Horizontal price tying: aligning prices among similar products
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Is the gap between your private-label brands and the leading brands remaining stable?
Schedule a meetingDiscover our product matching solutionHorizontal price linking ties the price of a product to thatof other equivalent products in the same category: two brands of plain yogurt, two power drills with similar features, a national brand and its private label. It maintains consistent price differentials between substitutable products.
The Essentials in 6 Questions
A price relationship between substitutable products within the same category.
Pricing teams and category managers.
With every price change in the leading benchmark.
Between a national brand and a store brand, or between competing brands in the same aisle.
Keep the offering clear and avoid cannibalization.
Ratios (rather than fixed margins) applied automatically.
Why Set Prices in a Horizontal Chain?
Because a stable price difference between substitutable products shapes the customer's purchasing decision.
- Maintaining clarity in the product lineup: a consistent price difference between private-label and national-brand products guides consumer choice.
- Avoid unintended cannibalization: if the gap narrows, one product takes sales away from the other without any benefit to the retailer.
- To make the category manager's job easier, as they manage cohesive product families rather than individual prices.
A concrete example: the pasta aisle
When the leading brand's price increases from €1.89 to €1.99, its two private-label products are adjusted by the same percentage.
One move by the leader, two MDDs adjusted proportionally
Pasta aisle · leading brand, national private label, entry-level private label
Price increase for the leading brand (€1.89 → €1.99), due to higher material costs.
National private label, ratio maintained (€1.29 → €1.35)
Entry-level private label, price ratio maintained (€0.89 → €0.94)
The rule: National private label = market leader × 0.68 and entry-level private label = market leader × 0.47. The national private label automatically increases from €1.29 to €1.35, and the entry-level private label from €0.89 to €0.94: the perceived price gaps remain stable.
How do you install horizontal tie bars?
By identifying the actual substitutes and then setting the ratios applied by the pricing engine.
Substitutable SKUs are identified by their attributes (use, format, value proposition), which requires reliable product matching (see competitive monitoring and product matching). Our solution for product matching, cloning, and chaining then applies the rules automatically. The choice of target price differentials between brands depends on your pricing strategy. To link product lines together, see vertical chaining.
3 Mistakes to Avoid in Horizontal Chaining
Fake substitutes, discrepancies in euro amounts, or too many rules piled on top of each other.
- Defining imperfect substitutes: Two yogurts with different health claims are not equivalent in the eyes of the customer.
- Maintaining a fixed margin in euros: €0.40 makes sense at €1.89, but much less so at €0.99.
- If you have too many rules for a single item, the engine becomes unpredictable.
Frequently Asked Questions
Short answers to the most frequently asked questions about horizontal chaining.
What is horizontal chaining?
Horizontal price linking ties the price of one item to that of other equivalent items within the same category, typically among substitutable products: two brands of plain yogurt, two similar hole punches, or two colors of the same textile item.
What is the difference between horizontal and vertical tie bars?
Horizontal linking connects substitutable products at the same level (competing brands, private labels, and national brands). Vertical linking connects the different tiers within the same product family (entry-level, mid-range, and premium).
Should we use a ratio or a fixed margin?
It's more of a ratio: a fixed difference in euros loses its meaning when prices change, whereas a ratio preserves the perceived difference.
What are the benefits for retailers?
A clearer pricing structure, less unintended cannibalization, and management based on coherent product families rather than on an item-by-item basis.
Key Takeaways
- Horizontal linking connects the prices of substitutable products.
- It relies on ratios to keep perceived discrepancies stable.
- It limits cannibalization and makes the product lineup easier to understand.
Do you want to maintain a consistent product line within each category?
Booper automatically applies horizontal chaining without requiring manual intervention for each product.
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