Competitive Pricing Online
What is competitive pricing?
Competitive pricing strategy is the practice of setting the price of your products or services relative to your competition. In the past, competitive pricing required labour-intensive manual price checking either in-store or online. Modern price monitoring software solves this problem at scale and enables greater coverage and better data quality than ever before.
Why is product pricing important?
A lot has changed in the retail market since online shopping took off in the early 1990s. Consumers now have the ability to comparison shop instantly, and retailers are increasingly in competition with the entire world, not just the shop next door.
These changes have a significant impact on the way businesses should manage their marketing — and which P's they should focus on in the marketing mix. One P has emerged as the clear focus for most consumers: Price.
source: Think with Google
- 87% of shoppers say 'knowing they got a got deal' is important to them. Then a product has been on the market for a long time, and there are many substitutes for the product.
- 60% of internet users in the U.S. "agreed" or "strongly agreed" that price is more important for them than the brand name when buying a product.
- Price is cited as the No.1 reason undecided tech shoppers stop considering a brand.
How does price monitoring software work?
Price monitoring software collects data direct from competitor websites or marketplaces like Google Shopping and Amazon. Typically, the attributes collected include price, product name, promotion, taxonomy, and more. These attributes can be analysed directly or used to perform product matching.
Product matching is the process of pairing the data collected from your competitor to the correct product in your catalogue. Good product matching is essential to produce accurate and relevant intelligence, and ultimately to achieve a successful competitive pricing strategy. Most basic price monitoring systems can match products using global identifiers like UPC or GTIN. Still, often you will need a solution to match similar or like-for-like products together or to handle inaccurate or unavailable product identifiers.
Garbage in, Garbage Out
Like all data collection tools, price monitoring software is only as useful as the intelligence it provides and the actions it inspires. There are many pitfalls in collecting billions of data points on millions of products across thousands of websites. These powerful tools can work against you if the data collection is wrong leading to mistakes in pricing the product because of a poorly designed system.
How to use price monitoring successfully
Knowing your competitors' pricing is essential to competing in the modern marketplace. By monitoring your competitors' prices, you can choose to match, exceed or undercut them according to your overall business model. In practice, companies often have a nuanced approach which varies according to the category or popularity of a given product.
Price monitoring and competitive pricing strategy typically brings to mind a picture of companies fighting a price war and eroding margins all round. While it can be important to remain competitive on key product lines, it isn't just about being the cheapest or racing to the bottom. If you know your customer service and delivery model is much better than your competitors, for example, you might decide to be 10% more expensive on average. Whatever your strategy is in relation to your competitors, you need reliable and accurate data to ensure that your strategy can be executed, measured and refined over time.
By using price monitoring software to enable a competitive pricing strategy, you can get a clear picture of what's going on in the market and make winning pricing decisions that help you to achieve your commercial goals.
By Jamie Young