RSP-per-kg Incentive Curve: The Single Most Important Diagnostic in Pack Architecture

The price incentive curve is the single most important diagnostic in Price Pack Architecture. It plots price per unit (PPU) on the vertical axis against pack size on the horizontal axis. In a well-designed portfolio, the curve slopes downward: larger packs offer a lower price per unit, rewarding consumers for buying more.

This downward slope is the "incentive" — the economic reward that motivates consumers to trade up from a small pack to a larger one. Without this incentive, consumers have no rational reason to buy the bigger format. With too much incentive, the small packs become uncompetitive and the large packs cannibalize the profitable singles.

The shape of this curve tells you everything about your portfolio's pricing logic:
- A smooth, gently declining curve signals coherent pricing architecture
- A jagged or irregular curve signals ad hoc pricing decisions made without portfolio context
- A flat curve signals no trade-up incentive at all
- An inverted section (where a larger pack has a higher PPU than a smaller one) signals a pricing error that confuses consumers and destroys value

Every FMCG company should be able to draw its incentive curve from memory. Most cannot — and that ignorance is where margin leaks live.

Price Per Unit (PPU) = Pack Price / (Pack Size x Unit Weight)

Where Unit Weight normalizes across formats (e.g., per 100g, per litre, per serving).

Incentive Index = (PPU of Pack X / PPU of Reference Pack) x 100

The reference pack is typically the smallest single-serve format in the range. If the 50g single-serve costs $1.50 (PPU = $3.00/100g) and the 300g family pack costs $4.99 (PPU = $1.66/100g), then:

Incentive Index (300g) = ($1.66 / $3.00) x 100 = 55

This means the family pack offers a 45% price-per-unit advantage over the single-serve. A target index of 70-85 for the largest versus the smallest pack is a common industry benchmark, meaning consumers should get a 15-30% PPU reduction for buying the largest format.

A premium biscuit brand plotted its incentive curve across five pack sizes:

• 50g single-serve: $1.49 (PPU = $2.98/100g) -- Index 100
• 150g standard: $3.29 (PPU = $2.19/100g) -- Index 74
• 250g sharing: $4.99 (PPU = $2.00/100g) -- Index 67
• 400g family: $5.99 (PPU = $1.50/100g) -- Index 50
• 750g tin: $8.99 (PPU = $1.20/100g) -- Index 40

The curve revealed two problems. First, the 400g family pack (index 50) was far too cheap relative to the 250g sharing pack (index 67) — a 17-point drop for just 150g more product. This steep section was cannibalizing the sharing pack. Second, the 750g tin (index 40) was priced so aggressively that it was destroying margin without generating proportional volume.

By adjusting the 400g price to $6.99 (index 58) and the 750g to $10.49 (index 47), the curve smoothed out. The 400g price increase held with only a 3% volume decline. The 750g adjustment reduced volume 8% but improved margin per unit by 17%.

When an experienced RGM manager looks at an incentive curve, they are asking three questions simultaneously:

1. Is the gradient commercially sensible? A curve that drops too steeply says "we are giving away too much value on large packs." A curve that barely drops says "we are not giving consumers any reason to trade up."

2. Are there structural breaks? Any point where the curve flattens, inverts, or jumps signals a pricing decision that was made in isolation. These breaks are the priority fixes.

3. What does the competitor curve look like? If your curve is steeper than the competition, your large packs look like bargains (good for volume, bad for margin). If your curve is flatter, your large packs look expensive (good for margin, vulnerable to competitor trade-up).

In practice, most FMCG portfolios have accumulated pricing decisions over years of individual negotiations, cost-plus calculations, and promotional activity. The incentive curve exposes the accumulated inconsistencies in a single picture.

Cross-lesson connection — PPA Lesson 2 (Pack Roles): the Incentive Curve is the diagnostic that catches violations of the Pack Role Price Index Guardrails (Entry ~120, Routine 100, Upsize 70-85, Upscale >120). When a practitioner spots a structural break, they should map each broken point to the role it represents and ask which guardrail has failed. A flat section between Routine and Upsize means the Upsize guardrail is broken; an inverted section between Routine and Upscale means the Upscale tier has lost its premium positioning.

Cross-lesson connection — Pricing Lesson 1 (Elasticity): each pack on the curve has its own price elasticity. Entry packs typically run -2.0 to -2.5 (constrained shoppers, comparison-shop heavily); the Routine sits near the -1.7/-1.8 CPG ceiling; Upsize packs in the 70-85 band attract value-seeker shoppers with elasticity often -2.5 to -3.0. This tier-specific elasticity is what makes the 70-85 guardrail commercially achievable — the Upsize shoppers respond strongly to per-kg savings, so the margin-percentage give-up is more than recovered through volume.