A pricing strategy is a strategy where, based on the channel, a price is set to cater to a customer’s value perception in order to make the most profit while boosting the relationship with customers simultaneously. This is where KVCs and KVIs come in.
Both a key value item and category help retailers figure out the target price in comparison to the competition based on criteria such as the channel or the location. Additionally, they can figure out things such as how the customers that they’re the most interested shop or what pushes their brand perception.
Thus, retailers are able to manage the neverending expansion of SKUs. In the past, these items and categories where found based on financial performance as well as competitive analysis. Afterward, lots of time was invested into figuring out the price. Although it worked in the past, it’s definitely time to reconsider how retailers should identify both KVCs and KVIs due to the fact that today, shoppers have full price transparency and are very well informed. They can find out any information online with ease, such as which company offers the best deal on an item. Therefore, if a retailer isn’t using the right method, they are incorrectly identifying the items and categories, which could impact them significantly and in a negative way. However, this can concern be eliminated with the help of advanced analytics and with an increased number of ways to collect fresh data.
For one, many other variables would be taken into consideration in order to get the most precise collection of KVIs. For instance, price sensitivity is taken into account since that’s the best way to calculate customer price perception. Information gathered online such as cart abandonment as well as user sentiment shouldn’t be neglected either. They are, after all, useful for figuring out why a shopper purchases the product initially.
Another thing to consider is that typically when a shopper buys one product, they end up buying more. Therefore, by incorporating market basket analysis, retailers can figure out the KVIs that cause add-on purchases. On top of that, with the help of segmentation, both KVC and KVI analysis can be immensely improved. Handling both big data along with advanced analytics, businesses can get a segmented list that is made for a certain type of customer purchasing behavior. Therefore, with that segmented list, they can become much more accurate with their pricing decisions.
On top of that, since the retail industry is very dynamic, they need to make sure that both their key value items and categories reflect that. It’s necessary for retailers to set a systematic method to evaluate them based on a specific schedule that way factors such as item assortment, seasonality, and user feedback are always reassessed.
Innovation has immensely impacted retail which is why static lists of both KVCs and KIVs need to be retired. Now, more than ever, it’s crucial to offer the correct products, at the correct time and place, followed by a corresponding price that is the most accurate. This is what will make retailers the most competitive while allowing them to make the biggest profit at the same time.