What is Stock-Keeping Unit

Standard approaches to measure price index on a specific retailer against competitors tend to be overly optimistic. The authors propose a methodology that deflects from analyzing solely the price of all products effectively bought by customers by taking into consideration their prior shopping intention. Loyalty schemes are game changers when measuring price index. The study proposes a two-step methodology that comprises on building the customer native baskets and allocating the prices collected to each customer. Under the assumption that a price sensitive customer will not buy a poorly priced product compared to the competitors in that specific period, the authors present an innovative methodology resulting in a more realistic price index metric.