Glossary & Formula Reference

A pricing strategy framework identifying ten factors that increase or decrease price sensitivity: (1) Reference Price, (2) Difficult Comparison, (3) Switching Cost, (4) Price-Quality Perception, (5) Expenditure Size, (6) End-Benefit, (7) Shared Cost, (8) Fairness, (9) Inventory/Framing, (10) Extremeness Aversion. Understanding which effects dominate guides pricing strategy and value communication.

A comprehensive industry TPO framework grouped into Effectiveness (7 levers driving uplift: critical weeks, right mechanics, high-uplift SKUs, high baseline, gap weeks, visibility, cannibalization), Efficiency (4 levers improving ROI: profitable SKUs, funding management, uplift drivers, pay-for-performance), and Structural (2 levers reducing waste: forward buying, subsidized base).

A three-stage diagnostic umbrella: Stage 1 IDENTIFY (external landscape + internal dynamics), Stage 2 DEFINE (deep-dive opportunities, prioritize, develop RGM plan), Stage 3 EXECUTE & Measure (track vs. targets, adjust). Connects pricing, PPA, mix, and trade investment.

A holistic pricing assessment covering five dimensions: Consumer (value perception, WTP), Category (dynamics, growth), Channel/Customer (retailer requirements), Competition (competitive set, price indices), and Company (cost structure, brand strategy). Pricing decisions ignoring any C are likely suboptimal.

A PPA diagnostic framework assessing Consumer (occasions, lifestyle trends), Shopper (household size, income, coping mechanisms), Channel/Customer (landscape, commercial strategies), Category (pack sizes, price tiers, growth segments), and Company (brand growth plans, price positioning, pack roles health, profit pools).

A structured industry approach: (1) Targets & Priorities — align with financial targets, (2) Identify Opportunities — find white spaces and value extraction, (3) Review — scenario modelling and triple-win validation, (4) Develop Plan — business case with guardrails, (5) Execute — trade selling story and SMART KPIs, (6) Evaluate — tracking scorecard and course correction.

SKU portfolio diagnostic plotting NSV level against SGP/kg, with volume growth as a third dimension. Produces: Strong Performer (high margin + high scale + growing), Improve Sales, Improve Profit, Re-engineer, Rationalise (small + low margin + declining).

A 3x3 matrix with pack size change (Down/Constant/Up) on one axis and price change (Down/Constant/Up) on the other, producing nine possible pack-price actions: downsizing, shrinkflation, price decrease, starting point, price increase, give away, better value, upsizing. Each cell has decision rules based on margin, elasticity, and price threshold proximity.

Multi-criteria SKU scoring for assortment decisions: Consumer & Strategy (0-3 points), Volumetric (0-4 points: scale, growth, share gap, distribution gap), Commercial (0-2 points: GP/1000, TI ratio). Scores >7 = growth drivers, 2-6 = core, <2 = review/delist candidates.

Price elasticity measured over a discrete range using the midpoint method, avoiding the asymmetry problem of simple percentage changes. Arc elasticity is what you actually calculate from real sales data (two observed price-quantity pairs), as opposed to point elasticity which is a theoretical concept at a single price.

The weighted average price at which a brand or SKU is actually sold, accounting for both full-price and promotional sales. ASP = Total Revenue / Total Units. Tracking ASP over time reveals whether promotional intensity is eroding price realization. ASP declining faster than list price indicates deepening or broadening promotions.

Retailer earnings from off-invoice trade investments: rebates, promotional allowances, listing fees, cooperative advertising. Less visible than front margin and the area where trade spend often drifts upward without proportional performance improvement.

Estimated sales that would have occurred without the promotion — the counterfactual for measuring uplift. Methods include moving averages, regression models, and syndicated data baselines. Accurate baselines are critical: overestimating understates effectiveness; underestimating overstates it.

A mechanic offering a free or discounted second unit with a qualifying purchase. Delivers the deepest effective discount and highest uplift but also the highest pantry loading and typically lowest ROI. Used for trial generation or competitive defence rather than sustained volume building.

A composite measure of brand strength relative to competitors, combining awareness, differentiation, quality perception, and loyalty. Plotted against relative price or market share to diagnose pricing headroom. When brand power exceeds the price index, there is room to increase price; when it falls below, the brand is over-priced.

Volume gained from competitor brands during a promotional event — one of the beneficial sources of promotional volume, representing genuine share gain. Depends on brand loyalty strength, discount depth relative to the competitive set, and display/feature support.

A 2x2 decision matrix comparing actual price elasticity against break-even elasticity to determine if a price change is profitable. The matrix variant cross-references base price elasticity vs. promotional elasticity to guide execution strategy (EDLP vs. Hi-Lo). If actual elasticity is less severe than BEE, the price change generates profit.

The minimum percentage change in sales volume required to maintain current profit after a price change. BESC is the single most important pre-decision metric in pricing — if you do not know your BESC, do not change the price. Higher-margin products can absorb larger volume losses, making them more resilient to price increases.

Trade investments activating base sales through category management, innovation support, cross-merchandising, and data sharing. Should be conditional on specific retailer actions. Differ from promotional spend by focusing on the underlying business foundation rather than driving incremental volume.

Volume lost from the manufacturer's own products during a promotion on a sister SKU. One of the most common sources of wasted promotional spend because incremental volume on the promoted product is offset by losses elsewhere. Always analyse at portfolio level, not just the promoted SKU.

A grid mapping product pairs to identify interaction effects during promotions. Cells are colour-coded: red (cannibalised sales — do not co-promote), green (mutual growth — co-promote), amber (only one product grows — do not co-promote). Essential for promotional calendar optimization to avoid scheduling conflicting events.

The specific need, occasion, or motivation triggering a consumer to think about purchasing from the category. Different entry points lead to different pack-price requirements (quick midweek dinner vs. weekend family meal). PPA must cover the key entry points relevant to the brand's target shoppers.

New volume from a promotion that grows the total category — consumers drawn in who would not have bought from the category otherwise. The most valuable source of promotional volume because it creates growth for both manufacturer and retailer without destroying existing volume.

