Reimagining Food Manufacturing Pricing

Situation

A U.S.-based food manufacturer faced challenges with pricing analysis, a critical lever for managing demand during promotions and regular sales periods. Previously reliant on third-party vendors, the client sought to build an in-house capability to enhance accuracy, scalability, and cost efficiency.

Challenge

The transition to an internal pricing analysis approach posed several hurdles:

• High external costs: Vendor dependency drained resources without delivering tailored insights.
• Limited demand forecasting: Lack of precise models to predict customer behavior under varying price scenarios.
• Segment-specific challenges: Diverse consumer responses to pricing changes were not well understood, hindering targeted strategies.

Approach

Mu Sigma partnered with the client to establish a robust in-house pricing analysis framework:

• Conducted a comprehensive study of factors influencing pricing and demand, including socio-economic drivers.
• Developed price elasticity models to quantify customer responses to price fluctuations across products and segments.
• Identified critical correlations between socio-economic status and price sensitivity, enabling segmentation-based insights.
• Enhanced demand forecasting accuracy by analyzing product-category level price sensitivity and crafting predictive models.

The insights enabled the client to design and execute strategic trade promotions and establish a sustainable, scalable pricing analysis capability.

Impact

• 8% increase in sales, driven by more effective trade promotions.
• Improved demand forecasting, enabling data-driven decision-making.
• Reduced costs by eliminating reliance on third-party vendors and fostering self-sufficiency.