What is it?
ARP answers the simple question: on average, how much did consumers pay for this item or brand? To get it, you add up all the dollars sold and divide by the number of packages sold in the same time frame, geography, and retailer set. Because it uses real sales, ARP reflects everyday shelf prices, promotional prices, discounts, and the mix of sizes and formats bought.
Why is it important?
Pricing is important to understand as a brand and a retailer. As a brand, especially an emerging one, it’s important to know what other major competitors are charging for their products. As a retailer, it’s good to know if your assortment is in line with the average of the other retailers in the channel. ARP is a blend of promoted and everyday pricing over a time period, and when used at the category, subcategory, or brand levels, bunches up all the products together. For instance, in the Soda subcategory, individual cans, six packs, and two-liter bottles are all averaged together. Brands can use Equivalized Units (EQ Units) pricing to normalize for that, or they can use Base ARP to figure out everyday pricing and ARP, Promo to learn about promotional pricing.
What are some examples?
The table below compares four brands and a Private Label. Here we see that the Private Label is the cheapest option, by a significant amount. Other brands are a dollar or more. Also, price increases are consistent across brands in this set, which come from a variety of factors, like bigger pack sizes, premiumization, less promotional activity than last year, or inflationary causes. Going deeper requires the usage of other ARP measures (Base, Promo, EQ) and/or study of pack size or pack count attributes.
| Brands | Dollars | ARP | ARP % Chg |
| Brand A | $3,300,601,831 | $4.45 | 8% |
| Brand B | $2,075,687,821 | $3.04 | 5% |
| Brand C | $1,821,234,571 | $3.96 | 3% |
| Private Label | $1,568,472,441 | $2.87 | 7% |
| Brand E | $983,735,881 | $4.83 | 7% |