1 yakult price evaluation. 2 copyright © 2002 acnielsen yakult yakult contains 30 billion live...
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YakultPrice Evaluation
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Copyright © 2002 ACNielsen
Yakult
Yakult contains 30 Billion live Lactobacillus casei Shirota, a probiotic strain of good bacteria Strong enough to survive the journey through the stomach’s
gastric juices to reach the small intestine alive, where they help maintain an ideal balance of beneficial bacteria
Probiotics: Replenish and balance the level of beneficial bacteria Help control the number of harmful bacteria that naturally
exist in the digestive system Assist with the digestion of food and absorption of nutrients
from the foods you eat Help manufacture vitamins Enhance you immune system Help normalise the regularity of your
bowel movements
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Copyright © 2002 ACNielsen
Yakult – Price Evaluation
Market scenario Cultured milk market comprises of 2 brands, Yakult and
Vitagen, available in only 1 standard (5s) pack size Price
• Yakult $2.60 • Vitagen $2.40
Share• Yakult 67%• Vitagen 33%
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Copyright © 2002 ACNielsen
Yakult – Price Evaluation
Case analysis Yakult is interested in reviewing price and has commissioned
a $9.99 research study to understand how consumers
respond to changes in price
Research findings are provided. You are required to: Compute the price elasticity of demand for Yakult at $2.30, $2.60,
$2.90 and $3.10. Estimate the price at which Yakult will maximize profit. (Note that
total market remains fixed at the tested price range) What are the key implications of taking price up / down? Make a
recommendation on the selling price for Yakult.
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Copyright © 2002 ACNielsen
$9.99 – Research Method
Approach to predicting the sensitivity of demand to price where respondents in separate matched panels are asked to indicate their purchase intent for each brand using a constant sum scale.
The price of the test brand is varied across the panels while the price of other brands is maintained at their market level
Estimate of market share for test brand is obtained at different price levels based on the purchase intent of each respondent in each panel
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Copyright © 2002 ACNielsen
Research DesignCultured Milk
To determine the price-share relationship for Yakult Study Centre: Singapore Target Group: Household decision makers across all race /
income groups Brand portfolio: Yakult and Vitagen Price range:
• Yakult: $2.30, $2.60, $2.90, $3.10• Vitagen: $2.40
Panel matched on race and income group Panel matched on brand usage
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Cultured Milk Market: Buyer Base
Yakult Only
Yakult & Vitagen
Total Cultured Milk: 80%
Vitagen Only 20 4020
80% of consumers consume cultured milk. Of this 40% consume Yakult only, 20% consume Vitagen only and the remaining 20% consume both brands
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Copyright © 2002 ACNielsen
Sample Frame
Panel#
Yakult Yakult & Vitagen
Vitagen Total
1 200 100 100 400
2 200 100 100 400
3 200 100 100 400
4 200 100 100 400
Total 800 400 400 1600
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Copyright © 2002 ACNielsen
Test Price Range (S$)
Panel#
Yakult Vitagen
1 2.30 2.40
2 2.60 2.40
3 2.90 2.40
4 3.10 2.40
Current price
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Copyright © 2002 ACNielsen
Research Results – Share at different PricesYakult – Price Elasticity of Demand?
Price Share Elasticity
2.30 76 ?
2.60 67 ?
2.90 58 ?
3.10 52 ?
Yakult – Price and Share
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Copyright © 2002 ACNielsen
Profit Optimisation
At what price point do we maximise profit? Assume:
• Trade margin is 20%
• Cost per unit is S$ 1.17
• Total market volume for cultured milk remains unchanged.
(Should Yakult adjust price in the range $2.30 to $3.10, while
some consumer will switch brands, we do not expect the
market as whole to decline or increase).
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Copyright © 2002 ACNielsen
Decision
Make a price decision. What do you recommend as the selling price for Yakult?
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Definitions and Formulae
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Price Elasticity
Relates change in price to change in sales volume Formula:
e = Price elasticityV = VolumeP = Price
In the chart, the price elasticity at P0, V0 is:
V
PP0
V0
ΔV
ΔP
𝑒=𝑃 𝑑𝑉𝑉 𝑑𝑃
𝑒=𝑃 0𝑑𝑉𝑉 0𝑑𝑃
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Copyright © 2002 ACNielsen
Gross Profit Yakult’s Gross Profit = Revenue – Variable Costs
= Sales Value – Trade Margin – Variable Costs
One approach to comparing profit across price points
Assuming total market volume is constant within price range
I Current III IV
Consumer Selling Price 2.30 2.60 2.90 3.10
Share 76 67 58 52
Sales Volume (Index) ? 67 ? ?
Sales Value (Index) ? 174.2 ? ?
Trade Margin 20% 20% 20% 20%
Revenue (Index) ? 139.4 ? ?
Variable cost / unit 1.17
Variable costs (Index) ? 78.4 ? ?
Gross Profit (Index) ? 61.0 ? ?
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Copyright © 2002 ACNielsen
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