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ACADEMIC SKILLS I
FEB11019X SKILLS AND GUIDANCE




Assignment 3


Aysel Jabrayilova 454308
Adrian Baev 457377

Tutorial group: IB05-B

Word count: 1900
Date: 22
...
2017



Tutorial group: IB05-B












“Evaluate the pricing and effectiveness of the pricing strategy for an extension of the
product line of the private label”
Introduction
This report will analyze the data of three brands, namely, two Dutch labels and the
private label, that has been collected within half a year in order to evaluate whether a
development of the product line of the private label, Freshgel, is needed
...
In order to conduct this report,
different methods will be used to examine the relationships between the three particular
brands
...

After obtaining the relevant results, key parameters will be used in order to inspect the
feasible future success of releasing an additional line of the private brand
...

Data
The data that has been derived by making use of descriptive statistics, are mathematical
variables such as median, mean and standard deviation that interpret some of the
properties of data
...
The mean highlights the average weekly price and sales
volumes of each brand and store
...






Table 1- Descriptive statistics of three brands across both stores during 26-week
period

Prodent

Private Label

Price Of
Toothpaste (€)

Sales Of Store
(units)

Sales Of Store 2
(units)

Mean

1
...
39

154
...
Deviation

0
...
97

45
...
30

113
...
00

Std
...
17

29
...
94

Mean

Colgate

Statistics

Mean

Brand Name

0
...
12

138
...
Deviation

0
...
91

35
...
55, it shows the highest mean price at €1
...

The reason for this is due to the fact that Colgate products are influenced by frequent
promotions and discounts
...
79, as it is using uniform pricing strategy
...
5 and 47
...
In
addition, Colgate has the highest standard deviation of sales volume across both stores,
while the private label showed the lowest results
...
Nonetheless, it can be derived from the Table 1 that the private label performed
better in the Store 2, and this can be explained by the fact that the private label was
successful in gaining customers loyalty as well as positioning itself in the market as a
cost leader
...
Transformation of variables that will been
done in the log-log regression model is a common way to control situations where a




non-linear relationship exits between the independent and dependent variables
...
All these
corrections have to be performed in order to interpret the information in a simple way
to follow, particularly when combining the data by a brand
...
The dependent or response
variable is an outcome that expected to change, while the independent or explanatory
variable is a manipulated event
...
Log-log regression model will enable us to gain insight into the price
elasticity of demand of the products within the dataset, which in turn will help to make
choices in the evaluation on how to best choose the pricing strategy for the new product
line of the private label
...

This graphical interpretation will be helpful in the examination of the price and the sales
volumes
...
This data
will allow us to obtain the correlation between two variables that can be created by
using the scatterplots
...
The strength of the
correlation represents its numerical value, while the direction of the correlation is
defined by whether the correlation is positive or negative
...

Obtained results from the data analysis will allow us to determine a viable path for the
future of the new product line, and how it should be priced in the future
...

Results
In this section of the assignment, the output of the statistical methods as well as its
economic interpretation will be provided
...

For the first step error bar charts for Colgate sales across both stores will be analysed
...
This result is extremely
similar to that of the private brand label; however, Prodent showed inverse results
...
It is also important to point out that having a larger spread
of data does not necessarily indicate that the data is not valid
...
2 and
2
...

Correlations (Colgate)
Variables

LogSales of
Price

Statistics

LogSales of Price

LogSales of Store
1

LogSales of Store
2

Pearson
Correlation

1

-0
...
11

0
...
59

Sig
...
91

1

-0
...
(2-tailed)


...
11

-0
...
(2-tailed)

0
...
87

number of weeks

LogSales of
Store 2

26

number of weeks

LogSales of
Store 1

26

26

26

0
...
91 between
the price and sales of Store 1
...
Sales volumes of
Store 2 are not significantly influenced by the price strategy of Colgate in comparison




with the correlation of Store 1 showing a positive correlation coefficient of 0
...

Looking at the table which has been created for the national brand label-Prodent, it can
be clearly noticed that the results are similar to that of Colgate, representing both
positive correlation coefficients in Store 1 and Store 2 (see appendix 3
...
As can be
seen, no table has been provided for the private brand label as they keep their price
level fixed
...

The analysis can be performed after obtaining the log-log regression models for all
three tested brands
...

