- Consumers in developing markets are less price sensitive to beer than those in developed markets, contrary to the common belief. This is because in developing markets, premium brands signal status and quality perceptions are lower, leading consumers to be less sensitive to price increases on higher priced brands.
- There is no difference in price sensitivity between men and women for beer, unlike the belief that women are more price sensitive.
- Beer bottles are actually more price elastic than beer cans in supermarkets, unlike the belief that bottles have lower elasticity. This is because there are more switching possibilities for bottle buyers.
- Both decreasing pack size and increasing price can result in volume losses, but consumers are more sensitive to size
Myth or Truth? Common beliefs about pricing in the beer industry
1. Common beliefs about pricing
Myth or Truth?
Price beliefs impacting
marketing strategy in the beer industry
Mini Kalivianakis | Margot Pradon
2. SKIM’s three pillars of expertise are: pricing and portfolio,
product innovation and communication research
3. 200 pricing studies in the past 5 years
18
countries
7000
shopping
trips
500
products
45
categories
4. SKIM expertise in pricing
Set the right price: Strategies need
to be based on truths not beliefs
selling price operating profit!
McKinsey & Company
5. Women are more price
sensitive towards beer
than men
Beer bottles have a
lower price elasticity
than beer cans, in
supermarkets
It’s better to decrease
pack size than to
increase price
Products belonging
to lower tiers are more
price elastic
than other tiers
Consumers are
more sensitive to price
increases on large
formats
Consumers in
emerging markets are
more price sensitive
than consumers in
developed markets
Price Beliefs: True or False?
6. Pricing belief 1
Consumers in emerging markets are more price
sensitive to beer than consumers in developed
markets
7. Example:
Raising the price of beer bottles in Nigeria will
result in a greater volume loss than raising the
price of beer bottles in the United States
8. Behind the Myth
Consumers in developing countries have less
money to spend.
Therefore they are more focused on price,
hence they are more price sensitive.
9. Pricing belief 1
Consumers in emerging markets are more
price sensitive to beer than consumers in
developed markets
TRUE OR FALSE?
FALSE!
10. Consumers in developing markets are
less price sensitive to beer than those in
developed markets
-1.31
-0.89
Average elasticity to up-pricing
Developed Countries
Developing Countries
11. more choice
available in developed
countries, driving higher
PE: more switching
choice
consumption of
premium brands
for status in developing
countries, driving lower
PE: keep buying higher
priced brand to maintain
status
lower quality perceptions
in developing countries is
driving lower PE: keep
buying higher priced
brands because do not
trust quality of
alternatives
Explanation
14. Example:
Raising the price of beer bottles will result in a
greater volume loss amongst women than
amongst men
15. Behind the Myth
Women are often in charge
of household budget, and hence more price sensitive
Men shop mostly for products they are personally
involved with, hence are less price sensitive.
16. Pricing belief 2
Women are more price sensitive
towards beer than men
TRUE OR FALSE?
FALSE!
17. Looking at beer, there is no difference in
price sensitivity between men and women
-1.05
-1.05
Average elasticity to up-pricing
Men
Women
18. Pricing belief 3
Beer bottles have a lower price elasticity than
beer cans, in supermarkets
19. Example:
Raising the price of beer bottles will result in a
smaller volume loss than raising the price of
beer cans
20. Behind the Myth
Bottles are more premium than cans, and
therefore they have a lower price elasticity
21. Pricing belief 3
Beer bottles have a lower price elasticity than
beer cans, in supermarkets
TRUE OR FALSE?
FALSE!
30. Implications
easier to change
price than size
smaller sizes create
more switching
opportunities, due to
higher purchase
frequency
Introducing
smaller sizes
poses risk of
decreasing
consumption
volume
37. more switching
possibilities in
medium tier, driving
higher PE
high-end consumers
are more brand-loyal
and are less focused
on prices, therefore
less price sensitive.
Explanation
low-end consumer,
mainly driven by price
have little cheap
options to switch to
when uppricing,
driving lower PE
40. Example:
Increasing the price on a beer crate will result in
a greater volume loss than increasing the price
on a beer bottle
41. Large formats have higher prices, and price
increases are more easily noticed
Behind the myth
Increase: 20%
In absolute terms: + € 0,24
Increase: 20%
In absolute terms: + € 1,34
42. Pricing belief 6
Shoppers are more sensitive to
price increases on large formats
TRUE OR FALSE?
TRUE!
43. -1.0
-1.2
Average elasticity to up-pricing
Singlepacks
Multipacks
Multipacks of beer are more price elastic
than individual units