying on digital platforms & tools to access rural & untapped
markets. The budget again provides for expansion of digital infrastructure
through “BharatNet” and is proposing a policy for private sector to develop
“data parks”.
Harsha Razdan Feb 05, 2020, 12.50 PM IST
Harsha Razdan
Partner and Head, Consumer Markets, KPMG India
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5/20/2020 The art and science of pricing - Re-Tales by Anurag Mathur | ET Retail

NEWS SITES   Sign in/Sign up

Books and Stationery

Home / Re-Tales / Anurag Mathur

Fresh takes, in-depth analysis and opinions from our

The art and science of pricing

Your Email JOIN N

Hence, the need of the hour is a comprehensive

pricing infrastructure. The Pillars of Profitability

Analytics: In the fast moving consumer goods

Strategy: It’s time to be agile—one should

prices, bundling/packaging of products, price

A good pricing analytics approach should model

Pricing structures: This approach is a valuable

adjustments to price structures (i.e. subscription

Cross-/up-sell: This is a must-have strategy for

Promotional pricing: This approach is applicable

Profit leakage analytics: This approach helps in

Markdown optimisation: This approach helps in

There are quite a few cases where companies

It’s time that FMCG companies collaborate with

symbiotic ecosystem wherein analytics can help

Rajat Mathur (Associate Director, PwC India) has

DISCLAIMER: The views expressed are solely of

Facebook Comments Plugin

Why going 'Touchless' should be

Nitin Chhabra May 14, 2020, 02.14 PM IST

 Click Here to Read This Story

Going digital: The only option for

Dr. Sheetal Jain Apr 28, 2020, 01.30 PM IST

Dr. Sheetal Jain

 Click Here to Read This Story

Post Covid-19 scenario for

Shriram Sanjeevi Apr 20, 2020, 11.59 AM IST

 Click Here to Read This Story

Will India's retail industry survive

Sanjay Vakharia Apr 06, 2020, 02.15 PM IST

 Click Here to Read This Story

Covid-19: Opportunities in crisis

Dr. Sheetal Jain Mar 31, 2020, 12.35 PM IST

Dr. Sheetal Jain

 Click Here to Read This Story

Impact of COVID-19 on online

Dr. Deepak Halan Mar 25, 2020, 01.08 PM IST

Dr. Deepak Halan

 Click Here to Read This Story

The instant generation &

Shriram Sanjeevi Mar 14, 2020, 12.11 PM IST

 Click Here to Read This Story

Luxury brand's tryst with online

Berry Singh Feb 24, 2020, 12.18 PM IST

 Click Here to Read This Story

The journey of deals and

Rohan Bhargava Feb 13, 2020, 03.51 PM IST

 Click Here to Read This Story

Traffic Congestion - The Retail

Shriram Sanjeevi Feb 10, 2020, 03.12 PM IST

 Click Here to Read This Story

Budget 2020 : Promoting