HORIZONTAL CHAINING
Definition
Horizontal price linking ties the price of one product to that of other equivalent products within the same category
This is typically the case for substitutable products: two different brands of plain yogurt, two models of hammer drills with similar features, or two color variations of the same textile item.
The goal is to maintain a consistent price spread between these reference prices to avoid sudden price jumps that would confuse consumers or lead to uncontrolled cannibalization effects.
Why is this important to know?
- Ensuring the clarity of the product offering: a consistent price difference between the private label and the equivalent national brand influences the purchasing decision.
- Avoid unintended cannibalization: if the price gap between two interchangeable products narrows, one will cannibalize the other without any benefit to the retailer.
- Make the catman's job easier: rather than managing each price individually, he manages coherent families.
Example
A grocery chain sells three brands of pasta: the market-leading brand at €1.89, its national private label at €1.29, and its entry-level private label at €0.89
The horizontal pricing strategy follows this rule: national private label = market leader × 0.68 and entry-level private label = market leader × 0.47.
When the flagship product’s price rises to €1.99 due to higher material costs, the national private-label product automatically drops to €1.35 and the entry-level product to €0.94.
The perceived differences remain stable, and the scale remains easy to read.
Reliable competitive monitoring and product matching prevents comparing non-equivalent products and anchors repricing on verified product page, EAN, and attribute alignments.
Pitfalls to avoid
- Defining imperfect substitutes: Two yogurts from different brands but with distinct health claims are not perceived as equivalent by the customer.
- Maintain a fixed difference in absolute terms: 0.40 € makes sense at 1.89 €, but loses its meaning at 0.99 €.
- Having too many horizontal rules: for a single product code, the system becomes unpredictable and decision-making becomes opaque.
FAQ
Horizontal benchmarking involves comparing identical or equivalent products offered by different retailers or competitors
It allows for the comparison of prices, promotions, product assortments, or availability of the same product on the market in order to analyze its competitive positioning.
Horizontal chaining compares the same product across multiple distributors or competitors
Vertical chaining, on the other hand, establishes correspondences between substitute products or products from different lines within the same catalog in order to analyze shifts in demand or opportunities for moving upmarket.
Horizontal benchmarking is the foundation of any reliable competitive analysis
It enables pricing teams to compare truly equivalent products, measure their competitiveness, track price differences, and adjust their pricing strategy in response to market movements.
Pricing solutions use matching engines capable of analyzing EAN codes, product characteristics, product descriptions, brands, dimensions, and even images
Artificial intelligence then improves the quality of the matches when the available information is incomplete or varies by retailer.
Horizontal linking automates competitive comparisons, improves the quality of price analyses, reduces matching errors, and speeds up decision-making
It also provides pricing optimization models with reliable, regularly updated data.
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