GLOSSARY

Price adjustment refers to a one-time or recurring change to a price that is already in effect for a specific product, category, or product line. It is implemented in response to a change in costs, a competitor’s price move, a margin target, or a shift in seasonality.

Strategic alignment refers to the consistency between a company's strategy and the decisions made by each of its functions. In pricing, it ensures that pricing decisions are consistent with the objectives of senior management, marketing, procurement, and finance.

Competitive analysis is the systematic study of the prices, product assortments, promotions, and sales strategies of competing retailers. It forms the foundation of an informed pricing policy and enables a company to position its offerings in line with the market. It is an ongoing process that combines data collection (web scraping, field surveys) and analysis (benchmarking, segmentation, scoring).

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Competitive benchmarking is the systematic comparative analysis of prices, product assortments, and promotional offers between a retailer and its direct competitors. More structured than a simple price monitoring exercise, it incorporates summary metrics (Price Index, promotion rate, assortment depth) that enable the management of competitive positioning over time and by category.

The BQP, or “Bouclier Qualité Prix” (Quality-Price Shield), is a program launched in France in 2012 in the overseas territories and communities to combat the high cost of living. It takes the form of an annual agreement between government authorities and major retailers, establishing a list of everyday consumer goods for which prices are capped or moderated.

The break-even point is the sales volume at which a business, product, or project covers all of its costs (fixed and variable) without generating a profit or a loss. Below the break-even point, the business operates at a loss.

The bullwhip effect refers to the amplification of fluctuations in demand as one moves up the supply chain. A small fluctuation in final consumption leads to more pronounced variations at the retailer level, even more pronounced variations at the wholesaler level, and significant fluctuations at the manufacturer level.

Bundle pricing involves selling multiple products or services as a package at a total price lower than the sum of their individual prices. It is a powerful tool for increasing the average order value, moving slow-moving items, and enhancing perceived value. There are two types of bundles: pure bundles (available only as a package) and mixed bundles (products also sold individually).

Calculating the selling price involves determining a product’s pre-tax price based on its purchase cost and the target margin (pre-tax selling price = pre-tax purchase cost ÷ (1 − Gross margin)), before adding VAT and verifying the break-even point.

A distribution channel is the path a product or service takes from the producer to the end consumer. Distribution channels are classified as direct (no intermediaries), short (one intermediary), and long (multiple intermediaries), both in-store and online.

Intra-category cannibalization is the phenomenon whereby sales of Product A capture a portion of the sales of Product B, which belongs to the same category or is sold under the same brand. It can be intentional (the launch of a new product intended to replace an older one) or involuntary (a promotion that erodes the margin of a competing product). When properly understood and managed, it is a lever; when mismanaged, it destroys value.

The category manager, often abbreviated as "catman," is responsible for managing a product family within a retail chain. Their responsibilities include the product assortment (selection of SKUs), merchandising (shelf display), supplier negotiations, promotions, and pricing.

A distribution center, sometimes called a distribution warehouse or logistics hub, is a physical facility where products are received from suppliers, temporarily stored, and then shipped on to stores or end customers. It plays a key role in the retail supply chain: it consolidates shipments, optimizes transportation, and gives the retailer control over delivery times.

Automatic price linking involves programmatically linking the price of one SKU to that of another SKU according to a predefined rule, and allowing the system to automatically apply the update when the price of the master SKU changes. For example, the price of a family-size item can be linked to the price of the individual-size item using a fixed ratio.

Horizontal price linking ties the price of one product to that of other equivalent products within the same category. This is typically the case with substitutable products: two different brands of plain yogurt, two models of hammer drills with similar features, or two color variations of the same garment.

Product chaining involves linking successive SKUs for the same product over time, despite changes in packaging, EAN codes, trade names, or internal SKUs. The goal is to reconstruct a product’s complete history in order to analyze trends in its prices, sales, and performance, even if its technical SKU has changed.

Vertical pricing links the price of one product to that of other products positioned within the same vertical range—entry-level, mid-range, and premium—within the same product family. It ensures that the price difference between these different levels accurately reflects the product’s value proposition (superior quality, enhanced features, premium packaging).

The EAN (European Article Number, now known as GTIN in the international GS1 nomenclature) is the unique numerical identifier assigned to every product sold. The most common format is EAN-13 (13 digits), which appears beneath the barcode.

The price elasticity coefficient measures the sensitivity of demand for a product to a change in its price. It is expressed as a number—usually negative—that indicates the percentage change in sales resulting from a 1% change in price.

