Retail Pricing Intelligence: How to compose smart pricing
Monitoring competitors' prices, processing data, creating reports and completing other tasks is necessary to work on pricing.
What if you had a robot as your assistant? He has studied a million operations and is able to make the right decisions much faster than a human. He does not sleep at night: if the price of a competitor's product suddenly falls in the middle of the night (an abnormal deviation occurres), the robot will immediately report it.
But the main task of this robot is to set up smart pricing based simultaneously on researching competitors, your business strategies and customers demands.
Why is Pricing Intelligence so important?
The volume of data generated by retail grows exponentially, and this data is actively being used. According to McKinsey, Amazon and other market leaders repricing popular products up to 12 times a day and react to changes in competitors' prices within an hour.
Therefore, if you make a mistake in pricing, the consequences may have serious consequences: a decrease in sales, margin, and customer mistrust. To keep pace with competitors and establish the optimal prices, you need to create an effective system of competitive intelligence and pricing.
The structure of a competitive intelligence system
In the head of our robot, an assistant in pricing, there must necessarily be a system set up, otherwise the analysis of competitors will not be effective. It is called a competitive intelligence system and it should be part of the company’s business strategy.
The main objectives of the system:
- Track the emergence of competitors and their position in the market
- Understand the pricing strategies of competitors
- Determine their methods of promotion
- Learn about the weaknesses, advantages and unique trading offers of a competitor
The competitive intelligence system consists of the following components:
Collection and processing of data
To make a robot work effectively, you should give him some energy, namely data in this case. To collect and process data, you need to identify the main competitors that affect your sales, as well as the key assortment.
Step by step:
- Identify the sources of data (the websites of your main competitors).
- Decide what part of your assortment will be investigated (usually these are your most profitable goods).
- Choose the time of data delivery.
- Analyze the initial results and add information if something has changed in the processes of your company or among your competitors.
When data collection is set up, important information about prices and competitor activities will come to you regularly in the form of graphs and reports. It is important that the accuracy of the data is more than 95%. If data collection is working, the first stage of the process of competitive intelligence has been passed.
When you have defined pricing strategies and selected suitable scenarios, the robot will offer optimal solutions for repricing products, categories or brands. You will know for sure how much to raise or lower the price.
Was the robot useful?
An important component of our competitive intelligence system is in the heart of the robot, it’s an analysis of the effectiveness of decisions taken. You can see the effectiveness of the competitive intelligence system on a special report in the section with the price index, with your prices in the dynamics, the prices of competitors and the corresponding dynamics of sales. Analyzing this report, you can, if necessary, adjust the pricing strategy and scenarios.
To see an example of how effective smart pricing can be, check out the F.ua case. Traffic growth of 43.29%, increase in turnover and profit, saving 20 hours of manager's working time is a mathematically calculated result of a well-tuned pricing system.
To set the smart pricing for your company, you need to create a competitive intelligence system. To do so, define the goals, principles of data collection and processing, reprice the products according to recommendations and analyze the effectiveness. An important condition for the performance of this system is a reliable competitor analysis tool, by the help of which competitive intelligence will bring profits to the company and save resources.