Tackling Supply Chain Disruption - Increase Prices While Maintaining Consumer Satisfaction

Situation

Supply chain disruption can make or break product success. When threats such as war, epidemics, recessions, and inflation strike the market, companies can find it hard to maintain their profit margins.

A footwear brand was at a crossroads when their supply chain was disrupted by a significant increase in container shipment costs. The retailer was eating the incremental shipping costs and not passing them along to the customer.

They had to make critical product and pricing decisions to see if they could raise their prices to offset these new costs without dramatically impacting demand.

Action

First Insight ran a series of tests on each category and product line. Items were tested with current customers at their expected increased price point. The footwear company used price optimization to see whether demand for a product would decrease if its price was raised, and how much.

Outcome

While analyzing demand at full price, First Insight's InsightPricing tool enabled the footwear brand to quantify reductions in demand from increasing ticket prices with each dollar increment. After seeing that the increased shipment cost was long-term and not temporary, they determined that raising the price by $2 was enough to give them the margin dollars they needed to offset the loss of 10% demand.