Identifying and Choosing Key Value Items for Effective Pricing Strategy


The landscape of retail has been significantly transformed by the digital era. More than ever, pricing plays a crucial role in a retailer's strategy, determining customer engagement, loyalty, and overall business results. In this evolving environment, understanding Key Value Categories (KVCs) and Key Value Items (KVIs) is critical. This lesson will guide you through identifying your KVIs and how to choose them effectively to maximize your pricing strategy.

Unveiling the Power of Key Value Items

Prepare to meet the MVPs of your pricing strategy—Key Value Items! These special products hold the key to shaping your customers' perception of value. They're the ones that shoppers remember, the ones that fly off the shelves, and the ones that leave an everlasting impression. By strategically pricing these powerful items, you can gain a competitive edge and unlock the true potential of your business.

Identifying KVIs involves understanding both your business and your customers deeply. Retailers traditionally use transaction data, basket data, shopper price-perception data, and merchant judgment to determine which items become part of their KVI list. 

  1. Transaction and basket data: Analyzing sales performance at the category and item level, including sales volume, number and size of baskets including the item, price elasticity, and market share, can help identify potential KVIs.
  2. Shopper price-perception data: Through primary research, retailers can identify the categories and items that most drive value perception, which are likely to be KVIs.
  3.  Merchant judgment: Experienced merchants can add strategic items with a high degree of competitive intensity to the KVI list.

In addition to these traditional data sources, the digital retail environment presents new sources of information, such as user reviews, search and click-through rates, and social media commentary. These can provide valuable insights into customer behavior and preferences, assisting in identifying KVIs. Let the digital realm guide you towards the most dominant KVIs!

How to Choose Your KVIs

Now comes the time to make strategic decisions that will shape your pricing destiny. Here are the key factors to consider when choosing your KVIs:

  1. Value Perception: Focus on items that leave a lasting impression on customers, shaping their perception of your store's value. These are the items that keep customers coming back for more!
  2. Assortment Perception: Highlight those unique and distinctive products that showcase your merchandise authority. Let them shine and give customers a fresh perspective on what they should buy.
  3. Traffic and Basket Drivers: Seek out the high-velocity items that inspire customers to make additional shopping trips. And don't forget the low-velocity items that entice customers to add more to their baskets during a single shopping trip.
  4. Competitive and Customer Dynamics: Consider the competitive landscape, customer dynamics, and your specific category objectives. Choose KVIs that align with your goals and give you an edge over the competition.
  5. Price Elasticity and Margin Goals: Find the sweet spot between price elasticity, margin goals, and market-share targets. A KVI candidate with high price elasticity might be just the ticket to success!

Adapting to the Digital Retail Era

In this digital age, we must adapt and evolve our strategies. Dynamic pricing allows us to optimize our KVI lists in real-time as market conditions change. Transparency reigns supreme, so competitive pricing for KVIs is essential. And let's not forget the power of personalization—tailor deals based on customer shopping history to enhance their perception of value and foster loyalty.

In conclusion, identifying and choosing your KVIs is your path to pricing greatness in the digital retail realm. Harness their power, understand your customers, and adapt to the evolving landscape. May your pricing strategy shine and your business soar to new heights!

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