7 Ways to Clean Up Pricing Mistakes

At Storewise, we pride ourselves not only on our platform, but also on the deep wealth of industry knowledge and experience we offer to our partners. Storewise customers gain access to seasoned technologists, former grocery operators, CPG professionals, and support specialists ready to work together and strengthen their businesses. 

One such expert in our network is President of Price Dimensions LLC, Jon Hauptman. 

Jon is widely known as one of the industry’s leading price experts, and frequently speaks at major industry forums, addressing retail trend implications for operators across channels. His insights are regularly featured in major market newspapers and national publications, including The Wall Street Journal and USA Today. Jon has also been a guest on NPR's Morning Edition.

As a Storewise partner, Jon graciously contributes his insights below:

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Pricing has never been more important to independent grocers. Retailers and shoppers are both facing great challenges. Grocery store operators now compete against an ever-growing number of traditional and non-traditional competitors, many of which are attempting to attract shoppers with low prices. Additionally, record high inflation and corresponding shopper concern about managing their weekly grocery budgets, has made “price” a key driver of stores they’ll visit. Success—and in some cases even survival—will depend on how well independent supermarkets can strengthen their price-value image among shoppers.  

While it may seem overwhelming for retailers to decide what to do next, a great starting point is to get “back-to-basics” with pricing, i.e., applying proven best practices to fix common unintentional problems that are hurting their price image. More closely, managing and taking action in each of the following seven areas will help grocers “clean up” pricing mistakes, inconsistencies and oversights, and improve price image.  

1. Like Items/Price Families – Products from the same manufacturer that are nearly identical (same size, brand) but differ by flavor should be managed as a single “price family”, i.e., all items in the line should have the same retail base price and/or promotional price. An example of these like items is 3 oz Jello gelatin boxes with multiple flavors, all of which should carry the same price point. When shoppers see different price points for like items, they become confused and lose trust in the retailer’s overall price offering.

2. Price Scaling – Retailers should always encourage shoppers to purchase larger sizes within a product line. Price scaling refers to providing a price per-unit-of-measure benefit for purchasing larger sizes. E.g., a 32 oz jar of a brand of peanut butter should have a lower price-per-ounce than a smaller size (e.g., 18 oz jar) of the same brand/product. In fact, a good rule of thumb is that shoppers should be able to save at least 10% on a price per oz/lb basis if they double the size of package purchased.

3. Known-Value Items (KVIs) – KVIs are items found across the store that have the greatest impact on price image. Identifying KVIs require retailers to select the top-selling/most important items in all major categories (versus simply picking the “top" 250+ items which would likely come from a small number of categories) because shoppers derive their price impressions based on their experiences shopping the entire store. Once identified, KVIs should be managed with special care, e.g., KVI prices should be sharper/lower than other prices in the store.

4. Competitive Benchmarks – It’s important to know the prices available at your key competitors, especially KVIs. While matching a competitor is not necessarily required, a retailer cannot have prices that are disruptively higher than those available at a neighboring store. It’s not uncommon to find supermarkets unintentionally have dozens or even hundreds of prices that are 10%-20%+ higher than prices on the same items at the competitor’s store down the street. Retailers should check competitor prices when possible and “smooth the rough edges” off noticeably high prices.

5.  Private Label Gaps – Private label products should be priced at a savings (gap) versus their corresponding national brands. However, over the past year as national brand product costs have risen, we’ve seen supermarkets pass on the added costs with retail price increases. However, it’s quite common for retailers to forget to adjust their private label prices and, in turn, private label price gaps versus their brands are unintentionally—and often needlessly—growing. While ideal private label vs. national brand price gaps may average around 20%, optimal gaps differ significantly by category, with gaps as low as 10% working well in some categories while 40% gaps are needed in other categories. Managing private label price gaps can help increase your profits while saving money for your shoppers.

6. Meaningful Promotional Savings – Retailers know that signs and shelf tags highlighting promotions attract shoppers. However, shoppers will lose trust in these signs and tags if the promotions they are flagging do not provide an adequate savings. Promotions should offer a minimum 10% savings (or at least a $1.00 savings on high-ticket items over $10.00), and any promotions merchandised on front end cap displays or the front page of the weekly ad circular should offer a minimum of a 15% savings to keep shoppers interested in your promotional program.

7. Doing the Math – The most common mistake that supermarket retailers make when promoting items in-store is emphasizing the sale price only and not highlighting the $ savings. Whenever an item is promoted, it’s critically important for display signs and shelf tags to “do the math” for the shopper and calculate the savings. That way, even casual shoppers who aren’t interested in purchasing from the display or the category can recognize the savings. When a shopper is traveling through the store and sees display signs and shelf tags highlighting significant savings on dozens of promoted items, they feel comfortable that the store is a place to find great deals and save money.

Ensuring you receive credit for great prices and values you already offer is a first step toward improving price-value image. These best practices are designed to convince people to shop your stores more intensively on every trip which will drive profitable sales growth and shopper satisfaction. And a great way to take full advantage of these opportunities is with tools/systems that can automate these “back-to-basics” ideas. 

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Price Dimensions LLC helps more than 50 retailers across the country to effectively manage prices and strengthen price-value image. Prior to Price Dimensions LLC, Jon Hauptman held roles at Inmar, Willard Bishop LLC, United Airlines and Dominick's Finer Foods. He earned his M.B.A. at the University of Chicago.