The square of the correlation denoted r2 of Colgate in Store 1 shows that r2 is equal to
0
...
Coefficient of determinations are insignificant for both national
brand labels in Store 2 presenting 0
...
05 for Prodent
...
72 which means that 72% of the variability in the sales can
be interpreted by its price
...
As can be seen from the Tables 4 and 6, the
customers of Store 2 are less price sensitive, with a price elasticity of demand for
Colgate brand 0
...
95
...
91%
...
32
...

(All above mentioned data can be found in appendix 4
...
6, and for more detailed
information see appendix 5
...
4)
Conclusion
The main question of the conducted research was an evaluation of the pricing strategy
for an extension of the product line of the private label, Freshgel, compared to the two
national brands
...

Based on the outcomes obtained throughout the research, it was revealed that Colgate
showed the highest mean price, while Freshgel demonstrated the lowest average price
...
One more point that should
be noticed is an analogous correlation coefficients of Colgate and Prodent showing both
positive correlation coefficient across two stores
...

After examining all the data obtained during the analysis, it can be concluded that the
research question has to be rejected, as there is insufficient evidence to prove the
efficiency of pricing strategy for a launch of the new product line of Freshgel
...
Also being a lowestpriced company can create the perception of selling low-quality products compared to
that of the competitors
...
It is also suggested to
use penetration pricing strategy to attract customers’ attention using different
promotional tools in order to reach higher profits
...
1
Figure 1 – Error bar chart of Colgate sales means in 2 stores with the 95% confidence
interval

Appendix 2
...
3
Figure 3 - Error bar chart of Private label sales means in 2 stores with the 95%
confidence interval

Appendix 3
...

Correlations (Prodent)

LogSales of
Price

Statistics

LogSales of
Price

LogSales of
Store 1

LogSales of Store
2

Pearson
Correlation

Variables

1

-0
...
23


...
25

Sig
...
85

1

0
...
(2-tailed)


...
23

-0
...
(2-tailed)

0
...
29

number of weeks



26

number of weeks

LogSales of
Store 2

26

Pearson
Correlation
LogSales of
Store 1

26

26

26

0
...
1
Figure 4- The log-log linear regression model of the sales in Store 1 and price of
Colgate in 26 weeks
...
2
Figure 5- The log-log linear regression model of the sales in Store 2 and price of
Colgate in 26 weeks
...
3

Figure 5- The log-log linear regression model of the sales in Store 1 and Store 2 of
Colgate in 26 weeks
...
4


Figure 6- The log-log linear regression model of the sales in Store 1 and price of
Prodent in 26 weeks
...
5

Figure 7 - The log-log linear regression model of the sales in Store 2 and price of
Prodent in 26 weeks
...
6

Figure 8- The log-log linear regression model of the sales in Store 1 and Store 2 of
Prodent in 26 weeks
...
1

Table 4-Prices and Sales of Colgate in Store 1
(Values are rounded to 2 decimal places)
Model Summary
Model
R
R Square
1

...
83
b
...
82

Std
...
00

Coefficients

Model
1

(Constant)
Log of Price

Standardized
Coefficients
Beta

Unstandardized Coefficients
B
Std
...
07

...
95
b
...
09

-
...
88

Sig
...
00

-10
...
00

t
102
...
75

Sig
...
00

...
2
Table 5- Prices and Sales of Prodent in Store 1
Model Summary

Model
R
R Square
1

...
72
b
...
70

Std
...
13

Coefficients
Unstandardized Coefficients
Model
B
Std
...
03

...
32

...
Dependent Variable: LogSales of Store 1



Standardized
Coefficients
Beta
-
...
3
Table 6- Prices and Sales of Colgate in Store 2
Model Summary
Model
R
R Square
1

...
01
b
...
03

Std
...
29

Coefficients
Standardized
Coefficients

Unstandardized Coefficients
B
4
...
15
b
...
Error

...
26

Beta

...
20

...


...
58

t
55
...


...
17


...
4
Table 7- Prices and Sales of Prodent in Store 2
Model Summary
Model
R
R Square
1

...
05
b
...
02

Std
...
20

Coefficients

Model
1

(Constant)
Log of Price

Unstandardized Coefficients
B
Std
...
41

...
32
b
...
27

Standardized
Coefficients
Beta

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