Retailers looking for counsel on how to price their items correctly, stay price competitive and still manage to eke out a profit would be well served to get a Key Value Item (KVI) analysis. The SKU-level analysis helps identify which products disproportionately drive customer’s price-value perception of a retailer and are the first products that drive store switching when pricing is not aligned.
A KVI analysis is based on both behavioral data such as sales, household penetration and purchase frequency as well as attitudinal data on customer awareness of specific products, their accurate recall of the prices and their level of significance in price comparisons between stores. Products that index high in KVI require special attention from retailers for both everyday pricing and promotional pricing. These items are the critical “Price Halo” products that sets the price image of the store. In a successful Price Halo model, the “halo” of the low prices on the KVI’s shines on your entire store.
Examples of KVI’s for grocers in the US include:
Unbranded: 1 gal milk, 1 doz eggs, 1 lb bananas, 1 lb grapes, 1 loaf white bread, 1 lb ground chuck
Dairy: 6oz Yoplait Yogurt, 16 slice Kraft Am Singles, 1 lb Land O Lakes Butter, 1 lb Parkay sticks, 1 lb Oscar Mayer Bacon, 1 lb Ballpark Franks
Frozen: 1.5 Qt Breyers Vanilla Ice Cream, 8 oz Cool Whip, Lean Cuisine Single Serve Dinner, 12″ Tombstone Pizza
Dry: 14 oz Cheerios, 40 oz Heinz Ketchup, 30 oz Hellmans Mayo, Kraft Mac & Cheese Blue Box, 26 oz Ragu, Campbells Red Label Soup, 18 oz Jif PB
Drinks & Snacks: 12 & 24 pk Coke, Diet Coke, Pepsi & Diet Pepsi, 18 Oz Oreos, 10-11 oz Lay’s Chips, 12 oz Doritos, 20pk Capri Sun
HBA: 500 ct Q-Tips, Nice N Easy Haircolor, 12.5 oz Pantene Shampoo, 30 ct Band-Aids, 40 ct Tampax
Household: 4 pk AA Duracell & Energizer, 150 oz Tide, 96 oz Clorox, 100 ct Ziploc Sandwich Bags, Huggies & Pampers Diapers, 8 ct Bounty
KVI’s will change by market – to accommodate strong regional brands – as well as by time of year. Holiday items like Halloween bagged candy, turkey, cranberries, stuffing, marshmallows, cream cheese, sugar, flour and other key items rise to the top of customer’s lists as they search out traditional ingredients and compare them to the prices of their memory.
A risk to staying focused on KVI’s is being disciplined in selecting a narrow number of critical items and not letting competitors distract you into reducing prices on so many other products that your profitability suffers. Your promotions may feel repetitive as you feature the same items over and over, but if you have selected the most universally appealing products, they can still succeed. Keep promotions fresh by also showcasing new items that you can highlight at full price.