A strategic approach where the retailer and manufacturer jointly manage a product category as a business unit, optimizing assortment, pricing, promotion, and shelf placement to maximize category profitability. Category management provides the collaborative framework within which RGM initiatives are executed at the retailer level.

Chi-Squared Automatic Interaction Detection — a statistical technique producing data-driven consumer decision trees from panel data. CHAID identifies the product attributes that most strongly differentiate purchase behaviour at each level of the hierarchy.

The RGM governance cycle connecting strategy to execution to evaluation: Set strategy, Build plan, Execute, Measure, Review vs. plan, Identify learnings, Adjust strategy. Without a closed loop, spending drifts and mix deterioration accumulates. The quarterly RGM Council is the governance forum.

An integrated commercial framework with four quadrants and 12 growth levers: Win with Brands (assets, communications, media), Win with Retailers (category development, multichannel, commercial excellence), Win with Shoppers (price/promo/PPA/mix, assortment, activation), Win with Food (quality, innovation, superiority). RGM sits in Win with Shoppers.

The process by which products become increasingly undifferentiated in consumers' eyes, shifting purchase decisions to price alone. Commoditization erodes brand pricing power and shifts value share toward private label. RGM combats it through PPA innovation, value communication, and avoiding excessive promotional frequency.

Setting prices primarily based on what competitors charge, typically maintaining a target price index versus the competitive set. Widely used in FMCG but risks margin erosion if all players follow each other downward. Best used as one input alongside value-based and cost-based considerations.

Geometric mean annual growth rate over a specified period, smoothing year-to-year volatility. The standard measure for comparing growth rates across brands, categories, and channels, typically calculated over 2-3 years.

The degree to which trade investment is tied to specific, measurable retailer performance requirements. High conditionality means payment is contingent on verified delivery of agreed counterparts. Shifting from unconditional to conditional spend is a primary RGM value driver.

A quantitative research technique where respondents choose among product profiles with different attributes and prices, revealing the implicit value (part-worth utility) of each feature. Can calculate WTP for individual features and simulate market share. Limitation: respondents may over-attend to price, overstating sensitivity by 15-30%.

A hierarchical model of how shoppers navigate purchase decisions in a category, showing the order in which they filter options (segment, brand, pack size, price). CDTs inform PPA by revealing what drives substitution vs. switching. Built from purchase panel data, CHAID analysis, or qualitative shopper research.

The difference between what a consumer is willing to pay and what they actually pay. Aggregate consumer surplus represents value left on the table by the seller. Price structure tools (segmented pricing, versioning, bundling) aim to capture more consumer surplus as revenue without losing volume.

The degree to which increasing pack weight or piece count drives additional consumption rather than simply reducing purchase frequency. If adding pieces leads consumers to eat more per occasion without changing buying frequency, the pack change is genuinely volume-expanding, distinct from pantry loading.

Price minus variable cost per unit. The contribution margin is the single most important number in pricing — it tells you how much each unit sold contributes toward covering fixed costs and generating profit. Higher CM products can absorb larger volume losses from price increases and still break even.

The direct costs of producing goods sold by the company, including raw materials, packaging, direct labour, and manufacturing overhead. COGS excludes selling, distribution, and administrative costs. In FMCG, COGS typically represents 50-70% of NSV depending on the category.

Setting price by adding a standard markup to unit cost. While simple and transparent, cost-plus pricing ignores customer value and competitive context, leading to overpricing in weak markets and underpricing in strong ones. Costs determine the price floor; the optimal price is determined by value delivered.

Designing differentiated pack-price portfolios across retail channels while managing read-across risk. Best practice: same routine pack across channels, wider range in high-service banners, restricted range in discounters. Differentiated packaging design helps prevent direct price comparison.

Coordinating pricing, PPA, TPO, and mix decisions to maximize total commercial impact rather than optimizing each lever in isolation. A price increase on a high-volume SKU shifts mix, which changes portfolio margin, which affects promotional ROI — all levers interact.

Measures how demand for Product A changes when the price of Product B changes. Positive cross-elasticity indicates substitutes (competitor raises price, your volume grows). Negative indicates complements. Critical for understanding competitive dynamics and portfolio cannibalization effects.

A framework prioritizing retailer investment based on strategic value: Gold, Silver, or Bronze classification using weighted KPIs (market share, growth, margin contribution, strategic alignment). Drives allocation: Grow (Gold), Maintain (Silver), Reduce (Bronze).

A function showing the relationship between price and quantity demanded, downward-sloping by convention. In FMCG, the constant-elasticity (log-log) form is most commonly used. Key insight: elasticity varies along a linear demand curve — elastic at high prices, inelastic at low prices, unit elastic at the midpoint.

The intersection of a consumer demographic context with emotional and functional needs that explains product choices. Demand spaces map where, when, with whom, and why consumers use products. Used in PPA and innovation to identify unmet needs and prioritize pack-price solutions against the most valuable spaces.

The monetary or psychological value of features and benefits that distinguish a product from the next best competitive alternative (NBCA). Monetary differentiation includes cost savings and revenue gains. Psychological differentiation includes prestige and brand assurance. Both must be actively communicated — customers rarely perceive value without explicit framing.

A measure of buyer overlap between two products. High duplication suggests direct substitutability; low duplication suggests different shopper segments. Used in PPA to understand cannibalization risk within a portfolio.

Earnings Before Interest and Tax — the operating profit measure most commonly used as the bottom-line target in FMCG commercial planning. A 1% price improvement typically delivers 8-11% EBIT growth (depending on starting margin structure), compared with 3-4% from a 1% volume increase, making pricing the most powerful profit lever.

Two contrasting retail pricing strategies. EDLP offers consistently low shelf prices with minimal promotion. Hi-Lo features higher regular prices with frequent deep discounts. PPA must align with the retailer's strategy: routine packs suit Hi-Lo; entry and upsize packs suit EDLP. The choice depends on Regular vs. Promoted Price Elasticity.

The seven ROI levers driving higher sales uplift: (1) plan in critical weeks, (2) choose right mechanics, (3) promote high-uplift SKUs, (4) create high baseline, (5) reduce promo fatigue with optimal gap weeks, (6) optimize visibility (display/feature), (7) reduce portfolio cannibalization.

The four ROI levers improving profit return per dollar of promo spend: (8) select profitable SKUs, (9) manage funding (on/off-invoice split), (10) invest in uplift drivers (display, advertising overlay), (11) pay for performance (SMART counterparts).

The smallest, most affordable pack in the portfolio, designed to build penetration through accessible price points for constrained shoppers, impulse purchases, and trial. Typically 2 servings, priced at or below key psychological price points. RSP/kg index ~120 vs. routine pack. Execution: EDLP, low promotional intensity.

Electronic Point of Sale data based on recorded transactions at the checkout, providing granular sell-out information by SKU, store, day, price, and promotion flag. EPOS is the foundation of promotional analysis, baseline estimation, and price compliance monitoring in modern RGM.

The cognitive bias where consumers avoid the cheapest and most expensive options, gravitating toward the middle. In FMCG, this is the psychological foundation of Good-Better-Best tiering: adding a premium tier shifts purchasing toward the middle option. Also called the Goldilocks Effect.

The share of a specific segment, channel, or price tier that a brand would hold if its overall market share applied equally across all segments. Comparing actual share to fair share identifies under- and over-indexed segments, revealing white-space opportunities and competitive vulnerabilities.

Inclusion of a promoted product in retailer advertising (leaflets, circulars, digital). Amplifies promotional uplift by driving awareness before the shopper enters the store. Feature combined with display typically produces the highest uplift of any execution.

A promotional strategy principle: fewer total events, each with stronger execution (better display, smarter mechanics, aligned media) to generate greater total ROI. Counters the common pattern of spreading budget thinly across too many mediocre events.

Instead of matching a rival's price cut, creating a separate lower-priced offer (a fighter brand or stripped-down variant) to compete at the lower price point while protecting the premium brand's positioning. The flanking offer must be clearly differentiated, not just a discounted version.

Fast-Moving Consumer Goods (FMCG) or Consumer Packaged Goods (CPG) — low-cost products sold quickly and consumed regularly, such as food, beverages, toiletries, and household products. Characterized by high purchase frequency, low unit margins, and heavy reliance on distribution and promotion.

Retailers purchasing excess inventory during manufacturer promotions to sell at full margin afterward. Detected by sell-in spikes without corresponding sell-out peaks. Generates no incremental volume for the manufacturer. Mitigation: link investments to realized sell-out volumes.

Retailer profit from the difference between purchase price (invoice cost) and consumer selling price. Directly affected by shelf pricing and promotional depth. In profit pool analysis, front margin plus back margin equals total retailer earnings.

The principle that money recovered from stopped or reduced poor-performing promotions is reinvested in higher-ROI events, not simply cut from the budget. This reallocation mindset is critical for organizational buy-in: TPO is about spending smarter, not spending less.

Application of strategic interaction models to pricing, recognizing that pricing is a repeated game where today's decisions affect competitors' future behaviour. Key concepts: positive-sum vs. negative-sum games, Nash equilibrium, credible commitment, and the distinction between differentiated vs. commodity market competition.

Non-promotional weeks between consecutive events for the same product. Insufficient gap weeks lead to promo fatigue (declining uplift) and baseline erosion (consumers trained to wait for deals). Optimal gap week analysis reveals the minimum interval for strong uplift.

A secondary display at the end of a store aisle offering high visibility. Consistently generates the highest value sales per promotional event — significantly outperforming shelf promotions, side stacks, and store entrance displays. Worth paying a premium for in trade negotiations.

A tiered product architecture segmenting the portfolio into three quality-price levels. Good provides an accessible entry point, Better serves the core market, Best captures premium WTP. GBB exploits extremeness aversion — adding a Best tier shifts purchases toward Better. The retailer lens combines brand and quality positioning across manufacturers.

Gross profit per 1000 units sold — a profit density measure normalizing across price points and pack sizes. Primary SKU performance metric in mix management. SKUs with GP/1000 below portfolio average are candidates for price increases, re-engineering, or rationalization.

The percentage of net revenue remaining after subtracting COGS. Gross margin is the primary profitability measure for pricing decisions because it captures the interplay between pricing power and production efficiency. Typical FMCG gross margins: biscuits 35-45%, frozen pizza 30-40%, frozen fish 30-38%.

Total revenue before any trade deductions, calculated as list price multiplied by volume. GSV is the starting point of the gross-to-net waterfall. The gap between GSV and NSV represents total trade spend — typically 15-30% of GSV in FMCG.

The complete bridge from GSV to Net Revenue showing every trade deduction layer: on-invoice discounts to NIV, off-invoice CPP, Business Building Terms, Efficient Operations terms, customer-specific terms, arriving at Turnover. The master diagnostic for trade investment — shows where value leaks and which layers grow fastest.

A price at which a disproportionate share of category volume concentrates, indicating strong consumer resonance. Identified through frequency analysis of transaction data. PPA must be designed so key packs land on hot price points — products between hot points tend to underperform.

The minimum acceptable rate of return (volume, rate of sale, or net revenue) for a product to be listed or launched. In PPA innovation, hurdle rates are applied to bubble charts of incremental volume vs. incremental NR to classify opportunities as STAR (meets both hurdles), QUESTION MARK, or DOG (meets neither).

The price/kg trajectory across pack sizes that motivates shoppers to trade up. Optimal incentive for trade-up packs: price/kg index 70-85 vs. routine pack. A broken incentive curve (where larger packs cost more per kg than smaller ones) signals a PPA problem requiring immediate correction.

A collaborative planning agreement between manufacturer and retailer that aligns on growth targets, trade investment, promotional calendars, and category development initiatives. JBPs typically cover 12 months and serve as the commercial framework for executing RGM strategies at the customer level.

