Price Pack Architecture (PPA)
Leading consumer packaged goods companies are realizing that by using cutting-edge research known as price pack architecture (PPA), they can deliver huge increases in profitability to capitalize on key consumer trends. Using a multistage process that includes category diagnostic, ideation, conjoint testing and simulation, executives are able to determine which product enhancements are likely to yield the best results. These basic but effective PPA-based variations can be used to supplement or replace more resource-intensive investments in innovative packaging.
A compelling example of PPA in action is the case of Coca-Cola, which sought to offset the effects of a decline in soft drink consumption at the start of the decade. Through PPA, Coke discovered that consumers not only liked the idea of a more compact serving size (including 7.5-oz. mini cans and 8-oz. glass bottles), but were also willing to pay more per ounce for a smaller Coke than for the traditional 12-oz. cans or larger containers.
The PPA framework combines consumer insights, competitive dynamics and a company’s capabilities to identify ideas, simulate/test results and, in turn, drive new price pack architecture solutions.
Diagnostic: Compile a category “fact-pack,” channel dynamics, consumer insights and “outside in” market perspectives
Ideation and prioritization: Develop a long list of ideas, considering occasions and consumer unmet needs and prioritization of attributes to test in the conjoint
Testing: Design and field a consumer survey with conjoint (to test attribute utilities) and nonconjoint portions (e.g., occasions)
Simulation engine: Develop an advanced category simulator to derive “lift” of PPA attributes tested and deep understanding of cannibalization
Financial impact: Develop P&Ls for new SKUs to couple with estimated lift and quantify the impact with forecasted revenue and EBIT for PPA innovations
PPA channel strategy development: Develop an overall price pack architecture strategy with channel “swim lanes,” price/pack curves and overarching goals to achieve
Training and implementation: Create an implementation plan (with names, key milestones), retail selling presentations and training/simulator handoff
Price Pack Architecture: Democracy in CPG Innovation
This Harvard Business Review article delves deeper into how brands can increase profitability through price pack architecture
Fortune 100 CPG company: We conducted consumer research to evaluate the importance of package characteristics, and ran consumer simulations on various pricing/pack configurations to develop pricing strategies around new product formats (e.g., smaller packs, zippers). The price pack architecture strategy is projected to generate an incremental ~$50 million in sales and ~$15 million in EBIT.
Leading branded CPG food company: Faced with flat sales and a customer flight from frozen to fresh, the company engaged us to conduct consumer research to evaluate claim, flavor, format, package type, package size and protein characteristics. We ran consumer simulations on various PPA configurations to develop a channel-specific product and pricing strategy. The project resulted in a clear product strategy pathway for several marquee brands and significant sales and EBIT increases.
Leading vitamin brand: We evaluated the impact of changing promotion strategy and conducted consumer research to understand the importance of promotions in the purchase process. We ran consumer simulations on various pricing/pack/promotion configurations to develop a pricing strategy, and identified a potential ~$20 million in direct contributions through a new pricing and trade promotion strategy.