Performance Improvement in the Private Sector
After navigating the challenges of the pandemic, pub operator and brewing company Greene King was keen to explore additional sources of value to help drive profitability. KPMG was asked to support in reviewing diverse aspects of the business. But it was the team’s analysis of the pricing approach and potential strategy that caught the client’s attention.
Greene King operates a very diverse portfolio of pubs, from busy city centre venues and community locals, to food-led pubs in picturesque rural villages. The customer-base, too, was equally varied, depending on factors such as the venue, the location, the food and drinks on offer and the amenities provided. This huge diversity of pubs, consumption patterns, expectations, and preferences, however, was not reflected in its pricing strategy.
KPMG identified an opportunity to implement a value-based pricing strategy that was aligned to the consumers’ perception of value, with levers that enabled price customisation at an individual pub level, while still ensuring a consistent pricing architecture. This was supported with a dynamic market signals tool that facilitated more frequent, market-driven price reviews.
Step one was a data-driven network segmentation to group similar pubs together into distinct segments. This was based on factors such as the location, type of venue, balance of product types (drinks versus food), type of product offering and, crucially, the preferences and expectations both of existing customers and the local market in general. Even without the pricing element, this was hugely valuable for the client, giving them much deeper insights into their estate.
The next step was a detailed consumer preference study to understand preferences for each product and associated willingness-to-pay, to inform a product-price architecture for each segment. For each product, the aim was to understand the consumer’s willingness to pay, depending on location, where they were going, what the occasion is, who they were with, etc., together with the inter-relationship between these factors and their impact on price. This provided invaluable insights not only into the pricing strategy for different segments, but also a target pricing hierarchy among the beer brands.
The final step was to turn these insights and analysis into a pricing tool and supporting capability to review and refresh prices on an on-going basis. This enabled the client to understand for every pub, for every beer, what the current price is, what the target price is, and how best to move from the current price to target price by venue, while maintaining its competitiveness.
Implementing the new pricing strategy and toolkit was a transformational change for Greene King, which praised the project as one of their most successful ever engagements with an external consultancy. Following the roll-out over the summer of 2022, the company saw a significant increase in gross profit in the 12-month period after the new value-based pricing strategy was implemented. These benefits will be realised on an annual recurring basis, as this engagement enabled the company to build an in-house, data-led pricing capability.
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