The smallest price or size change that consumers can perceive. Changes below the JND are effectively invisible to shoppers. In FMCG, the JND for pack size reductions is typically around 10% — changes smaller than this generally go unnoticed, which is why incremental shrinkflation is effective (if ethically debatable).

Classification of trade investments by conditionality and variability: K = Conditional Variable (condition + volume rate), A = Conditional Fixed (condition + fixed amount), T = Unconditional Variable (volume-linked, no condition), I/E = Unconditional Fixed (no conditions). Goal: shift from unconditional (I/E, T) to conditional (K, A) for better ROI.

NRM Lever 4 sub-modules from a leading FMCG company's framework: L4D — set guidelines and targets from scorecarding, L4E — scenario development and calendar optimization, L4F — develop sell-in story and JBP for retailer negotiations. These form the analytical backbone of promotional planning.

An economic concept showing that beyond a certain point, increasing price (or tax rate) actually reduces total revenue because the volume lost more than offsets the higher per-unit revenue. In FMCG, the Laffer curve demonstrates why excessive price increases are self-defeating — there is an optimal point beyond which further increases destroy value.

Five empirically-validated brand growth principles: (1) Penetration is King, (2) Penetration is a Leaky Bucket, (3) Most buyers only buy occasionally, (4) People buy from a repertoire, (5) Memories are fragile. These empirically-validated laws underpin commercial strategy across all RGM levers.

A measure of market power expressed as the optimal price-cost markup ratio. At the profit-maximizing price, the Lerner Index equals the inverse of the absolute value of price elasticity. It provides a direct formula to calculate optimal price from marginal cost and elasticity.

A formal increase in list price to the trade, typically to offset cost inflation or improve margins. Requires validation against brand equity, elasticity, competitive positioning, and price threshold proximity. Net NSV benefit is always less than gross increase due to trade pass-through and volume effects.

A 2x2 matrix crossing market maturity (consumption per capita) with brand market share to determine PPA priorities: Low share + High maturity = Steal Share (entry pack first), High share + High maturity = Create Value (upsize/upscale), Low share + Low maturity = Drive Penetration (entry pack), High share + Low maturity = Drive Volume (routine/upsize).

Revenue or profit variance explained by shifts in sales composition — selling more premium products (positive mix) or more value products (negative mix). Often the number two driver of negative gross margin variance in FMCG, after COGS inflation.

Actively managing sales composition across brands, SKUs, channels, and customers to improve portfolio profitability. Uses the 9-Box Grid to classify SKUs as Strong Performers, Improve Sales, Improve Profit, Re-engineer, or Rationalise, with specific action plans for each.

The fundamental economic rule that profit is maximized where marginal revenue equals marginal cost. In practical FMCG pricing: keep raising price until the revenue lost from the next unit of volume decline equals the cost saved by not producing that unit. The Lerner Index operationalizes this.

A mechanic requiring multiple-unit purchase for a discount (e.g., 'Buy 2 for 5'). Increases transaction size but risks pantry loading and can break pack-price architecture if effective per-unit price drops below smaller pack formats.

Portfolio prioritization: A MWB (profit centres, full resources), B Battles (important but secondary), C Segments (small, low margin — cure or kill), Growth Platforms (new, specific business cases). Determines RGM resource and investment allocation per segment.

Own-price elasticity adjusted for cross-price effects within the same company's portfolio. If a brand's own elasticity is -1.7 but 30% of lost volume flows to sister brands, the net elasticity is approximately -1.2. Net elasticity gives the true company-level impact of a price change, which is always less severe than the brand-level measure.

The gross profit generated by net incremental volume minus the promotional investment. Waterfall: Gross Incremental Volume minus Cannibalization minus Subsidized Base equals Net Incremental Volume, times GP per unit, minus Promo Investment equals Net Incremental Profit.

The true revenue gain from a promotion after subtracting cannibalization of own products, subsidized base volume, and stockpiling effects. Net incremental revenue is always less — often dramatically less — than gross incremental revenue.

GSV minus on-invoice discounts — the amount invoiced to the retailer before off-invoice deductions. Level 1 in the G2N waterfall. Subsequent off-invoice deductions further reduce revenue to Turnover/Net Revenue.

How much of a gross price increase actually flows through to net revenue after trade investment increases, mix shifts, and promo depth changes. Positive NSR means real pricing capture; negative means trade costs or mix are absorbing the increase.

A waterfall decomposing NSV change between periods into: volume growth, base price changes, mix shifts, promotional investment changes, trade term changes, and currency effects. The standard format for explaining revenue performance to senior management.

Revenue after deducting all trade spend, discounts, and allowances from gross sales. NSV is the true top-line measure of what the manufacturer retains. In most FMCG companies, NSV is the primary revenue KPI because it reflects both pricing power and trade investment efficiency.

Net sales value divided by the weight of product sold — the primary measure of pricing density in FMCG. NSV/kg allows comparison across different pack sizes and formats. Improving NSV/kg through price increases, premiumization, or shrinkflation is a key RGM objective.

Occasion-Based Portfolio, Pricing, and Channel strategy — a framework originated by a global beverage leader organizing pack-price decisions around consumer consumption occasions rather than internal manufacturing logic. Maps occasions to pack formats to channels to price points.

Trade discount paid separately from the invoice as periodic rebates, allowances, or claim-based payments. More controllable than on-invoice because payment can be conditional on retailer performance (SMART counterparts). Requires robust tracking and audit processes.

A trade discount applied directly on the sales invoice, reducing Net Invoice Value. Immediate and transparent but difficult to reverse once granted. Key risk: moving spend to on-invoice is easy, but reversing it when a retailer changes strategy is extremely difficult without strong contractual terms.

An approval process requiring escalation when a proposed promotional event falls outside established guidelines on mechanic, depth, frequency, duration, or display. Prevents the calendar from accumulating value-destroying events through inertia. Events below the amber ROI threshold trigger OOG escalation.

Quantifying the EBIT impact of a 1% change in each P&L variable. Typical FMCG hierarchy: 1% price = 8-11% EBIT growth (depending on starting margin structure); 1% COGS saving = 4-5%; 1% volume = 3-4%. Proves pricing is the most powerful profit lever.

