generally, although not universally, value pricing was gradually implemented for more products (Exhibit 6). By late 1993, almost all P&G products were on some form of value-pricing plan.
The shift to value pricing represented a radical change in policies and was driven mostly by concern that frequent and complex promotions were eroding the value of P&G's brands. Brand loyalty declined in the United States during the 1970s and 1980s due to the wild price swings that came with constant promotional activity. Frequent promotions rewarded only those consumers most sensitive to prince and acted as a dis-incentive to brand-loyal consumers. Value pricing eliminated incentives for retailer forward buying and essentially offered constant procurement costs combined with some flexible allowances or funds provided for retail store promotions.
Value pricing offered important benefits for CRP customers, encouraging increased CRP adoption. Implementation of CRP with the first few customers required prototyping new net-pricing terms that eliminated variable discounts and promotions in order to remove incentives for forward buying. There was little benefits in trying to improve channel logistics efficiency (e.g., forward buying). Until P&G restructure pricing, efforts to extend CRP were constrained because it lacked a standardized pricing structure that would eliminate forward-buying incentives.
Implementation of value pricing reduced the number of pricing changes at P&G from 55 per day in 1992 to less than 1 per day in early 1994. In July 1994, all remaining variable promotional allowances were eliminated for the last few product categories using these incentives, and geographic pricing differences were eliminated as well. Temporary price reductions or special promotions were allowed only to meet significant competitive threats to P&G brands, and they had to be approved by Jager.
generally, although not universally, value pricing was gradually implemented for more products (Exhibit 6). By late 1993, almost all P&G products were on some form of value-pricing plan.The shift to value pricing represented a radical change in policies and was driven mostly by concern that frequent and complex promotions were eroding the value of P&G's brands. Brand loyalty declined in the United States during the 1970s and 1980s due to the wild price swings that came with constant promotional activity. Frequent promotions rewarded only those consumers most sensitive to prince and acted as a dis-incentive to brand-loyal consumers. Value pricing eliminated incentives for retailer forward buying and essentially offered constant procurement costs combined with some flexible allowances or funds provided for retail store promotions.Value pricing offered important benefits for CRP customers, encouraging increased CRP adoption. Implementation of CRP with the first few customers required prototyping new net-pricing terms that eliminated variable discounts and promotions in order to remove incentives for forward buying. There was little benefits in trying to improve channel logistics efficiency (e.g., forward buying). Until P&G restructure pricing, efforts to extend CRP were constrained because it lacked a standardized pricing structure that would eliminate forward-buying incentives.Implementation of value pricing reduced the number of pricing changes at P&G from 55 per day in 1992 to less than 1 per day in early 1994. In July 1994, all remaining variable promotional allowances were eliminated for the last few product categories using these incentives, and geographic pricing differences were eliminated as well. Temporary price reductions or special promotions were allowed only to meet significant competitive threats to P&G brands, and they had to be approved by Jager.
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