In retail, pricing is one of the most powerful tools that retailers have to attract customers, increase revenue, and maximize their margins.
Beyond setting competitive prices, which often involves competitive analysis, your prices also need to be consistent. That’s why range consistency has become a priority for retail brands.
In practice, range consistency involves implementing an approach to maintain a uniform price structure within the entire range of products. In other words, each product in the same category is assigned a price that aligns consistently with the other products in the range.
This approach has a profound impact on the brand’s price image and margin mix.
In this article, find out why range consistency has become a cornerstone of retailers’ pricing strategies, and our tips for optimising it.
What is a range ?
As we browse the aisles of a store or navigate an e-commerce website, we are immediately immersed in a vast universe of products designed to meet our needs, desires, and preferences. At the heart of this shopping experience is a fundamental concept: range management.
A range refers to a collection of products or services offered by a retailer. It encompasses a multitude of choices—from the color and size of a garment to the flavor and size of a food product, including the features of an electronic device. The breadth of a range sets the backdrop for the consumer’s shopping experience. It is much more than just a collection of products; it embodies the vision, pricing strategy, and identity of a brand.
In this article, we will delve into the critical importance of range consistency in retail. We’ll explore how a carefully crafted range can influence consumer purchasing decisions, strengthen a brand’s reputation, and contribute to a company’s longevity by positively impacting revenue.
So, what exactly does range consistency mean, and why is it so essential in an increasingly competitive market? That’s what we’ll uncover in the pages ahead.
Why is range consistency important ?
TO REINFORCE THE BRAND'S PRICE IMAGE
Range consistency means maintaining a consistent price structure between products in the same range. This approach has a significant impact on the brand’s price image. However, not all retailers are concerned, as retailers place less emphasis on the coherence of their product ranges.
Consistent pricing enhances consumer trust in the brand. Your prices appear more understandable and logical to them, setting clear expectations, which eases their purchasing decisions.
Consider, by contrast, an example of inconsistent pricing. Suppose in a store, the per-kilo price of a 500-gram butter block is higher than that of a 250-gram block. Consumers would find it more expensive to buy one large block than two small ones, creating confusion and frustration because these prices are counterintuitive, ultimately damaging your price image.
One of the goals of product line consistency is therefore to avoid consumer confusion, which might otherwise lead them to hesitate or seek alternatives.
TO OPTIMIZE THE MARGIN MIX
Pricing strategy is a profitability lever for retailers. In particular, the margin rate, an important indicator for sector players, is determined by two factors:
- Product sales levels
- The margin level of each product
Changes in the sales levels of products constitute the margin mix. When you change the price of a mid-range product, this adjustment impacts the sales not only of the targeted product but also of others in the same product line. If your approach disregards product line consistency, you risk destabilizing your sales structure and margin mix.
This is why it is recommended to link the prices of products within the same range. In this case, when you change the price of one product, the prices of other products in the range adjust accordingly, keeping your mix consistent.
By focusing on product line consistency, it becomes easier to guide consumers towards higher-margin products (regardless of price).
How can you keep your ranges consistent to optimise your pricing strategy ?
DEFINE THE LINKS BETWEEN PRODUCTS
To maintain range consistency, the first step is to define links between products and matching criteria. This is what we call as internal or vertical chaining (or linking).
For example, you can define classic chaining based on criteria such as :
- Format or volume: for example, 250 gram or 500 gram butter packets, or a pack of 5 pens or 10 pens.)
- Type of brand : private label / national brand
- Colour or flavour: for example, strawberry yoghurt / raspberry yoghurt
- Promotion (“giraffe” product, batches, etc.) versus the back of the shelf
Other, sometimes more complex, criteria might include:
- Product origin
- Whether the product is strategically important to you
- Whether it is nearing the end of its lifecycle
- Etc.
You can establish rules or apply coefficients between linked products to evolve your prices coherently within product lines.
For example, linking based on volume might involve a 10% reduction in price per kilogram or per unit with each jump to a larger size. This makes pricing coherent and transparent for consumers.
By diversifying the breadth of your product line, you also maximize market need coverage while positioning your offers in an attractive mid-range segment.
STANDARDIZE THE NOMENCLATURE OF PRODUCTS
Often, the challenge in establishing these linkages lies in the lack of harmonization in product labels.
Retailers must work upstream to standardize product labels, thereby harmonizing denominations and facilitating links and comparisons between products in the line. Harmonization should cover not just the label but also the weight and other linking criteria, encompassing the total number of specifications to be standardized.
