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Confidently redefining your pricing strategy: Why Pernod Ricard turned to consumers for clarity 

16
Jan
2025
min. read
Business question

Havana Club is one of Pernod Ricard’s most beloved brands, both within the company and among consumers. However, earlier this year, it faced a challenge in the Swiss market as rum sales declined after the initial post-COVID consumption boom. Persistent inflation negatively affected consumers’ disposable income, heightening their price sensitivity. Pernod Ricard needed to decide whether or not to adapt its pricing and promotional strategy to address these shifts. 

After many internal discussions, we realised we needed to understand more clearly how people perceive Havana Club and how they would respond to different price points,” explains Giordano Diamanti, Head of Revenue Growth Management at Pernod Ricard Swiss. “We felt we lacked the necessary data to make the right decisions moving forward. That’s why we decided to call on boobook to help us understand what was really going on in the market.” 

Knowing your Brand Equity is crucial 

If you want to get to the gist of consumers’ attitudes and behaviours, shopper research is an invaluable source of information. Different types of Havana Club rum were included in the design, such as Havana Club 3 Años, 7 Años and Especial, as well as the most important competing brands. In addition to price, boobook also focused on branding, because understanding brands – both your own and your competitors’ – is pivotal to develop the right pricing strategy. 

In summary, you need to understand three aspects to get it right: 

  • Price elasticity to gauge how consumers respond to price changes. Higher price elasticity indicates that they are more sensitive to these changes, increasing the risk associated with raising prices. 
  • Brand equity and brand image, because the strength of the brand and its position relative to its competitors play a crucial role in determining your pricing power. 
  • Promo sensitivity to understand how consumers respond to promotions. 

The chosen technique to measure both price and promo sensitivity was a conjoint analysis; a powerful trade-off analysis that accurately reveals how consumers respond to different prices and promotions. 

Next to strategic recommendations, Pernod Ricard received a ‘what-if’ simulation tool that enabled them to independently assess the impact of potential price changes and promotional offers in a data-driven way. 

Strong brand justifies premium pricing 

The data-powered recommendations supported Pernod Ricard in determining the best course of action for each type of rum, in terms of pricing, promotional strategy as well as branding. For some rums with strong brand equity, they decided to weather the storm and stay the course. 

It was very reassuring to discover that, overall, our brand equity was strong, and Havana Club is well perceived by our Swiss consumers,” explains Giordano. “When faced with challenging market circumstances, you tend to question everything. Adapting the price and promotional strategy is an attractive option because it yields immediate effects, but it might not be the best call for your business in the long run. We knew that brand equity and pricing were one-to-one connected, and this collaboration has given us the insights we needed to make informed decisions.” 

Moreover, due to the broad scope of the project, Pernod Ricard gained valuable additional insights about both its own and its competitors’ brands. “For instance, we learned a lot about drinking occasions and the link between location and the type of rum consumed. This is very useful for our brand activation strategy. We gained a much clearer understanding of the entire market, and some of these insights were quite surprising.” 

Entrepreneurial spirit turns insights into action 

One of Giordano’s key takeaways is that investing in consumer understanding and external consultancy is always a smart move when you need to make critical business decisions but lack the data and insights to do so in an informed way. “It’s tempting to invest the budget in marketing activities that have a more immediate impact on people, but it if you think about what’s at stake, investing in consumer understanding is definitely worthwhile,” he considers. “The resulting data helped everyone in the company understand the implications of our decisions, leading us to a more fact-based approach.” 

Giordano emphasises the risks of relying solely on the opinions of team members, no matter how experienced they are. “We need to recognise that our perspective on the world is always a subjective one, and it can differ significantly from consumers’. No matter how well we know our brands, we still need to challenge our assumptions from time to time by listening to consumers. For me, finding the right balance between data and entrepreneurial thinking is key. If you can back your assumptions, you have everything you need to move your business forward.” 

Find out more about our pricing solutions, or get in touch to tackle your pricing challenges. 

“Collaborating with boobook to redefine our pricing strategy in Switzerland was an excellent experience. They understand our business very well and are always accommodating of our additional requests. Their recommendations were very clear, and the price simulation tool they developed was both advanced and helpful. I also appreciate how approachable and responsive they were throughout the process.” 

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