The structure of a product range defined by different pack sizes, formats, and their associated price points. PPA determines how a brand's portfolio serves different consumer occasions, shopper missions, and channel requirements. A well-designed PPA creates logical incentive curves that trade shoppers up to larger or more premium packs.

A tabular view of the entire brand portfolio showing each SKU's pack size, RSP, RSP/kg, price index vs. routine pack, gross margin, and promotional parameters. The working document for diagnosing incentive curve problems and planning PPA changes.

Volume pulled forward from future purchases during a promotion — consumers buy more than they need and reduce subsequent purchases. Creates apparent uplift but no real incremental demand. Particularly prevalent in non-perishable categories and detectable as a post-promotion dip.

The percentage of households in a defined market that have purchased a product or brand at least once in a given period. According to empirical brand science, penetration is the single most important driver of brand growth — brands grow primarily by acquiring new buyers, not by increasing loyalty among existing ones.

Setting an initially low price to maximize adoption and market share quickly. Best when there are strong network effects, significant learning-curve cost advantages, or a need to pre-empt competition. Risk: difficult to raise prices later and may attract price-sensitive customers with low lifetime value.

A visual diagram specifying exact placement, facings, and shelf position of every product in a store fixture. Planograms translate PPA strategy into physical execution. The SPACE framework (Space, Placement, Adjacencies, Count, Environment) governs planogram design principles.

The decline in sales below baseline levels following a promotional event, caused by consumers having stocked up during the promotion. A deep dip indicates the promotion pulled forward future demand rather than generating genuine incremental consumption.

An SKU that drives high value sales and ROS, builds penetration, and generates profit for both manufacturer and retailer. Deserves double facings and diamond-area shelf placement. Not items that only perform well on promotion or where competitors do better.

Setting prices below cost to drive competitors out, then raising prices once competition is eliminated. Illegal in most jurisdictions but very difficult to prove — courts require evidence of both below-cost pricing and a dangerous probability of recouping losses through future monopoly pricing.

Strategic shift of portfolio mix toward higher price-per-unit products, driven by innovation, quality improvements, or format changes. Improves NSV/kg and gross margin without relying on volume growth. In developed FMCG markets, premiumization is often the primary source of organic revenue growth.

The range of prices within a category or segment where the majority of volume is sold, identified by plotting cumulative volume against shelf price. Products within the corridor compete directly; products outside serve niche demand. Corridor analysis reveals fair-share gaps and identifies which corridors are growing or shrinking.

Revenue or profit variance explained by change in average selling price (net revenue per unit), holding volume and mix constant. A positive price effect indicates successful price realization — the highest-quality form of revenue growth because it flows directly to margin.

The percentage change in quantity demanded resulting from a 1% change in price. Almost always negative (higher price means lower demand). In FMCG, mainstream categories typically show elasticities of -1.5 to -2.5; premium segments -0.8 to -1.5; value/private label -2.0 to -3.5. Elasticity varies by season, channel, competitive context, and price level.

A 2x2 matrix crossing Regular Price Elasticity (RPE) vs. Promoted Price Elasticity (PPE): High RPE + Low PPE = EDLP; High RPE + High PPE = Strategize; Low RPE + Low PPE = Price Increase; Low RPE + High PPE = Hi-Lo (increase base, invest in promos).

A relative measure expressing one price as a percentage of a reference price. In FMCG, price index tracks brand positioning versus competition (e.g., Index 110 means 10% more expensive than the benchmark). Typical targets: premium brands 105-115 vs. category average, value/steal-share brands 70-85.

Relative price density of a pack expressed as an index versus the routine/core pack (Index 100). Entry packs typically index ~120 (smaller format premium), upsize packs 70-85 (value incentive), upscale packs >120 (premium positioning).

A visual analysis showing all products in a category or competitive set arranged by price from lowest to highest, with bubble sizes representing sales volume. Identifies where volume concentrates, reveals white spaces, and shows whether the brand's portfolio covers the right price points across the competitive landscape.

Communicating pricing intentions to competitors through observable actions such as pre-announced price changes, public statements, or consistent patterns. Effective price signaling reduces competitive uncertainty and stabilizes industry pricing. Works best when signals are credible and backed by demonstrated willingness to defend.

A price point at which consumer demand drops sharply and non-linearly, driven by psychological perception rather than rational calculation. In FMCG, thresholds typically occur at round numbers or currency increments (e.g., every 0.50 in the UK). Crossing a threshold upward causes volume losses far exceeding what elasticity models predict.

A category segment defined by price positioning: Super Value (<85 index), Good/Value (85-95), Core/Better (95-105), Upper Core (105-115), Premium/Best (>115). Tracking tier growth and fair share within each tier reveals where the market is moving.

A competitive dynamic where firms repeatedly cut prices in response to each other, destroying industry profitability. Price wars are negative-sum games — total industry profit falls. They are easier to start than stop, and the long-term damage to price expectations often exceeds the short-term margin loss.

A step-down chart showing every deduction from list price to pocket price (actual revenue received per unit). Each step represents a discount, rebate, allowance, or cost. Price waterfall analysis typically reveals 15-25% of revenue leaking through unmanaged deductions. Pocket price is what matters for profitability.

The tendency for consumers to use price as a signal of quality, particularly when quality is difficult to assess before purchase or consequences of poor quality are severe. Reduces price sensitivity: consumers may reject low-priced options as too cheap to be good. Strongest for prestige goods, wine, and professional services.

The gap between a product's regular shelf price and its average realized price (accounting for promotions). Where perceived value exceeds realized value, there is bandwidth to extract more — by raising shelf price or reducing promo depth. Wide bandwidth in premium products signals over-promotion eroding brand equity.

The gap between a product's current price and the maximum price the market will sustain without unacceptable volume loss. Assessed by comparing brand power to price index, analysing elasticity, reviewing WTP data, and benchmarking against price corridors. Products with strong brand equity and low elasticity have the most headroom.

