Classify your products and watch your profits soar

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Classification of the products in an e-commerce catalogue is crucial if you want your chosen pricing strategy to achieve healthy profits. It is not enough to classify them into customer-facing categories. You also need to create groups internally, classifying articles according to their demand and their price perception. Product classification allows you to have a general view of each article’s profitability, based on which you can adapt your pricing strategy. Below we will explain the three groups you can create in your catalogue to boost sales optimisation. 


Create 3 product groups within your e-commerce 

1. Key Value Items (KVIs): Essential products that condition users’ perception of your prices

Key Value Items are essential products that trigger greater interest from users and have a greater ability to lure them into the online store. The key to this is in their prices, amounts seen as reasonable and even attractive, in keeping with users’ expectations. In other words, prices should be low. This group includes products known by different buyer personas. They are purchased frequently and are in high demand. However, they are not very profitable items, they may even cause losses. They act as a highly effective beacon to direct traffic to the website and achieve a higher conversion rate. 

When assessing which of your products is a Key Value Item, it is vital to ask yourself about the demand for each product and how many competitors you are up against. Exclusive items or items with less competition will attract more consumers to the website.

2. Volume Drivers: essential products that increase the shopping basket total

This group will include products that consumers are more inclined to buy once they are on the e-commerce site. These items increase the value of the shopping basket and each user’s average ticket. Volume drivers generate higher returns than KVIs, but they are still competitively priced and in line with the market condition. Their main objective is to recoup some of the client acquisition costs, as users are less price-sensitive with these items.  

Classify your products

3. Profit Generators: highly profitable non-essential products 

Profit Generators are the products which return a higher yield for brands and retailers. Although they have a lower sales volume, their prices allow the e-commerce’s profits to increase. They tend to be more exclusive products, or products that are hard to get hold of, like, for example, rare varieties of fruit and vegetables in an online supermarket. Profit Generators are the second most important product type for the company, after Key Value Items. 

Once you have classified your products, you can decide which are your key value categories, which generate more web traffic, and which have more KVI’s. Today’s online market is fiercely competitive, and users constantly check and compare prices and even use offer searching tools. It is also vital to analyse your competitors’ catalogues. This will provide you with up-to-date information about their prices, stock, brands, categories, descriptions etc. This data is invaluable to help identify new business opportunities and achieve competitive positioning. 

Angela de la Vieja
Content Manager
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