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Gain Confidence in Price Adjustments

Using a 'What-If' Analysis to Model Potential Price Adjustments

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Have you ever wondered about the impact of a simple price change in your taproom? Many breweries remain apprehensive about adjusting their prices, fearing it may reduce demand and negatively impact the bottom line; oftentimes they just keep prices static even if there might be opportunity for more profit.

But what if you could model the impact before making the change?
Enter the world of modern analytics.

Why 'What-if' Analysis?
'What-if' analysis is a powerful tool that allows you to simulate potential outcomes based on varying inputs. For breweries, this can translate to gauging the reaction of your customer base if the price of a beloved IPA is raised by a dollar or if a seasonal brew is given a discount. Such insights equip businesses to make informed decisions, minimize risks, and maximize profits.

In this example, we’ll be using a single dashboard to:
- Understand the current price environment across two locations
- Adjust price and volume parameters to try different scenarios
- See the potential impact to average sales price, quantity, and total sales would be.

Understand Recent Pricing
A robust analytics tool integrates seamlessly with your sales data, letting you observe recent pricing trends at a glance. This is the starting point of any 'what-if' analysis. By understanding the current landscape, businesses can better hypothesize future scenarios.

In our example, we can quickly see that our pricing is different across our locations:
- Restaurant normally changes $9 a pint and 90% of transactions are at that level.
- Taproom normally changes $8 a pint and 72% of transactions are at that level; there is more volatility in pricing.

Modifying to a New Price and Estimating Change in Volume
Advanced analytics platforms allow you to easily adjust prices in a simulated environment, providing real-time insights without affecting the live pricing. Want to know the potential impact of raising a price by $0.50? Just input the new price and watch the analytics work its magic.

In our example, we are modeling the following scenario for one of our WC IPA’s:
- Restaurant price to $8.75; estimated volume increase of +15% (our most common price was $9.00 previously)
- Taproom price to $8.25; estimated volume drop of -10% (our most common price was $8.00 previously)

Seeing the Total Results
Next, a modern analytics tool will showcase the complete results: potential changes in sales volume, revenue, and profitability.

In our example, across both locations, we see the average price going up by 11% and volume dropping by -1%; this leads to a sales increase of +10% or $2,500.

Imagine being equipped with this knowledge before making any price change... It turns a guessing game into a strategic decision.

Modify and Adjust
And this isn’t just a “set it and forget it” exercise. We should confidently make our change and then monitor the situation to make sure that our assumptions on volume are holding true.

In our example, let’s say our price increase was initiated on Jul 1. We can see different results and trends across our two locations:
- In the Restaurant, we are seeing a much larger Qty decrease than we expected. We should go back and revisit our pricing.
- In the Taproom, volume hasn’t really changed much with the higher price. We should continue with the price.

In Conclusion
Modern analytics has revolutionized the way breweries, and indeed all businesses, can approach pricing strategies. Instead of relying on gut feelings or broad market trends, breweries can use 'what-if' analysis to make data-driven decisions tailored to their unique situation.

In the ever-evolving landscape of craft beers, staying ahead of the curve is essential. And with modern analytics in your arsenal, you're not just brewing great beer, but also brewing great business strategies. Cheers!

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