Pricing Performance in the Apparel Industry
The company was a large retailer of Athletic Apparel. They had recently taken a substantial price increase and were concerned that they weren’t getting the expected results.
INDUSTRIES
Apparel, Retail
PROJECT
8 weeks, including 4 for elasticity modeling
SERVICES
Price Elasticity Modeling, Pricing Performance, Price and Promo Optimization
DATA
Size: > 3TB, 100+ Tables
Cleanliness: 9 out of 10
Business Challenge
To counter the adverse impact of inflation on its manufacturing costs, the company had no choice but to take a larger-than-usual price increase on some key assortments.
After a few weeks, the business wasn’t getting the expected results and decided to conduct an in-depth study of the price increase. Keenalytix helped the client by developing and implementing a custom solution based on state-of-the-art impact assessment models.
Solution Development
The engagement focused on finding the right class of model to accurately measure the client’s Pricing Performance.
Not only did we need to accurately capture pre- vs. post-increase effects, but we also needed to isolate the price increase itself from other price changes (namely, promotions and markdowns) that happened at the same time.
Solution Implementation
The solution was to adapt a class of models widely used in other disciplines (such as economic policy), called difference-in-difference. These models allowed us to accurately measure the impact of the price increase, both direct (price elasticity) and indirect (cross-elasticity and products substitution).
Results
The business finally got a crystal-clear picture of the impact of its price increase. It also gained a lot of confidence in the results, which significantly improved buy-in across teams and departments.
The business also learned several lessons that were implemented in subsequent price increases and improved its overall pricing practices.
