When optimizing your product prices with an AI-based Price Optimization like Sniffie, the most typical scenario is to optimize individual SKUs.
However, sometimes it makes sense to group SKUs into bigger optimizable units. Let’s explore the different options.
What is an optimizable unit?
Optimizable unit refers to a single SKU or a group of SKUs whose price is optimized with an AI-based pricing tool.
To start with, it is not mandatory to group products into an optimizable unit. If the sales volumes of an individual SKU are high enough, the SKU by itself can (and typically should) be an optimizable unit.
The minimum amount of sales volume for an individual SKU to be considered an optimizable unit is 0.5 sold units in a week.
Another criteria for any SKU to be considered an optimizable unit is that you have to be able to change the price point of the SKU in question.
When it makes sense to optimize a group of products as one unit?
If the products that you are selling are very similar to each other, grouping them together can be a good idea instead of having them compete with each other in price.
Let’s say you’re selling t-shirts in five sizes and in five different colors for the same price. It is a good idea to group these five together so that all their prices change when a new price suggestion is made by our tool.
In some industries, grouping products with the same use case and similar price can be a good idea. Think about a hardware store in which they sell many different models of simple screws that are in a similar price range. No matter the model, all the screws could be grouped together to neutralize the risk for cannibalization.
A good rule of thumb is that if you have many similar products within the same price range in your product catalogue, such as t-shirts, grouping them together is often a good solution.
We at Sniffie are more than happy to help you with the process of deciding which products could be grouped together and which products should be optimized singularly.
Benefits of grouping products together into bigger optimizable units
Grouping products into bigger optimizable units has two main benefits:
First, grouping can minimize cannibalization when optimizing products that are at risk of cannibalizing each other.
Secondly, grouping allows you to price your products based on price elasticity in a situation where individual SKUs are not providing enough sales for them to be optimized efficiently.
Read more about our AI-based Price Optimization tool for ecommerce and retail businesses.
Learn more about e-commerce pricing
All things e-commerce pricing & price optimization right in your inbox. No spam.