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The theory that CPG players should focus on primarily high- and low-end segments while deemphasizing mid-tier priced offerings is an ongoing concern for manufacturers that has been further exacerbated by the volatile economy and shrinking middle class. The price-tier polarization of CPG, however, doesn’t necessarily hold true across the board, especially when analyzing the beauty and personal care categories. In fact, the new norm of financial disparity brings with it a redefined middle class facing long-lasting financial challenges, and their decisions on how they spend their money and into which brands to invest are becoming more difficult in light of the increasing absence of mid-tier products. The latest SymphonyIRI Group Point of View, “In the Eye of the Beholder: High-Low Pricing Strategies are not Always Suitable for Beauty,” takes an up-close look at beauty pricing dynamics and how savvy marketers can take advantage of an opportunity to provide consumers with meaningful mid-tier product options.
“Even though the middle class has lost 7% of its buying power in the past 25 years, they still represent a substantial part of the population that wants to purchase mid-tier products,” says Victoria Gustafson, author of the Point of View and principal and team lead of strategic insights, SymphonyIRI. “Companies that disregard this still large and powerful section of the market, especially in beauty, are poised to miss a great portion of sales and broad opportunity today and into the future. This analysis points to certain beauty markets where high-low portfolio pricing strategy holds, but also highlights segments that are neglecting the middle market, which means losing overall.”
In order to best analyze the beauty industry and how this high-low portfolio pricing strategy fits—or doesn’t—into the diverse segments within it, SymphonyIRI established a methodology that dissected the hair care, hand and body lotion, body wash, and facial skin care categories. SymphonyIRI built price quartiles along several value dimensions. This analysis proves that while high-low portfolio pricing strategy certainly warrants merit in CPG, it is not an optimal strategy in the beauty and personal care industry, which is known for being innovative and destination driven.
Brand owners and retailers looking to tap into the opportunity the underserved mid-tier beauty market represents should consider the following factors: