When a shopper walks into a store, they typically base their price perception on a subset of items. According to Nielsen shopper surveys, >50% of shoppers’ price perception is driven by the price on 10 or less items. Spending time in retail or being a shopper, we know the top items right off the cuff; milk, eggs, bread, bananas. How do we identify all the other items that are important to our shoppers?
KVI Overview
The most important items across the store that shape shopper price perceptions are commonly known as “Key Value Items” or “KVIs”. KVIs are often used to drive price perception and communicate value to shoppers.
KVIs can span across many departments and brands and can even differ by retailer. There are many types of KVIs, each playing a role to shoppers and within our stores. AWG has partnered with Nielsen to bring an innovative approach to identifying KVIs for our members.
A perfect blend of Art & Science
AWG has partnered with Nielsen to identify key shopper metrics to scientifically identify KVIs across the store. AWG analyzes how not only sales and units drive KVI methodology but also what the purchase frequency of an item is, what is the basket penetration and how elastic is the price among other metrics. These metrics help identify the importance of items in our stores and to our competitors, ultimately helping identify the items that matter most to all shoppers. Below is an illustration of those metrics and how items are categorized into an item priority.
We then pressure test the science with our category management teams for alignment. Bringing together the perfect blend of art and science.
Investing in KVIs
Identifying the right KVIs is critical in driving price perception but also in prioritizing everyday retail investments. Investing in KVIs is a balancing act on its own. By identifying KVIs, members may focus their retail investments on KVIs while offsetting those investments on background items. This approach will continue to deliver shopper value through KVI price perception.
Identifying KVIs allows pricing teams to prioritize competitive price checks as well. Price checks can be costly, and one way to reduce price check costs is by ensuring KVIs are prioritized among all other checks. Did you know that AWG has partnered with Retail Data Solutions to offer members a 7% discount on new programs? Just ask us how!
Communicating Value
Be sure to take credit for investments and highlight KVI pricing to shoppers. AWG recommends that stores communicate value to shoppers on the items that matter most by signing KVIs with “Everyday Low Price” hangtags and showcasing any investments with “New Lower Price” tags.
Another effective way to communicate value to shoppers is by leveraging Compare and Save signage throughout the store. Compare and Save signage helps showcase the savings shoppers can expect when switching from the national brand to a private branded equivalent.
If you have questions about identifying KVIs, the impact KVIs can have, discounts on price check programs or AWG’s Compare and Save program, please feel free to contact your Divisional Pricing Manager.
Alatiel Barragan | Director of Category Analytics and Pricing
