Smarter Pricing: How to capture more value in your market

Managing pricing discipline

In consumer markets, there are pressures to discount or ‘promote’ products. Consumers respond to promotions. Retail channels encourage promotions and discounts to enhance store interest. Branded goods manufacturers are under great pressure to promote. Yet before promotions are created, manufacturers need to take account of two factors: the price elasticity or expandability of their category (will people buy more if the price goes down?) and the brand equity or reputation. Considering these factors could reduce the promotional discounts where value is given away unnecessarily.

McKinsey consultants, Davey, Childs and Carlotti (1998) state that a brand with a high reputation in an expandable category, for example a brand-leading ...