An introduction to competitor price monitoring
Essential for eCommerce
Price is the strongest lever you can pull as an eCommerce business. It’s where everything you offer from a product to service, to shipping, to customer experience, coalesces into one objective measure of value. Customers use price to measure everything about your business, and they decide to purchase from you when they’re convinced that your price and your service provides them with the greatest value. If you want to win and delight more customers through great pricing, competitor price monitoring should be your top priority.
Competitor price monitoring is any process by which you gather intelligence on how much your competitors charge for the products you have in common. This is typically achieved in one of three ways; by manual price collection, by in-house web scraping or by outsourcing to a specialist provider of eCommerce competitive intelligence.
Which method of competitor price monitoring is best?
Manual price collection is a cheap and cheerful method for keeping an eye on your competitors. Typically, it entails visiting your competitors’ websites and taking a note of their prices in a spreadsheet. This method is straightforward to implement, and on the surface appears to be very low cost.
In reality, however, the cost benefits are superficial. In smaller businesses, this manual collection often takes valuable time away from the owner or senior management. In larger businesses, pricing managers spend as much time clicking through competitor sites as they do making decisions. Given that there are also significant limitations on how much data a human being can accurately gather in a day, manual price collection may well be more trouble than it’s worth.
In-house web scraping can be achieved either by building price monitoring software from scratch or by leveraging (free) screen scraping software to get the job done. In many ways, this is a significant improvement on manual collection as it increases the volume of data available for price comparison without taking up much time. In practice, though, effective and reliable web scraping systems require significant investment to develop and continuous maintenance to operate as intended. More often than not in-house web scraping projects become an unmanageable burden for IT teams and contractors, and fail to deliver the consistent stream of competitor data a modern eCommerce business relies on.
Outsourcing your competitor price monitoring to a specialist provider of pricing intelligence allows you to maximise the volume and frequency of competitor prices collected while optimising value for money and freeing up internal resource for decision making and price setting. Typically, these solutions are cloud-based and handle all of the data collection and reporting for you.
There are several vendors offering competitor price monitoring solutions at bargain prices, but buyer beware: this is a space in which you very much get what you pay for. For a modest increase in your monthly spend, you should be able to find a vendor who doesn’t require you to manually collect all of your competitor URLs for them, and you won’t have to tolerate any of the data quality issues which plague the lower-end providers.
Five elements of a successful competitor price monitoring strategy
1. Define your budget
Your budget will have a bearing on important factors like how much data you can access and how often it’s refreshed. It’s crucial to find the balance between under and overinvesting here; be too cautious, and you could be leaving significant return on investment untapped, too frivolous, and you may not hone in your requirements well enough to maximise your return. In my experience, smaller companies often lean towards underinvesting, throwing away the opportunity to win new customers, convert more views and tactically capture more margin through safe price increases for the sake of a small monthly investment in the correct data.
2. Identify your competition
Who do you see as a competitor? How does that compare to your customers’ view of the market? Do you have a handful of key players to monitor, or should you focus on marketplaces like Google Shopping or eBay? Do some competitors become more crucial at different times of the year? These are vital questions that you need to answer to properly inform your pricing strategy, and therefore your approach to competitor price monitoring.
3. Choose which products to price compare
To gather actionable price comparison data through competitor price monitoring, you must first identify which of your products to monitor. A common approach is to select 20% of products which make up the lion’s share of your sales. This approach will ensure that your existing customers (and new customers with a similar profile) are happy with your prices, but it doesn’t tell the whole story. What if, for example, your worst-selling products are only performing so poorly because you’re way out on price? Many retailers have gained considerable additional revenue from setting the prices of their long-tail products to competitive rates following a price monitoring exercise.
All in all, it is advisable to select as broad a set of products to monitor as you can, bearing in mind that you have to have sufficient time and resources to act on the intelligence when it lands.
4. Determine the frequency of collection
The frequency of data collection is a key variable to determine before embarking on a price monitoring project. A competent vendor should be able to provide any frequency from once a year to every minute but bear in mind that higher frequencies usually attract higher fees. Your market and your internal resource should be the guide here; how often prices change, how tolerant customers are of frequent price changes, and how often you can afford to react are all factors to consider. As a guide, daily or weekly collections are standard in most categories, with frequency often increasing in festive periods.
5. Identify which other attributes are important
In the process of gathering competitor prices, it’s also possible to gather additional attributes like delivery or shipping fees, availability, popularity, reviews, promotions, image URLs, product descriptions and more. In addition to competitor price, these attributes often influence customer buying behaviour and can be used to enhance your pricing decisions.
Imagine a scenario, for example, where you and your competitor both typically charge 9.99 for an item. You’ve just received up to date data showing that your competitor has slashed his price down to 6.99 and his availability sticker below the product image reads "Just 1 item left in stock." With the additional information on availability, you’re able to hold your nerve and keep your price high safe in the knowledge that your competitor’s product is about to go out of stock.
Consumers have come to expect great prices from online retailers. To ensure you’re offering competitive prices on those products which best indicate value to your customers, or for which your customers are most price-sensitive, you have to keep a close eye on the market. To do that effectively, you should partner with a competitor price monitoring vendor with the capability, quality and expertise to take care of your data requirements and free you up to set winning prices.By Jamie Young