A temporary price reduction (TPR) is when a product's price is reduced by 10% for up to four weeks. After four weeks we classify it as a permanent price change.
Why is it useful?
Tracking your TPR performance helps you decide the products suited to temporary promotions, while ensuring your price cuts stay profitable.
Share TPR results with your retailer to negotiate win-win promotion strategies. If retailer promotions impact the sell-out price at the point of sale, we'll let you know.
We won’t always show all the insights in the weekly view. TPR coverage is not displayed to assure retailer confidentiality, we report this insight only, if at least 4 retailers are selling the model with a price reduction in a week.
For aggregated periods the weighted TPR coverage is only reported, if in all selected weeks the model was on price promotion at minimum 4 retailers.
How is it calculated?
TPR insights are based on weekly GfK POS data. We only include temporary price changes, permanent price changes are not included.
The weighted TPR coverage is a measure of the breadth of a price reduction activity. It is measured by counting the shops, in which the price reduction was observed. The shops are weighted by their size / importance which is measured as sales revenue in the category in the respective week. For the model under consideration you can assess the range of the TPR coverage by investigating the history plot.
Online retailers are treated as one shop in the weighted TPR coverage, but their importance - based on category revenue - is taken into consideration. Hence, if an important online retailer puts a model on TPR, this retailer will be considered in the weighted TPR coverage according to its importance in the category.
Retailer cashbacks which are instantly deducted from the regular price at the point of sale are included. Manufacturer Cashbacks which require that the consumer sends the receipt to the manufacture are not included. Returns and cancellations are taken into consideration.
Price reductions with a duration of 1 day are captured but depends on whether the price reduction impacts the average selling price in a week. In any case, the price reduction and sales uplift of the 1-day activity will be underestimated, since it reflects the average of a full week (4 days without price reduction).
Baseline sales of a model at a shop level are calculated as average sales over the last 4 weeks. The current week is excluded from the calculation. At model/shop level, past weeks, where we observed a TPR at model/shop level are excluded. Sales are de-seasonalised and outliers are removed before calculating the average.
The baseline price is calculated at shop level. Baseline price can never be lower than the average selling price and not higher than the maximum average selling price of the next 4 weeks.
TPR Intensity
TPR Intensity measures promotional intensity, dividing units sold with a temporary price reduction by the total of all units sold.
TPR Efficiency
TPR efficiency is the ratio between revenue uplift of a temporary price reduction and the incremental costs of the TPR. Revenue uplift is the difference between actual revenue and baseline revenue (expected). Incremental costs are the price reduction given in total for all units sold with a TPR. Values greater than 1 indicate, that the price reduction generated more incremental revenue than it costs the retailer, values smaller 1 indicate the opposite.
The difference between TPR efficiency and relative TPR efficiency is Relative TPR efficiency is derived from the TPR efficiency. It sets the TPR efficiency of a model in relation to the average TPR efficiency (across all models) in the category.
For more information on TPR, read our TPR simulator guide.