Сompetitive Pricing and Analysis for Competitive Pricing Strategy
If you analyze the prices of your competitors to change the prices in your own store, you use the competitive pricing strategy, which is the main element of the dynamic pricing.
Why you need to monitor competitors
According to Forrester Consulting, 81% of buyers compare the prices of several stores in search of a better offer. This is due to the publicity of prices of online stores. The optimal price for the product significantly increases sales in your store.
Determining the quality of data
Competera works with 200 retailers from around the world, and we know for sure that for correct pricing, it's important to use complete and accurate data about competitors. As part of a survey of retailers from six countries, we identified such indicators of data quality:
- Depth of comparisons. Everything should be taken into account: color, technical characteristics and other parameters not available on the main product card.
- Percentage of errors. Speed and accurate automatic comparison process may be mixed with careful manual comparison to get the best result.
- Percentage of prices found. Due to various reasons it’s sometimes impossible to find a price on the competitor’s website, then the data is not full.
- Freshness of data. It’ best to use the relevant data collected no later than two hours before the repricing.
- Data delivery time. The data should be delivered to the internal system of a retailer in 20-30 minutes to make the price analysis more effective.
What to analyze?
Monitoring the prices of your competitors is the first step to introducing competition-based pricing.
The second step is to analyze them and to make decisions. To do this, you need to take into account:
- Price Index. It’s the most important indicator for the competitive pricing strategy, which displays the price positioning of your store in comparison with competitors, and helps to understand which of them influences sales more than others. By researching the price index, you will understand which products can be sold more expensively without losses, and which ones should be lowered.
- Promo-activity of competitors. In the same study, Forrester Consulting indicated that at least a third of customers are trying to find discounts before buying the goods. It is important to constantly monitor what actions are conducted by competitors in order to optimize their promotional offers and prices.
- Availability of goods. If you see that the competitors are running out of goods, make a decision according to your pricing tactics.
Internal company data also affect competitive pricing. You know the the list price and the cost price of your product, the desired margin, the planned sales volume. Use this data to better analyze the effectiveness of pricing.
Building efficient competitive pricing
Professor of University of Washington Charles Toftoy characterized pricing as “... part art and part science”, and it is hard not to agree with him.
The essence of effective competitive pricing is in qualitative data and its analysis. In order to make the right decisions, it is important for the retailer to analyze competitors in order to understand what value a product represents for the end user. Based on this data, you can create a business, and develop your retail pricing strategies to choose the right models and pricing scenarios. When these processes are set up, high-speed game starts where competitive pricing helps to increase sales, margins, improve interaction with suppliers or gain market share of a competitor.
Therefore, develop the art of strategic planning, watch your competitors every day, use their experience, make them predictable and in be better than them!