PRICE MATCHING POLICY

Definition

A comprehensive understanding of price elasticity—its definition, calculation formulas, and concrete use cases—remains a prerequisite for any serious pricing management initiative. Why it matters

• Providing a clear framework for repricing decisions: without a price matching policy, every decision becomes an ad hoc compromise, leading to inconsistency.
• Focusing matching efforts: on the references where they truly have an impact (KVIs), rather than scattering resources.
• Preserve margin: on references where blind matching serves no purpose (low-visibility references with low elasticity).

Real-world example

A grocery retailer structures its matching strategy into three circles: 200 KVI references tracked daily and strictly matched to the best of the 3 market leaders, 1,800 secondary references tracked weekly with a tolerated variance of up to +3%, and the remainder of the assortment managed without direct competitive constraints

This segmentation makes it possible to focus analytical resources on the 200 KVIs that drive 60% of the price image

Gross margin increases by 0.4 pts in one year thanks to the non-erosion of secondary references.

How to measure and use it

Building a matching policy requires categorizing references based on their competitive sensitivity (KVI vs. non-KVI), defining relevant competitors by category (rarely the same across all categories), setting the target variance per reference circle, and determining the associated update frequency

Pricing analytics tools automate the execution of this policy across tens of thousands of references, applying different rules for each circle

A quarterly review allows circles to be adjusted based on evolving competitor behaviors.

Common pitfalls

• Matching indiscriminately: across the entire assortment, which destroys margin without any significant brand image gain.
• Underestimating KVI depth: beyond 300 to 500 KVIs, the marginal price-image effect becomes weak and effort dispersion becomes excessive.
• Failing to distinguish strict matching from target variance: strict matching (exact competitor price) and target variance (a constant gap) are handled differently.

Further reading

• Study & Data: Price monitoring and web scraping to continuously feed the matching strategy.
• Solutions: Pricing Analytics to apply rules at scale.
• Consulting: Operational Pricing Consulting to structure matching circles by category.
• Resources: Consult our pricing FAQ to identify KVIs eligible for strict matching.

Mini-FAQ

How many KVIs should be strictly matched?

Between 100 and 500 in most generalist grocery retail chains

Beyond that, the marginal price-image effect becomes weak and operational complexity becomes excessive

The rule of thumb: select references that together account for 50 to 60% of the retailer's price perception.

How many competitors should you match against?

Ideally 3 to 5 relevant, carefully selected competitors

Matching the lowest price among 10 competitors leads to systematic under-pricing

Matching the median of the 3 main competitors is often the best approach.

What if competitors are pricing unprofitably?

The temptation to match must be resisted

If a competitor sells at a loss, matching them sacrifices your own margin without any durable benefit

The proper approach is to match the market median and let the struggling competitor bear the consequences of their own choices.