Price ImagePricing Strategy

A Price Image Primer from Engage3 Data Scientist, Sahar Pirmoradian, Part 2 of 3

By September 2, 2020 September 4th, 2020 No Comments
Sahar Pirmoradian, Engage3 Data Scientist on Price Image

This video is Part 2 of our Price Image Primer series. You can find Part 1 HERE.

In this video, I talk to Engage3 Data Scientist, Sahar Pirmoradian, about how Price Image can be used with two popular pricing strategies – Hi-Lo and Everyday-Low-Price (EDLP). Sahar gives an example of a product category with 121 items that, while showing a positive Price Index, turned out to have a low Price Image measurement (a desirable outcome). She explains how Engage3’s Price Image metric can further be broken down to promotional items, which is where the opportunity for this retailer was found. Below is the transcript of Sahar’s explanation:

Marielle: We’re talking again to Sahar Pirmoradian, one of our data scientists. Welcome back, Sahar.

Sahar: Thank you, Marielle.

Marielle: So in our previous video, you talked about Price Image and how it was different from price index, but obviously there are different types of pricing strategies. There’s EDLP, or everyday low price, hi-lo, or a hybrid of both. So can we talk about Price Image in terms of how that applies to those various pricing strategies?

Sahar: Yes. We have customers with different pricing strategies. Two popular ones, as you mentioned, are EDLP and hi-lo–and some with hybrid strategies. Typically our hi-lo customers ask us to maintain their Price Image and improve their profitability, and our EDLP customers, they like to make investments in their Price Image and maintain their profitability.

Sahar: For example, you have a customer that, on their own, they were making price investments to improve their sales by 3%. With our tools, we were able to increase their sales beyond that while using only one third of their investment; we saved them millions. This improvement equated to more than 5% in their Price Image for the investment categories. And working with one of our hi-lo customers, we delivered around a hundred basis points increase in profit. That means 10 million for each billion dollars in sales, and held their Price Image constant.

Marielle: So how does a retailer know if they can benefit from using Price Image measurement? How does that work?

Sahar: Let me give you an example. One of our customers asked us to look to see opportunities in their price investments. When we looked at their price index, we observed the same thing. They knew that on average, their prices are higher than the competition here. The client price index is in blue and their competitor is in orange. Well, we looked at their Price Image. We saw a different story–that, in fact, consumers are perceiving this retailer’s price to be less expensive than the competition. So we asked, where are these differences coming from? Is it from regular or promotions? But then we zoomed into only regular price, both Price Image and Index suggested that this retailer’s pricing is perceived slightly higher than the competition, which we already saw.

Sahar: However, when we looked at their promotional pricing, we learned that this is their winning point. Although their price index for promotional prices is higher than the competitor, their Price Image is much, much lower. So we identified this opportunity in their regular pricing. And we worked with this retailer to evaluate their desired tradeoff between their Price Image and profit and accordingly, and we recommended prices that supported their objective.

Marielle: Very interesting stuff, Sahar. Next time we’ll be showing some specific product item investments and how we’re able to cover those for retailers. So watch out for that next and final episode of our Price Image Primer series. Thank you, Sahar.

Sahar: My pleasure.


This video is Part 2 of our Price Image Primer series. You can find Part 1 HERE.

Marielle Fong

Marielle Fong

Director of Marketing, Engage3

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