The markup factor, or multiplier, is the number by which the pre-tax purchase cost of a product is multiplied to obtain its selling price: selling price (excluding tax) ÷ purchase cost (excluding tax). A markup factor of 1.6 means that the product is sold for 1.6 times its purchase cost.

Product line consistency refers to the quality of the pricing structure within a product family: price differences between tiers (entry-level, mid-range, premium) are clear, differences between variants (sizes, colors, brands) are justified, and the whole structure makes sense to the customer. A coherent product line makes it easier for customers to choose, encourages them to move up the product line, and protects margins.

Pricing data collection refers to the set of processes that gather the information needed to make pricing decisions: competitor prices, internal sales, inventory, purchase costs, product attributes, customer behavior, and external indicators. Without structured data collection, pricing relies on intuition.

Price comparison refers to the process of comparing the price of a product with that of one or more equivalent products, whether they are direct competitors, substitutes, or variants from the same manufacturer. For retailers, it is a fundamental aspect of pricing strategy.

A price corridor is the permitted range around a target price, bounded by a floor and a ceiling. As long as the price remains within these limits, it can fluctuate without requiring approval; if it moves outside the range, an alert or an arbitrage transaction is triggered.

Cost-Based Pricing is a method that involves setting a product’s selling price based on the total cost of production, to which a target profit margin is added. It is one of the oldest and most widely used approaches in retail, manufacturing, and services, as it mathematically ensures that direct and indirect costs (raw materials, labor, logistics, overhead) are covered before applying a markup.

Cross-selling involves offering a customer a product that complements the one they are purchasing, in order to increase the total value of the shopping cart rather than the unit price of a single item.

A customer-centric approach places the customer’s needs, behaviors, and perceived value at the center of business decisions—including pricing, where it prioritizes value-based pricing over an approach based solely on costs or competition.

The markdown includes all price reductions applied to the original selling price: promotions, sales, end-of-season markdowns, employee discounts, and loyalty program benefits. When expressed as a percentage of sales, it yields the markdown rate.

Shrinkage is the difference between the book inventory—calculated based on recorded purchases and sales—and the actual inventory count. It includes losses whose cause is not recorded: theft, administrative errors, and unreported breakage.

Price discrimination involves selling the same product at different prices depending on the customer, the quantity, or the context, in order to capture a larger share of what each customer is willing to pay.

The price gap measures the difference between the price of a product at a retail outlet and a reference price: the average market price, the price of a direct competitor, the price of a substitute product, or the price from a previous period. It is expressed as an absolute value (in euros) or as a percentage.

Pricing capping refers to the mechanism by which price changes automatically calculated by a pricing engine are limited to prevent extreme fluctuations. The capping threshold is the limit beyond which the price change is no longer applied: for example, +/- 10% per cycle.

The halo effect refers to the phenomenon whereby the price of a product (often an iconic or highly visible one) influences the overall perception of a retailer’s price image. If key products are perceived as inexpensive, the entire product line is seen as competitively priced, even if some products are actually more expensive. This is a powerful tool for building a reputation for value without having to lower prices across the entire catalog.

The Veblen effect refers to goods for which demand increases as their price rises, contrary to the classical law of demand—with the high price itself contributing to the product’s perceived value as a symbol of status or exclusivity.

Cross-price elasticity measures the sensitivity of the demand for product A to a change in the price of product B. It reflects the economic relationships between products: substitutes (Coca-Cola / Pepsi), complements (printer / ink cartridge), or independent products. It is an essential concept for managing a product assortment consistently and avoiding pricing decisions that negatively offset each other at the category level.

Price elasticity measures how sensitive demand for a product is to a change in its price. Technically, it is calculated as the percentage change in the quantity sold divided by the percentage change in price. A product is said to be "elastic" if a small change in price leads to a large change in quantity.

Geopricing refers to a practice of differentiated pricing based on the geographic location of the point of sale or the customer. In brick-and-mortar stores, it involves applying different prices depending on the area (urban vs. rural, mainland France vs. overseas departments, downtown stores vs. outlying areas).

Price standardization involves aligning the prices of a given product across all retail locations within a network, or harmonizing the prices of equivalent products within a single catalog. It is a strategy that prioritizes simplicity and clarity at the expense of nuanced local adaptation.

Price image (or price perception) is customers' perception of a retailer's or brand's price level relative to the competition. It is based more on a few highly visible products (key volume items, or KVIs) than on the actual average price, and it influences the choice of store.

A price index measures a price level relative to a baseline set at 100. In retail, the competitive price index (or price index) compares a retailer’s prices to those of its competitors for the same basket of goods: an index of 105 means the prices are 5% higher than the baseline.

Horizontal integration is a growth strategy in which a company expands its business by acquiring or forming partnerships with competitors operating at the same stage of the value chain. In the retail sector, this can take the form of a store chain acquisition, a joint purchasing group, or a commercial alliance.

Vertical integration is a growth strategy in which a company takes control of several successive links in its value chain. Upstream integration occurs when a distributor acquires a supplier (for example, Decathlon, which manufactures its own brands), while downstream integration occurs when a manufacturer opens its own retail locations (Nespresso, Apple Store).

Just-in-time (JIT) is an industrial and logistical system that involves producing and delivering goods only when they are needed, in the exact quantities required. Developed at Toyota in the 1950s, this principle aims to minimize intermediate inventory, work-in-progress, and waste.

The "fair price" refers to the price that consumers consider equitable—both for the seller (who covers their costs and earns a reasonable profit margin) and for the buyer (who pays an amount consistent with the perceived value). It is not a single price that can be calculated mathematically, but rather a social and cultural construct.

Pricing KPIs (Key Performance Indicators) are the key metrics used to measure, monitor, and manage the performance of a retailer’s pricing strategy. They help answer essential questions such as: “Am I competitive?”, “Is my margin growing?”, “Are my promotions profitable?”, and “Are my prices optimal?”. Without KPIs, it is impossible to effectively manage pricing.

KVIs (Key Value Items) are the products that have the greatest impact on customers’ overall perception of a retailer’s pricing. These are the items that consumers easily compare across retailers and that directly influence price perception: milk, baguettes, eggs, smartphones, etc. Being competitive on KVIs is essential to building a reputation for attractive prices.

Machine learning (ML) is a branch of artificial intelligence in which algorithms learn from data rather than being explicitly programmed. In pricing, ML is used to model complex relationships (elasticity, demand, competition), make predictions, and recommend optimal prices. It transforms a discipline that has historically relied on business expertise into a data-driven and scalable discipline.

Gross margin is the difference between a product’s pre-tax selling price and its pre-tax purchase cost. It represents the gross profit generated on each sale before deducting overhead costs (logistics, personnel, rent, marketing, etc.). Gross margin is expressed as an absolute value (in euros) or as a percentage of the selling price (Markup ).

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Net margin is the actual profit generated by a retailer after deducting all costs: cost of goods sold, operating expenses (personnel, rent, marketing, logistics, IT), depreciation, financial expenses, and taxes. It represents the final profitability and is measured as a percentage of revenue. It is the ultimate indicator of a company’s financial health.

Product matching is the process of identifying and linking equivalent products betwe your catalog and those of your competitors. The goal is to ensure that when you compare prices, you are indeed comparing the same product (same brand, same model, same packaging, same variant). Effective product matching is essential for reliable price monitoring.

MDD stands for “private label”: products sold under a brand owned by the retailer (Marque Repère at E.Leclerc, Reflets de France at Carrefour, etc.), as opposed to national brands from manufacturers. Private labels cover budget, mid-range, premium, and specialty lines (organic, gluten-free, regional).

Price modeling involves constructing mathematical or statistical models that predict the impact of a price on a product’s sales, margin, or market share. It can rely on traditional econometric models (regressions, elasticities), machine learning models (gradient boosting, random forests), or deep learning models for the most complex cases.

Price optimization involves determining the price that maximizes a defined business objective (margin, volume, market share, price image) while adhering to operational constraints (product line consistency, minimum margin, competitive rules, positioning). It is not simply a matter of finding the highest or lowest price; rather, it is about finding the best balance among often conflicting objectives.

The average basket size is the average amount spent by each customer per checkout transaction or order: total revenue ÷ number of receipts. It is one of the three drivers of revenue, along with foot traffic and conversion rate.

The MSRP (manufacturer's suggested retail price) is the price at which the manufacturer recommends its distributors sell the product to the end consumer. Also known as the recommended retail price (RRP) or MSRP in English, it is merely a guideline: distributors are free to sell the product at a lower or higher price.

The price alignment policy defines the rules by which a retailer adjusts its prices relative to those of its competitors: which products to align (priority KPIs), at what target margin (strict alignment, ±2%, with a positive margin allowed), against which competitors (the top 3, the entire market), and how often (daily, weekly). It is a central component of the overall pricing policy and one of the most influential factors for short-term margins and long-term price image.

