In retail, pricing is one of the most powerful levers retailers have to attract customers, increase sales and maximise margins.
In retail, pricing is one of the most powerful levers retailers have to attract customers, increase sales and maximise margins. Beyond setting competitive prices, based particularly on competitive analysis, your prices must also be consistent. That’s why range consistency becomes a priority for 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 ?
When we browse the shelves of a shop or browse an e-commerce site, we are immediately immersed in a vast universe of products, each designed to meet our needs, desires and preferences. At the heart of this shopping experience is a fundamental concept : the range.
A range refers to a set 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 range is the backdrop against which the consumer’s shopping experience is drawn. It is much more than a simple collection of products ; it embodies the vision, strategy, and identity of a brand.
In this article, we will delve into the crucial importance of range consistency in retail. We will explore how a carefully crafted range can influence consumer purchasing decisions, strengthen a brand’s reputation, and contribute to the sustainability of the company.
So what does range consistency really mean, and why is it so essential in an increasingly competitive market ? That’s what we’re going to find out over the next few pages.
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 prices reinforce consumer trust in the store. Your prices are more understandable and logical to them. They know what to expect, which facilitates their purchasing decision.
Let’s take, conversely, an example of inconsistent prices. Imagine that, in a store, the price per kilo of a 500 gram butter packet is higher than that of a 250 gram packet. The consumer notices that it is more expensive for them to buy a larger packet than two smaller ones. You generate misunderstanding and annoyance as these prices are counterintuitive. And your price image is tarnished.
One of the goals of range consistency is therefore to avoid confusion among consumers.. They might otherwise hesitate or look for alternatives.
TO OPTIMIZE THE MARGIN MIX
Beyond its impacts on the price-image and purchase decisions, range consistency can be a lever for gain on the margin mix.
The pricing strategy is a lever of profitability for retailers. In particular, the margin rate, an important indicator for industry players, is determined by two factors :
- Product sales levels
- The margin level of each product
Variations affecting the level of product sales constitute the margin mix. However, as soon as you change the price of a product, this modification has repercussions on sales, not only of the concerned product but also of other products in the same range. If your approach does not take into account range consistency, you risk destabilizing the structure of your sales and your margin mix.
This is why it is recommended to link products within the same range. In this case, when you change the price of one product, the prices of the other products in the range are aligned and your mix remains consistent.
By focusing on range consistency, it is easier to guide the consumer towards the products with the best margins (regardless of the 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 criteria, sometimes more complex, can be used, such as the origin of the product, the fact that the product is strategic for you, that it is at the end of its life, etc.
You can set rules or apply coefficients between linked products to ensure that your prices evolve consistently within ranges.
For example, volume-based chaining could involve a 10% reduction in the price per kilo or per unit for each changeover to a larger format, making prices consistent and transparent for consumers.
STANDARDIZE THE NOMENCLATURE OF PRODUCTS
Often, the difficulty in linking products lies in the lack of harmonized product labels.
Upstream, retailers need to work on standardizing product labels to harmonize denominations and make it easier to link and compare products in the range. Harmonization should apply not only to wording, but also to grammage and other linking criteria.
Having your own repository is an essential prerequisite for applying automatic assortment consistency rules.
Understanding the advantages of pricing
When it comes to pricing, the traditional approach is to establish rules between products. For a long time, the prevailing approach was to define a “master product” (for example, Coca-Cola in the “soda” category) in a category and align the prices of “slave” or “related” products.
The approach has now been refined. In their pricing strategies, companies are establishing more complex links between products. They define coefficients to define price corridors. As soon as the price of a product changes, the coefficients are applied to related products, thus ensuring price consistency across the entire range.
The importance of cascade chaining
One of the most powerful strategies for ensuring range consistency in retail is what is known as “cascade chaining”.. This approach involves organizing products within a range so that they complement and harmonize with each other in a logical and attractive way.
Imagine choosing a set of sheets for your bed. If the colors, patterns and sizes of the sheets are carefully matched, and if you can find pillowcases, comforters and blankets that match perfectly, you’re more likely to buy the complete set. That’s where cascade chaining comes in. Each product in the range is designed to encourage the consumer to consider purchasing other complementary products.
Cascading links create synergy within the range, stimulates cross-selling and increases the average value of transactions. It also enhances brand visibility and recognition, as a coherent, comprehensive range conveys an image of professionalism and attention to detail. creates synergy within the range
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.
TheLinking module of our solution, Optimix XPA, offers label standardization and automatically manages intra- and inter-product links. The solution records, saves and perpetuates manual chaining work initiated by the customer, and completes it as required.
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.
It is therefore essential to be able to react quickly and change prices without error, while maintaining the coherence of ranges .
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 aim is to achieve complete automation of your range consistency, giving you absolute confidence in product interdependence and guaranteeing that prices always remain consistent when you modify your pricing strategy.
Is range consistency an issue for you? Are you planning to automate it?
Contact one of our experts.