The price structure defines the selling prices setup for a category. It is driven by the Price Image the retailer wants its category to have.
It corresponds to defining, for the range, the respective weight of Good, Better and Best (GBB) items.
A little note here: some retailers will apply the GBB weighting to Brands instead of products. When applying this approach, it is therefore required to:
● Define the price reference (per liter, per gram,...)
● Ensure that Brands have the right packing types to support the price image
● The more you allocate space to cheaper items, the cheaper you will be perceived
● Displaying the cheapest products at the beginning of the Customer Flow can do miracle for your price image
● The price image is not the same for all categories
● Price image must be strong for Traffic Categories
● Measure the sales contribution of each GBB segments to identify what is their importance, their trend... and their impact on margin
How to Build a Range Price Structure for a Retailer
How the retailer wants to address its Shoppers Target needs (a wealthy population around is more given to accept expensive products), its price image (What does the retailer wants its shopper to think as far as its “value for money” characteristics is concerned, and the profitability of the Range. In practice, for each segment of the range, the price structure will define how many items or brands should be offer by price type. In general, 3 price types are identified: Good (rather cheap), Better (average price) and Best (most expensive).
🎁 Take Away
A range's price structure is an important component of the category strategy. it needs to be reviewed - and challenged - during the Category Review.
🧰 Related Working Processes
● Price Survey
● Price Structure Survey
● Category Review
● Margin analyses