Pricing policy, or pricing strategy, is the structured set of rules that guide a company’s pricing decisions: objectives, type of policy adopted (low-price, promotional, alignment, premium, differentiated), decision-making rules, approval procedures, and performance metrics.

Price positioning refers to the place a brand or product occupies in the market's price hierarchy. It is expressed relative to a benchmark: the market median, the market leader's price, or the discount price.

Demand forecasting involves estimating what customers would purchase over a given period if the product were available at the proposed price, and anticipating how that volume responds to price, promotions, and external factors (weather, calendar, competition). It differs from sales forecasting, which projects the actual volumes sold, which are limited by inventory. It serves as the basis for all pricing, promotional, and purchasing decisions.

Sales forecasting (or demand forecasting) involves predicting future sales volumes for a product or category over a given period (week, month, season). It is based on an analysis of historical sales data, market trends, seasonality, planned promotions, and external events (weather, holidays, social trends). These forecasts inform decisions regarding purchasing, pricing, and logistics.

Price monitoring refers to the process of collecting, analyzing, and tracking competitors’ prices. In retail and e-commerce, it relies on automated tools that scrape competitors’ websites, track in-store prices, or aggregate panel data to provide a real-time view of pricing positioning.

The price waterfall is a graphical representation that breaks down, step by step, the progression from the list price (or marked price) to the net price actually received after all discounts, rebates, promotions, and hidden costs. Each step in the waterfall represents a “margin leak.” The goal is to identify where the loss of value occurs and to optimize each lever.

Price web scraping is the technique of automatically extracting pricing data from competitors’ websites or marketplaces. Performed by web crawlers, it enables the large-scale collection of prices, descriptions, inventory levels, and promotions. It is the underlying technology behind online price monitoring and competitive benchmarking.

Pricing is the process by which a company sets, adjusts, and manages its selling prices. It should not be confused with the price itself: the price is the result (a displayed figure), while pricing is the process that leads to it (data, rules, trade-offs).

Predictive pricing is a pricing approach that uses machine learning models to anticipate future demand, changes in competitors’ prices, and the impact of a price change even before it is implemented. It transforms pricing from a reactive discipline (adjusting after the fact) into a proactive one (making decisions with visibility into the expected impact).

A strikethrough price is a previous price that has been crossed out next to the new price to visually highlight the size of a discount. Its use has been regulated since 2022 by the European Omnibus Directive, which requires retailers to list the lowest price charged in the previous 30 days.

Competitive pricing is a strategy that involves setting prices by directly referencing competitors’ prices (matching, marking up, or marking down). It is the dominant approach in mature, highly competitive markets—such as mass retail, e-commerce, and specialty retail—where price differences are immediately visible to consumers.

A loss leader is a price that is intentionally set very low—sometimes even below cost—for a visible and desirable product, with the goal of driving traffic to the store or website. The objective is not to make a profit on that product, but to attract customers who will then purchase other, more profitable products. The loss leader is a classic promotional marketing tactic.

The shelf price refers to a product’s regular price, excluding promotions—that is, the price at which it is sold outside of specific sales campaigns. It serves as the baseline against which the nominal markup is applied and upon which the retailer’s structural price image is built.

Price is the amount of money a buyer is willing to pay for a product or service. It is the only element of the marketing mix that directly generates revenue—all the others (product, distribution, communication) are costs.

Psychological pricing refers to the set of techniques that exploit consumers’ cognitive biases to influence their perception of value and their purchasing decisions. The best-known example is pricing a product at €9.99 instead of €10: even though the difference is minimal, the brain focuses on “€9” and perceives the product as significantly cheaper.

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A relative price expresses a price in relation to a reference price: that of another good, a competitor, or a past period. It is calculated by dividing a price by the reference price and is expressed as a ratio or as an index with a base of 100.

Promotion depth refers to the extent of the discount applied to a product during a promotion, typically expressed as a percentage discount relative to the regular price. For example, a 20% discount corresponds to a promotion depth of 20%. The greater the promotion depth, the greater the impact on sales volume, but the lower the unit margin.

Price monitoring is the process of collecting competitors’ prices for a sample of products, either in physical stores or online. It can be done manually (on-site data collection by surveyors) or automatically (web scraping, APIs, data panels). Price monitoring is the first step in any price monitoring strategy.