The inverted-U relationship between price and total revenue. Revenue is maximized at the price where elasticity equals -1 (unit elastic). The profit-maximizing price is always higher than the revenue-maximizing price because it accounts for saved variable costs on reduced volume.

A game theory model showing why rational competitors may both cut prices even though both would benefit from maintaining them. In FMCG, each competitor fears losing share if they do not match a rival's cut, so both cut, and both lose margin. Breaking the dilemma requires credible commitment to defend pricing.

The percentage of category volume or value sold under retailer-owned brands. When private label share exceeds ~40%, branded price indices compress and pricing power shifts decisively to the retailer. In such markets, PPA innovation and differentiation become critical competitive tools.

A group of SKUs sharing similar pricing characteristics, promotional strategies, and competitive positioning — the standard unit of analysis for promotional planning. Typically defined by brand x segment x pack format. Promotional guidelines, corridors, and frequency limits are set at PPG level.

Setting price where the gap between total revenue and total cost is greatest (MR = MC). The profit-maximizing price is always higher than the revenue-maximizing price. For products with high variable costs relative to price, the gap can be substantial.

Mapping how total profit in the manufacturer-retailer value chain is distributed between parties, using SGP/kg vs. TM/kg analysis. Reveals whether the split is balanced or trending in favour of one party. Builds data-driven arguments for trade term renegotiation.

A weighted composite metric scoring individual promotional events across multiple dimensions: ROI, gross margin impact, retailer margin, POS consumption, market share change, and turnover uplift. Weightings can differ by category and retailer. Total = 100 points. Events below a threshold score are candidates for reallocation.

A 2x2 scatter plot classifying promo events on sales uplift (Y) vs. ROI (X): BEST (high uplift + positive ROI = replicate), GOOD (low uplift + positive ROI), REVIEW (high uplift + negative ROI = optimize), STOP (low uplift + negative ROI = reallocate). Each dot is one promo event.

Return on investment of a trade promotion: net incremental profit divided by promotional spend. Industry benchmark: 59% of FMCG promotions do not deliver positive ROI. Industry-standard thresholds: >25% = strong (green), -25% to +25% = review (amber), <-35% = stop (red).

The annual plan of all promotional events by period, brand/PPG, retailer, mechanic, depth, duration, and display. Calendar optimization — reallocating from STOP/REVIEW to BEST events — is the primary output of TPO analysis. The best promo is the one optimized before it runs.

A condition where a brand cannot sustain adequate volume at full price, resulting in perpetual reliance on discounts. Diagnosed by VSOD >50%, baseline erosion, and declining full-price volume share. Breaking it requires brand equity reinvestment, gradual promo frequency reduction, and EDLP strategies.

The declining effectiveness of promotions when they are run too frequently, with insufficient gap weeks between events. Consumers become conditioned to wait for deals, baseline volume erodes, and each successive promotion generates lower uplift. Optimal gap week analysis is the primary diagnostic tool.

The increase in sales during a promotional event compared to baseline, expressed as a percentage or multiplier (e.g., 2.5x means promoted volume was 2.5 times baseline). Typical FMCG ranges: 1.5-3x for mainstream frozen food, 1.2-2x for biscuits. High uplift at deep discounts can still destroy value.

Kahneman and Tversky's framework: people evaluate outcomes relative to a reference point, are loss-averse (losses hurt ~2x more than equivalent gains satisfy), and are risk-seeking for losses but risk-averse for gains. In pricing: consumers react more strongly to price increases than equivalent decreases.

Pricing strategies leveraging cognitive biases rather than rational calculation. Includes odd pricing (e.g., 4.99 vs. 5.00), charm pricing, anchoring, decoy pricing, and extremeness aversion. In FMCG, visible as clustering at key price points and shoppers' universal avoidance of the cheapest and most expensive options.

The average number of times a household purchases a brand or category within a given period. Frequency is driven by consumption rate, pack size, and promotional triggers. In the brand growth science framework, most brands have similar frequency levels relative to their penetration — growth comes primarily from gaining more buyers, not from getting existing buyers to purchase more often.

Average unit or value sales velocity per store per week. ROS is the key measure of SKU productivity at shelf level, used in assortment decisions, space allocation, and listing negotiations. Low-ROS SKUs in the long tail are prime candidates for rationalization.

The maximum sales loss you can accept before it becomes profitable to match a competitor's price cut. If expected loss from not matching exceeds the threshold, match the cut. If expected loss is smaller, accept the volume loss — it is cheaper than margin destruction from matching.

The price at which the manufacturer recommends the retailer sell the product to consumers. In practice, retailers may sell above or below RSP. Monitoring the gap between RSP and actual shelf price is a key RGM diagnostic for pricing compliance.

The price consumers use as a mental benchmark when evaluating whether a product is fairly priced. Internal reference prices are based on memory of past prices; external reference prices come from competitor prices or labels at point of sale. Promotions temporarily lower the reference price, which can erode WTP at full price over time.

A brand's market share divided by the leading competitor's market share (or vice versa if the brand is the leader). RMS above 1.0 indicates market leadership in that segment. Used alongside price index and brand equity to determine optimal pricing strategy and justify pricing headroom.

The total value of sales to consumers at retail selling prices, as measured by syndicated data providers. RSV is the standard currency for market share and category performance analysis. The gap between RSV and manufacturer NSV represents the combined retail margin and trade investment.

A cross-functional commercial discipline that uses pricing, pack-price architecture, trade promotion, and mix management as integrated levers to drive profitable top-line growth. RGM typically delivers 3-5% gross profit impact when properly implemented. Also known as Net Revenue Management (NRM) or Revenue Management (RM) depending on the organization.

Setting price at the point where total revenue is highest, which occurs where price elasticity equals -1 (unit elastic). Revenue maximization is rarely the right objective for established FMCG brands because it ignores costs — profit maximization requires pricing above this point.

Quarterly strategic governance forum chaired by RGM lead with Sales, Marketing, Supply Chain, and Finance. Reviews strategy performance, assesses risks/opportunities, and makes cross-functional decisions. Cadence: March, June, September, November/December.

