In an ideal situation, you would newly set all of your product prices daily and in line with market dynamics. In practice, however, we continuously find that the resources for this among most online retailers are unavailable. Initially, therefore, an optimal compromise has to be found. Introduce the products into active price management which have the biggest effect upon company success. Retailers can make use of the Pareto effect here: An often single-digit percentage of products commonly account for 80% of company success. From this article, you will be generating a list of focus-products, which represent the basis for active price management.
Include as many shares in sales as possible into the active price management.
- Sort your products by turnover and select the top items, which, during the last quarter, together made up ca. 40% of your revenue.
- Sort your products by sales and add into the list the biggest selling items which do not yet appear already on the list based on turnover.
- Fill up the list with products by which you enjoy good purchasing conditions amounting to above-average.
- From your own web analytics, include the products that generate the most traffic to the product pages.
- In the final step, add the “hidden champions”, which are the products you consider particularly important.
The list of focus-products should now encompass ca. 5% of your total range and forms the backbone of your product line. In our particular example, we can identify 900 focus-products from the total range of 150,000, enjoying a share of turnover amounting to 45% all told. In the next article of our series, you will learn how to segment the focus-products effectively.