Having a clean, organized database is a crucial prerequisite for applying automatic consistency rules in product lines and for ensuring better visibility at sales points.
Understanding the advantages of pricing
In pricing strategies, the traditional approach has been to establish rules between products. Historically, this involved defining a “master product” (like Coca-Cola in the “soda” category) and aligning the prices of “slave” or “linked” products accordingly.
Today, this approach has evolved. Companies now establish more complex relationships between products in their pricing strategies. They set coefficients to create price corridors. When the price of one product changes, these coefficients are applied to related products, ensuring pricing consistency across the entire range.
The importance of cascade chaining
One of the most effective strategies for maintaining range consistency in retail is what’s called “cascading linkage.” This approach involves arranging products within a range so that they complement and harmonize with each other in a logical and appealing way.
Imagine you’re selecting a set of sheets for your bed. If the colors, patterns, and sizes of the sheets are carefully matched, you’re more likely to buy the complete set. This is where cascading linkage comes into play. Each product in the range is designed to encourage the consumer to consider purchasing other complementary products.
Cascading linkage creates synergy within the range, boosting cross-sales and increasing the average transaction value. It also enhances brand visibility and recognition. A coherent and complete range portrays an image of professionalism and attention to detail.
WHY AUTOMATE range consistency?
Save time on chaining - linking
Many retailers still perform their chaining (alphabetical sorting) manually, within their Excel spreadsheets. The disadvantage is that each time a new modification is made, everything has to be reviewed and checked.
They invest a lot of time and energy in a necessary but tedious and repetitive task. The lack of harmonized labelling increases the risk of errors or omissions. As a result, certain related products may be overlooked, undermining range consistency.
The Linking module of our solution, Optimix XPA, offers label standardization and automatically manages intra- and inter-product links. The solution records, saves, and perpetuates the manual linking work initiated by the client, completing it as needed.
Automatically propose consistent prices in line with changes in pricing strategy
With inflation, retailers are changing their prices much more regularly than in the past.
Therefore, it’s essential to be responsive and able to quickly adjust prices without errors while maintaining range coherence.
With this in mind, an automation solution enables you to dynamically readjust your prices on the basis of the dependency coefficients you decide to apply.
The Importance of the Margin Mix
When it comes to range management, the notion of “margin mix” is central. Margin mix refers to the distribution of products within a range according to their respective profitability. In other words, it’s a question of deciding which products will generate the most profit compared to others, and how this distribution can be optimized to maximize overall profits.
This strategic component is often underestimated, but its impact on a company’s profitability is considerable.
1. Profit maximization
The margin mix enables retailers to prioritize high-margin products, i.e. those that generate more profit per sale. A well-balanced product range, in which high-margin items are given prominence, can considerably boost company profits.
This approach often involves carefully selecting flagship products and high-end items, while avoiding diluting margins with low-profitability products.
2. Reducing low-profitability products
Margin mix also offers the opportunity to rationalize a range by eliminating or reducing products that generate little profit margin. This can free up financial resources to invest more in more profitable products, or in improving the overall customer experience.
3. Strategic thinking
Managing the margin mix requires in-depth strategic thinking. It’s essential to take into account factors such as consumer demand, competition, production costs, and even market trends. Companies need to remain agile, ready to adjust their margin mix to changing market conditions.
Ultimately, the importance of the margin mix cannot be underestimated in the context of range consistency in retail. By judiciously balancing product profitability and adjusting the range accordingly, companies can not only increase profits, but also improve their ability to meet changing consumer needs, while maintaining a strong, consistent brand image.
It’s an essential part of the overall assortment management strategy for modern retail players.
By maintaining consistent prices between products within a range, retailers reinforce their price image, inspire consumer confidence and optimize their margin mix.
However, manual management of assortment consistency is tedious and error-prone, especially when price readjustments are more frequent than in the past.
To achieve greater consistency, efficiency and responsiveness, automated pricing is now essential. A solution like Optimix XPA improves standardization of wording and facilitates chaining between products. It allows you to calculate prices automatically when you change your pricing strategy.
Ultimately, the goal is to achieve complete automation of your range consistency to provide you with absolute confidence in the interdependence of products and ensure that prices remain consistent as you modify your pricing strategy.
Is range consistency a challenge for you? Are you considering automating it?
Contact one of our pricing experts, or request a demo!