The price potential of a brand or SKU to take a profitable manufacturer price increase, assessed across four dimensions: brand equity strength, price elasticity, competitive positioning (price index), and margin headroom. Only brands scoring green on most dimensions have a clear right to price upward.

The core pack driving repeat purchase and frequency. Typically 4 servings, competitively priced for weekly missions. Serves as the RSP/kg baseline (Index 100) against which all other pack roles are indexed. Execution: Hi-Lo with high promotional intensity. Usually the highest-volume pack in the lineup.

Five-phase RGM execution cycle: SCAN the external landscape, SEE internal performance (VPM, trade investment), SET strategy and targets (corridors, guidelines), GET execution through sales teams (JBPs, compliance), RESET by evaluating results and adjusting.

Sell-in is manufacturer shipments to the retailer; sell-out is retailer sales to consumers (EPOS data). The gap reveals forward buying. Diverging trends — sell-in growing while sell-out is flat — signal trade spend leaking into retailer inventory rather than consumer purchases.

A game-theory concept applied to category management to allocate total category value fairly across brands/SKUs based on marginal contribution. In PPA, Shapley values determine each pack's true contribution by accounting for interaction effects — some packs are valuable because they enable or support sales of others.

The percentage of total shelf space (facings, centimetres, or modules) allocated to a brand. A core RGM principle: share of shelf should be at least proportional to market share. Power SKUs warrant double facings for stopping power and out-of-stock reduction.

Promoting on the shoulders (before and after) peak seasonal demand rather than during the peak. Recruits new shoppers into the buying occasion and extends the consumption window without subsidizing volume that would sell anyway. One of the most effective tactics for reducing the subsidized base.

Reducing pack size while maintaining price, effectively increasing price per unit of weight. Effective when margins are below ~40% and elasticity is moderate. Drawbacks: rising consumer backlash via social media, often only postpones inevitable price changes, and counterproductive for high-margin products where cost savings from weight reduction are minimal.

Setting an initially high price to capture maximum value from the least price-sensitive customers, then gradually lowering price. Best for products with clear differentiation, limited competitive risk, and high development costs. Sequential skimming captures value from each sensitivity tier over time.

Systematic reduction of SKU count by delisting low performers that consume shelf space and supply chain complexity disproportionate to their contribution. Classic long-tail finding: top 10% of SKUs deliver 70-80% of volume. Must account for substitution risk (own-brand switching vs. competitor switching).

Trade term conditions that are Shopper-based, Measurable, Are Controllable, Return-based, and Time-bound. SMART counterparts dramatically improve trade spend ROI by linking payment to verified performance. Without them, overspend of 20-40% vs. plan is common.

Manufacturer's share of the total profit pool in the value chain. Below-average or declining SONA signals the retailer is capturing disproportionate value, warranting trade term renegotiation or mix strategy adjustment.

Framework breaking promotional volume into true sources: Category Expansion (best), Competitive Switching (good for manufacturer), Retail Switching (good for retailer), Internal Cannibalization (negative), Stockpiling/Forward Buy (no real growth), and Subsidized Base (pure waste).

Shelf execution framework: Space (fair share by category/segment), Placement (prime position, GBB flow), Adjacencies (relative to branded lines and competitors), Count (facings for visibility/availability), Environment (POS, signage). Translates PPA and assortment strategy into store execution.

A time-bound, focused RGM execution plan targeting a specific opportunity or challenge — typically 8-12 weeks. Sprints combine rapid diagnostic (2 weeks), action design (2 weeks), and execution with weekly tracking (4-8 weeks). Used when urgent commercial intervention is needed outside the normal annual planning cycle.

The most granular product identifier — a unique combination of brand, variant, pack size, and pack format. SKU-level analysis is fundamental to RGM because profitability, elasticity, and promotional response vary dramatically across SKUs within the same brand. The top 10% of SKUs often deliver 70-80% of volume.

The two ROI levers eliminating structural waste: (12) reduce forward buying by linking investments to sell-out volumes, (13) reduce subsidized base by promoting on seasonal shoulders rather than peaks.

Volume sold at promotional discount that would have been purchased at full price anyway — the single biggest source of wasted promo spend. Most egregious when promoting during peak seasonal demand or on products with strong habitual purchase. Every unit of subsidized base costs the full discount with zero incremental return.

How consumers respond when their preferred product is unavailable, unaffordable, or less attractive — whether they switch brand, pack size, category, or defer purchase. Understanding switching reveals which packs truly compete and where cannibalization risk is highest.

Price alignment among competitors achieved without explicit communication, through consistent pricing behaviour and predictable responses. Tacit coordination is legal (unlike price fixing) and common in concentrated FMCG categories where the market leader signals intent through pre-announced list price changes.

A promotional mechanic temporarily reducing the regular shelf price. The most common and transparent promotion type. Compared to multi-buy, TPR tends to generate higher value sales per event because it benefits all shoppers without requiring larger purchase commitments.

A competitive pricing strategy that matches the competitor's last action: cooperate (maintain prices) if they cooperated, retaliate (cut) if they defected. In repeated pricing games, tit-for-tat is the most effective strategy for sustaining profitable pricing because it is transparent, retaliatory, and forgiving.

The maximum price a fully informed, rational buyer would pay, calculated as the price of the next best alternative plus the net value of all differentiating features. TEV sets the theoretical price ceiling. The actual price should sit between the reference value (NBCA price) and the TEV.

Three levels of trade promotion management: TPO (Optimization) — strategic level, owned by RGM; TPM (Management) — execution level, owned by Sales; PEA (Post-Event Analysis) — review level measuring actual vs. planned performance.

Master TPO framework: (1) Understand Landscape — diagnose performance and dynamics, (2) Set Strategy — define objectives and guardrails, (3) Build Plan — calendar development and scenario modelling, (4) Execute — TPM system with OOG governance, (5) Review & Learn — post-event analysis and fuel-for-growth identification.

Diagnostic measuring whether incremental trade investment delivers incremental market share. Investments delivering share growth with less spend are effective; those losing share despite more spend demand review.

