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THE ART & SCIENCE OF PRIVATE LABEL PRICING

THE ART & SCIENCE OF PRIVATE LABEL PRICING. W. FRANK DELL II, CMC OCTOBER, 2003. AGENDA. INTRODUCTION ISSUES & DIFFERENCES PRICING APPROACH. Objectives. Provide an understanding of Private Label Identify common pricing mistakes Present a better approach. The Starting Point.

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THE ART & SCIENCE OF PRIVATE LABEL PRICING

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  1. THE ART & SCIENCE OF PRIVATE LABEL PRICING W. FRANK DELL II, CMC OCTOBER, 2003

  2. AGENDA INTRODUCTION ISSUES & DIFFERENCES PRICING APPROACH DELLMART & COMPANY

  3. Objectives • Provide an understanding of Private Label • Identify common pricing mistakes • Present a better approach DELLMART & COMPANY

  4. The Starting Point DELLMART & COMPANY

  5. Private Label - USA • Initiated by • Necessity • Pride • Lower priced commodities • Second tier quality • Second tier packaging • Follow the Brand’s lead Commercial TV DELLMART & COMPANY

  6. Sales by Channel Mass Merchants exceed $7B DELLMART & COMPANY

  7. Private Label Share DELLMART & COMPANY

  8. Top Categories - Sales DELLMART & COMPANY

  9. Top Items - Growth DELLMART & COMPANY

  10. External Drivers Consolidation Channel Blurring DELLMART & COMPANY

  11. Internal Drivers Competitive Sameness Gross Margin DELLMART & COMPANY

  12. Private Label Response Upgrade Quality Upgrade Packaging Expand Assortment Gourmet Products DELLMART & COMPANY

  13. AGENDA INTRODUCTION ISSUES & DIFFERENCES PRICING APPROACH DELLMART & COMPANY

  14. Retailer’s Goals High • Gross Margin • Quality Ratio Low • Price Image DELLMART & COMPANY

  15. CONSUMERS PERSPECTIVE • Recall up to 200 item prices • Frequently purchased items • High consumables • Translates to 500 - 1,000 items creating the retailer’s price image DELLMART & COMPANY

  16. Observation • Much of retail pricing seems to be follow the leader • Not unlike a dog chasing its tail DELLMART & COMPANY

  17. Private Label Not Comparable • Differences • Manufacturer • Formula • Size • Positioning • Packaging • Excludes commodities DELLMART & COMPANY

  18. Low Prices Not The Answer DELLMART & COMPANY

  19. Price Elasticity DELLMART & COMPANY

  20. Retail Price & Space Interrelated DELLMART & COMPANY

  21. Private Label Price Discount Source: Supermarket News DELLMART & COMPANY

  22. Channel Pricing Strategies DELLMART & COMPANY

  23. AGENDA INTRODUCTION ISSUES & DIFFERENCES PRICING APPROACH DELLMART & COMPANY

  24. Not Just One Private Label • Commodity (sugar) • Alternative (soup) • Gourmet/Super-premium (cookie) • Natural/Organic (juice) • Unique (Trader Joe’s) DELLMART & COMPANY

  25. Retail Strategy DELLMART & COMPANY

  26. Category Role • Destination - To be the primary category provider and help define the retailer as the store of choice by delivering consistent, superior target consumer value. • Routine - To be one of the preferred category providers and help develop the retailer as the store of choice by delivering consistent, competitive target consumer value. DELLMART & COMPANY

  27. Category Role (Cont.) • Occasional/Seasonal - To be a major category provider, help reinforce the retailer as the store of choice by delivering frequent, competitive target consumer value. • Convenience - To be a category provider and help reinforce the retailer as the store of choice by delivering good consumer target value. DELLMART & COMPANY

  28. Strategies Traffic Building Transaction Building Profit Contribution Cash Generating Excitement Creating Image Creating Turf Defending Characteristics - High share, frequently purchased, high % of sales - Higher Ring-up, impulse purchasing - Higher Gross Margin, turns - Higher turns, frequently purchased - Impulse, lifestyle oriented - Frequently purchased, highly promoted, impulse, unique - Used to draw customer base Category Strategy DELLMART & COMPANY

  29. Hi Lo EDLP Velocity Faster selling priced lower than slower Size Larger sizes priced lower than smaller Flavor/Pattern Priced as group Pricing Philosophy DELLMART & COMPANY

  30. Understand The Category • Purchase frequency • Solo, multiple or joint purchase • Competition • Inside store • Outside store DELLMART & COMPANY

  31. Product Factors DELLMART & COMPANY

  32. Set Item Objective DELLMART & COMPANY

  33. Honest Assessment • Product quality • Product performance • Packaging • Retail space allocation DELLMART & COMPANY

  34. Honest Value Determination PRICE VALUE = QUALITY DELLMART & COMPANY

  35. General Private Label Pricing DELLMART & COMPANY

  36. Commodity DELLMART & COMPANY

  37. Alternative DELLMART & COMPANY

  38. Gourmet DELLMART & COMPANY

  39. Organic DELLMART & COMPANY

  40. Unique DELLMART & COMPANY

  41. Art Strategy Tactics Design Assessment Science Share Objective Retail Space Price Point Summary DELLMART & COMPANY

  42. Thank You DELLMART & COMPANY

  43. W. Frank Dell II, CMC President DELLMART & Company 125 Hardesty Road Stamford, CT 06903 USA Tel: 203-968-8609 Fax: 203-968-8613 e-mail: Wfdell2@msn.com DELLMART & COMPANY

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