Survey by Simon-Kucher & Partners: VAT Increase is Overestimated by More Than 85 Percent of Consumers

LONDON, September 1, 2010 - According to a recent study by Simon-Kucher & Partners, global pricing
and marketing strategy consultancy, 89 percent of consumers are aware that
VAT will increase in the near future, yet only 53 percent know when it will
happen. The study also revealed that more than 85 percent of consumers
overestimate the 'real' price increase of forthcoming VAT changes. One
quarter of respondents wrongly thought that a GBP5 product will increase to
GBP6-a price increase of 20 percent. The correct price would be GBP5.11, yet
only 15 percent of interviewees estimated the price correctly. On average,
respondents expected an increase to GBP5.52-overrating the increase by a
factor of five. Interestingly, 60-79 percent of consumers would continue
spending as normal.

"Those with well prepared pricing strategies will implement the increase
much sooner, for example in late November when the Ashes hype will provide
distraction, or during half term when many consumers are away," says Stephan
Butscher (
www2.simon-kucher.com/index.php?option=com_content&view=article&id=82&Itemid=64&lang=)
,Managing Partner.

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"Companies should use this VAT increase as an opportunity to analyse
their price positioning more accurately. We expect price alterations of
between 0 and 15 percent", said Mr Butscher. "Surprisingly, many companies
pay very little attention to the overall strategic impact of VAT amendments.
Considering how much profit is at risk, rigorous management attention is
essential."

Pricing experts (www2.simon-kucher.com/) at Simon-Kucher &
Partners recommend the following approaches regarding VAT price strategy:

1. Don't go for a general X percent price increase. Take the opportunity
to rework your price strategy.

2. Start systematic pricing optimisation. Classify products in categories
regarding competition, price elasticity and margins, and growth potential.
Review factors like price optimisation for each category, impact simulations,
and price communication.

3. Consider "out-of-the-box" thinking. Implement options such as
diversified package sizes and bundling strategies.

4. Don't wait. Implement your new price strategy as soon as
possible-ideally while consumers are occupied with other matters and are less
likely to notice the changes. Then, in January 2011, you can demonstrate
price constancy and create positive PR.

For further details and recommendations read the full press release
(www2.simon-kucher.com/index.php/us/news/press-releases.html) at
www.simon-kucher.com or contact Saffi Haines +44-20-7841-5750,
Saffi.Haines at simon-kucher.com; Claudia Schulz +49-228-9843-372,
Claudia.Schulz at simon-kucher.com.