What Are Known Value Items?
The average consumer has a mental price book for about one hundred items. Those items are the KVIs – the Known Value Items, the ones whose typical price people can usually name off the top of their heads.
Bananas, ground beef, bread, and Band-Aids are in that category.
Step outside the comfort zone of KVIs and shoppers have much less clear expectations. Most shoppers aren’t picking up ipecac or marinated artichoke hearts every week, so they don’t have the price memorized.
This difference allows the halo effect to come into play. The halo effect, described by psychologist Edward Thorndike in the early 20th century, is the phenomenon that causes us to generalize one characteristic to our whole perception of someone — or of a store.
The halo effect explains why a bad first impression can stick with us, why so many of us assume attractive people are also intelligent, and even why taller candidates are more likely to be elected than shorter ones.
It works with prices, too.
Having seen a low price on a half-gallon of milk, consumers will allow the halo effect to give them the impression that a bag of frozen bay shrimp is also being sold at a low price.
If that milk seems expensive, though, the whole store feels expensive to the consumer. In short, as long as pricing remains competitive for KVIs, retailers have a lot of flexibility with the prices of other items. Consumers don’t really know whether the other items are a good deal or not.
The other side of the coin is that it is very important that the KVIs have competitive prices. A great price on artichoke hearts won’t make consumers feel that the store has great prices if the bananas are higher than the consumer’s mental idea of a good price on bananas.