Pricing will always remain a key task for retailers. However, this new digital era has altered the environment which has caused retailers to rethink both their pricing strategy and their capabilities.
A study by PwC shows that today, 60% of online shoppers buy the item with the optimal price. That is no longer difficult to figure out now that most information can be found online. As a result, it’s imperative to use various pricing strategies. A couple of examples are psychological, which is where you price an item at, for example, $6.99 instead of $7.00 because shoppers are mainly concerned with the first number. Another example is bundle-pricing, where you put together a few items and sell them at a lower price than you would individually in order to free up some inventory space (learn more about pricing strategies by taking our free course on pricing strategies).
Utilizing the right pricing strategy is highly beneficial because category strategies and items are closely linked to the strategic goals of the company.
KVC and KVI: relevance in the digital era
Key value categories (KVCs) and key value items (KVIs) are at the center of pricing strategies in today’s digital world. They are used to assist with managing item’s price decisions in contrast to reference rival price indexes. In fact, those lists are at the base of the efficient price index that retailers are aiming for. The decision can either be the exact same or a bit higher or lower. Pricing depends on the competitive and consumer dynamic in the area or even the price zone being questioned.
Let’s take a look at how the category strategies of KVC impact strategic goals.
KVI pricing, in essence, is heterogeneous and formally divided into these four subgroups.
New way to choose KVCs and KVIs
According to McKinsey, retailers will need to change
- Use new data sources. Notwithstanding the traditional information used (basket and transaction data, customer price perception, and merchant judgment), there is a wealth of new sources of data one of a kind to online channels. This incorporates organized data, for example, client reviews, navigation, search, and buy rates. It likewise incorporates unstructured data, for example, tweets or remarks on social websites. New marketing teams equipped with apparatuses can concentrate and clean these bits of information and enable organizations to control them.
- Make a set of segments of items. Segmenting goods into small sets of pricing groups (for instance, KVIs and non-KVIs) is normally not enough online. Rather, to adjust to client demand, competitor prices, activities, and financial contemplations, retailers should make an adaptable and flexible number of price segments. The key is to make them sufficiently granular so that they can stand alone yet not so granular that it becomes unwieldy to manage the price segments.
- Renew KVIs more often. KVCs and KVIs can be refreshed considerably more oftentimes on the web. At first, most retailers will need to refine the procedure by hand. Once the information sources, weightings, and calculations are set, they can be connected in real time through special services, moving item sets dynamically.
Additionally, the workflow and work, in general, has changed with the KVI analysis.
A retailer may end up moving one, static KVI list with close to 2-3 hundred products to a dynamic list of over 1,000 KVIs that work in a number of segments, even managing for a number close to the products across channels. Not every KVI will be a key item across channels, and there are a number of aspects that will push products to shift across KVI segments dynamically.
Altogether, they all require a single solution that will let you both quickly and transparently manage the assortment intelligence process. Thus, you’ll promptly track the results and be able to make changes accordingly.