THE PSYCHOLOGY OF PRICING:
RESHAPING YOUR ELASTICITY CURVE
By Ray Florio, Partner, Growth Consulting, IRI
During 2018, nine of the 10 largest CPG manufacturers announced price increases, citing cost inflation and margin pressures as the reason. By mid-2019, some industry estimates indicate that approximately 70% of CPGs will raise their list price. While this may seem like good news for manufacturers, many of whom have had to focus heavily on cost reduction over the past five years, research shows that most products experience significant volume loss if the entire category isn’t also raising prices. Price increases alone are incapable of fully offsetting companies’ margin losses due to underlying spikes in material and other costs.
This report shares some common myths and improved strategies around price elasticity, and its importance in shaping the product and brand.
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