Diagnostic measuring whether incremental trade investment delivers incremental gross margin. Plotted as trade investment change (X) vs. gross margin change (Y). Investments in the bottom-right (more spend, less margin) signal inefficiency.

A performance-based trade terms mechanism where retailers earn rebate percentages by meeting specific counterpart requirements (e.g., permanent display = 1.0%, promo compliance = 1.0%, JBP = 2.0%). Shifts investment from unconditional to conditional, improving ROI.

The total investment a manufacturer makes in the retail channel, including on-invoice discounts, off-invoice promotional allowances, business building terms, and retailer-specific rebates. Trade spend typically represents 15-30% of GSV and is the single largest controllable cost after COGS.

Contractual commercial conditions between manufacturer and retailer covering pricing, discounts, rebates, and service requirements. Structured in four layers: Efficient Operations (logistical efficiency), Business Building Terms (base sales activation), Consumer Price Promotions (incremental sales), and Customer-Specific Terms (collaboration).

The principle that every PPA initiative must deliver to three stakeholders simultaneously: (1) Consumer/Shopper — improved value or choice, (2) Customer/Retailer — delivers retailer P&L targets, (3) Company/Manufacturer — delivers manufacturer P&L targets. Initiatives winning for only one or two stakeholders are unsustainable.

Total Trade Spend as a percentage of Gross Sales Value — the primary measure of trade investment intensity. Typical FMCG range: 15-30%. Objective: reduce TTS/GSV while maintaining or growing volume and share, indicating improving trade spend productivity.

A pack positioned above the routine pack in price/kg, designed to drive value per occasion through superior product or smaller convenience formats. RSP/kg index >120, targeting unconstrained shoppers for routine or special occasions. Execution: no deep deals. Highest GP/kg in the portfolio.

A larger pack driving weight of purchase and stock-up behaviour by offering better value per kg. Typically 6-8 servings, targeting value-seekers and larger households. RSP/kg index 70-85 vs. routine pack (the incentive curve sweet spot). Execution: EDLP or moderate Hi-Lo.

Increasing pack size alongside a price increase so that price per kg decreases while absolute price rises above a threshold. Used when a straight price increase would cross a sensitive price point. The larger pack justifies the higher ticket price with better per-unit value.

A diagnostic model showing how each P&L line contributes to the gross margin growth target, decomposed into pricing actions, mix improvements, cost savings, and volume growth. Makes the RGM plan tangible and measurable.

A central organizing framework from pricing strategy literature for strategic pricing, with six sequential steps: (1) Value Creation — understand and create differentiated value, (2) Value Communication — influence WTP, (3) Value & Price Structure — design metrics, fences, bundles, (4) Pricing Policy — manage expectations and negotiations, (5) Price Competition — sustain profitable dynamics, (6) Price Level Setting — set specific prices.

A two-dimensional plot of perceived quality or brand power (Y-axis) against relative price (X-axis). Products above the diagonal offer good value (quality exceeds price); those below are over-priced. The value map identifies pricing opportunities (under-priced brands) and vulnerabilities (over-priced brands at risk of share loss).

A brand or SKU's revenue as a percentage of total category revenue. Value share captures both volume and price positioning. Growth in value share without corresponding volume share growth indicates successful premiumization or price realization.

Setting prices based on the quantified value a product delivers to customers rather than on cost or competitive benchmarks. Considered the gold standard in pricing strategy but requires deep consumer insight. Price is set between the reference value and total economic value, with exact position reflecting competitive intensity.

A survey technique asking four price perception questions: too expensive, expensive but worth considering, a bargain, and too cheap to trust quality. Plotting cumulative distributions identifies the acceptable price range, optimal price point, and indifference price point.

Revenue or profit variance explained purely by change in total units sold, holding price and mix constant. Positive volume effect with negative price and mix effects may indicate growth through discounting and trading down — a warning sign.

A brand or SKU's unit or weight sales as a percentage of total category sales. Volume share measures physical market presence. Comparing volume share to value share reveals pricing power: value share greater than volume share indicates premium positioning.

Variance analysis breaking revenue or profit change into Volume Effect (quantity change), Price Effect (revenue per unit change), and Mix Effect (shift in what is sold). The universal RGM diagnostic, applicable at total business, market, category, brand, and customer levels.

Percentage of total volume sold at a promoted price. High VSOD indicates promotional dependency. Typical ranges: entry packs ~10%, routine packs ~35%, stock-up packs ~48%. When VSOD exceeds 50%, the brand is effectively always on deal and should consider EDLP or portfolio restructuring.

A psychophysical principle stating that perceived change in a stimulus is proportional to the relative (not absolute) change. In pricing: consumers notice a 10% price change more readily than a fixed currency amount, regardless of absolute price level. This underpins the Just Noticeable Difference (JND) concept.

The average quantity (weight or units) purchased per trip or per period by a buying household. Weight of purchase is one of the three components of category value (penetration x frequency x weight of purchase). Upsize packs are specifically designed to increase weight of purchase per occasion.

The percentage of total category sales accounted for by stores in which the product is available. Unlike numeric distribution (which counts stores equally), weighted distribution reflects store importance. A product in 40% of stores accounting for 70% of category sales has 70% weighted distribution.

Gaps in the pack-price portfolio where consumer demand exists but no product is available — identified through CDT analysis, price corridor mapping, and competitive benchmarking. Filling white spaces profitably is a primary output of the PPA planning process.

The maximum price a consumer will accept for a product before switching to an alternative or not purchasing. WTP is not a single number but a distribution across the customer base — understanding the shape (mean, spread) matters more than the average. WTP can be influenced through value communication, brand building, and framing.

Working spend directly drives consumer purchase (promotions, displays, features). Non-working spend does not (unconditional rebates, listing fees, logistical allowances). Increasing the working ratio improves overall trade investment effectiveness.

A consumer perception that a product offers sufficient differentiation to justify a price premium. WPMF segments are the primary targets for premiumization and upscale pack strategies. Products perceived as WPMF can sustain price indices of 115+ vs. category average without share loss.