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A trade discount is a price reduction granted to a customer, most often based on the volume purchased, the customer’s loyalty, or their status. It appears on the invoice and reduces the net price paid, unlike a rebate, which is granted after the fact.

Repricing refers to the automated and repeated adjustment of a product’s price based on market signals—such as competitors’ prices, inventory levels, and demand—while adhering to a minimum and maximum price. It is managed using a repricing tool and category-specific rules.

Inventory turnover measures how many times inventory is replaced over a given period: cost of goods sold ÷ average inventory at cost. The higher the turnover, the shorter the time merchandise remains tied up before being sold.

Shrinkflation, or "reduflation," involves reducing the quantity of a product while maintaining or increasing its price. The listed price remains the same, but the price per kilogram or liter increases. Since July 1, 2024, large grocery stores have been required to display this information on their shelves.

Dormant inventory refers to items that have not sold, or have sold very little, for several months, even though they were expected to continue selling. It ties up cash and space, and loses value over time.

Skimming, or "skimming pricing" in English, is a launch strategy that involves setting a high initial price for a new product and then gradually lowering it over time. The idea is to first attract customer segments willing to pay a premium (early adopters, novelty seekers, professionals) before moving on to segments that are more price-sensitive.

Penetration pricing, or a penetration strategy, involves launching a new product or service at a deliberately low price to quickly capture market share. The goal is to attract a large number of customers from the outset, build customer loyalty, and then gradually raise prices once the market position has been consolidated. This approach is typical in competitive markets with high price elasticity.

A pricing strategy is the method a company chooses to set its prices (based on costs, perceived value, competition, or demand) in order to achieve a target margin, volume, market share, or brand image.

A promotional strategy consists of all the decisions that define a retailer’s promotional policy: which products to promote, how often, by how much, through which channels, and for what objectives (traffic, clearing inventory, customer acquisition, etc.). A coherent promotional strategy balances price image, profitability, and sales momentum.

Target costing, or the target pricing method, starts with the selling price the market will accept, subtracts the target margin, and derives the maximum allowable cost of the product. In retail, the term “target-based pricing” is also used when a retailer sets margin or price index targets by category and allows prices to be calculated based on those targets.

Dynamic pricing involves regularly adjusting prices based on demand, inventory, competitors' prices, or market conditions, using predefined rules, both online and in-store.

The sell-through rate measures the percentage of inventory received that has been sold over a given period: units sold ÷ units received × 100. Known as “sell-through” in English, it is used to evaluate a purchase and determine when to mark down prices.

Markup is the margin percentage calculated based on the purchase cost excluding tax: (selling price excluding tax − purchase cost excluding tax) ÷ purchase cost excluding tax × 100. It differs from the Gross margin, which is calculated based on the selling price.

Gross margin is the percentage margin calculated based on the pre-tax selling price (rather than the purchase cost, as in Markup). It represents the portion of the selling price that constitutes gross profit for the retailer.

The promotional rate measures the share of revenue or sales volume generated by promotional items relative to total sales. It is expressed as a percentage and provides insight into the retailer’s promotional intensity. A promotional rate of 30% means that 30% of sales are generated by promotional items. It is a key indicator for managing the balance between price image and profitability.

Natural Language Processing (NLP) is a branch of artificial intelligence that enables machines to understand, analyze, and generate text. In pricing, NLP is used to match products with different descriptions across catalogs, analyze customer reviews, extract product features, or detect price mentions in unstructured sources.

Up-selling involves guiding a customer toward a higher-tier version—one that is more powerful, more feature-rich, or of a higher grade—of the product they initially intended to purchase, in order to increase the value of the sale.

Value-Based Pricing sets the price of a product or service based on the value perceived by the customer, rather than on the cost of goods sold. The central idea is that the price should reflect the benefit a buyer derives from the product (time saved, money saved, prestige, performance), which can generate margins significantly higher than those of a traditional cost-plus-margin approach.

Web price monitoring, or online price monitoring, is the automated and continuous collection of prices charged by competitors on their e-commerce sites and marketplaces. It relies on web scraping, supplemented where possible by APIs or data feeds. It is the foundation of any modern competitive pricing strategy.

Yield management, or revenue management, is a pricing strategy that involves adjusting the price of a product or service in real time based on projected occupancy rates and future demand. Originating in the airline and hotel industries, it has now expanded to many sectors, including ticketing, rentals, restaurants, parking, and even retail for fresh produce.