for Pricing Strategy Implementation

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Project Background

Joeten Superstore is a warehouse retail store founded under Joeten Enterprises, Inc in the late 1900s. It is located in Saipan, Northern Marianas Islands and serves the Saipan market exclusively.

In the midst of a challenging time economically for the island of Saipan, Joeten Superstore looks to optimize key areas of operation to maximize profits and minimize losses. Specifically, the company feels they are able to take advantage of better pricing and are seeking a data-driven analysis to confidently choose the right products.

This project aims to locate these products, establishing which ones could benefit from price changes.

The given dataset includes 7148 rows of unique food products including key metrics (qty available, retail price, average cost and more) and key dimensions (time, product descriptions, and product SKUs). The analysis aims to determine the best products for price strategy under a price elasticity evaluation. Given the scope of the dataset, it will utilize a qualitative approach to price elasticity, assessing elasticity under 8 key categories. The goal of the analysis is to determine a list of the best products to apply pricing strategy and uncovering any hidden information that could be useful.

Northstar Metrics

Developed a rating system to establish price elasticity

• Price elasticity rating system: products will be given a rating under key categories strongly associated will price elastic products, higher ratings will indicate a more elastic product

• Key categories for price elasticity evaluation:

  • Scoring:
    • note that lower scores will coincide with inelasticity
  • Weights:
    • category weights were determined on a number of different factors
    • HIGH weighted categories:
      • higher weighted categories were ones that better followed microeconomic theory: what factors are stopping consumers from just purchasing another good when price changes (under laws of economic theory that as price increases, demand decreases)
        • substitutability: primary determinant of elasticity under microeconomic theory. The direct factor determining how easily one can purchase a similar product; 20%
        • promo sensitivity: doesn’t directly reflect microeconomic theory, but is the closest determinant of price change reaction without actual price change data; 15%
        • unit price: captures the income effect. Captures the primary element of elasticity which is price, income levels among customers do vary but perceived value is typically consistent; 15%
    • LOWER weighted categories
      • lower weighted categories were ones that influence demand but were more situational and subjective to behavioral patterns
        • staples: how easy is it for a consumer to stop buying the good; 10%
        • brand loyalty: how easy is it for a consumer to stop buying the good; 10%
        • perishability: affects the company more than the consumer; 10%
        • product differentiation: differentiating factors may be subject from person to person; 10%
        • purchase frequency: although reflecting demand, it is more indicative of buying habits and less about how prices changes can actually change that demand (not directly in line with microeconomic theory about price elasticity); 10%

  Category	Description	Scoring	Weight
  Promo sensitivity	qty of sales under the promo price/ total sales	1-5 (based on 20% bins)	15%
  Staple vs. non essential	is the product considered a staple or more of a luxury	0 or 1 (non essential or staple)	10%
  Perishability/Urgency	how quickly and necessary a customer needs a product/how long can a customer go without buying the product? How fresh/soon does it need to be purchased?	1-5 (rubric)	10%
  Brand Loyalty	is the brand widely recognized	1-5 (rubric)	10%
  Unit Price	lower price - more inelastic
  high price - more elastic	1-5 (based on 20% bins)	15%
  Purchase Frequency/Demand Importance	which product had the greatest qty sold, reflecting stronger demand	1-5 (based on 20% bins)	10%
  Product Differentiation/uniqueness	how unique is the product? does it offer something else other similar products don’t offer?	1-5 (rubric)
  note: to avoid confounded results score will be the inverse of substitutability	10%
  Substitutability within category	is the product easily substitutable with other products in its category	1-5 (rubric)
  note: to avoid confounded results score will be the inverse of product differentiation/uniqueness	20%

• Total Revenue (Dec24-Dec25): total sales units multiplied by retail price

  • note: any previous price changes will be considered in calculation (previous retail price x sales units under that price (determined by date of “last price change”))

• **Product margins: (**retail price - average cost) / (average cost)

Executive Summary