Manually Tracking Competitor Pricing Vs Automated Solutions

Obviously, you should track your competition’s pricing. There is no question about that. With all the competition that’s constantly growing, consumers have their veritable pick of the litter. In essence, they are spoilt for choice and can easily find the best deals on the required products in just a few taps or clicks. So, in order to keep up with the savvy customers and competitors, businesses turns to price tracking. It allows them to be increasingly competitive and focal in their efforts while achieving greater profitability through the use of data.

In principle, there are two ways price tracking is done:

  • Manual tracking
  • Automated tracking

In a true gladiatorial nature, this post will pit the methods against each other and evaluate what’s the best option for today’s retailers. Minus Russell Crowe, of course.

Round 1 – manual tracking

As every pricing manager who ever dabbled in manual price tracking knows, it is essential to make an analytics based on the huge data acquired. Usually, there is a team involved that covers various aspects of competitor’s pricing by using Excel spreadsheets to keep all of the information in one place. The information itself is detailed as it can be and, as there’s a lot to go through by doing it manually, it takes time.

Ultimately, the enormous usage of both time and resources severely limits the scope and effectiveness of manual price tracking. Here is an example of how that works (or not, depending on your perspective).

Let’s say you have 100 products in your online store. It’s a nice, round number (why would we ever want to complicate this?) and in reality, it’s really not a big amount of products, but bear with us. Previously, you have identified five key competitors (also not a big amount) whose prices you wish to track. Now consider this – competitors change their prices all the time so if you choose to check them on a daily basis, that’s tracking a minimum of 500 references a day. Mind you, this is without taking into account more than one price per product, something which is a common feature depending on the product’s attributes. It’s a lot of time to be spending on only a select few of your competitors, not the mention the workforce needed to pull it off.

Rest assured – manual tracking works, but only up to a certain degree, most notably for very small businesses who don’t have a lot of offerings. Unfortunately, in today’s rapidly evolving ecommerce market and advanced technology, it’s far from being enough. Even if the amount of products offered in your catalog is tiny, the competition isn’t and that is your primary concern. Hey, it’s not like the competition doesn’t already know things about you, right?

Round 2 – automated tracking

Posing as a challenger in this bout, automated tracking solutions have a lot going on for them. Whereas manual efforts to gather competitive intelligence prove to be non-scalable and ineffective after a certain point, automated solutions don’t have that problem. They effectively reduce the amount of time your team has to spend manually tracking the prices of your competition. In turn, they have more time to focus on other important aspects of the business.

So, automated price tracking solutions are real time-savers. What else?

Every day, online businesses are operating in a growingly competitive environment that demands a proactive response to market fluctuations. It is impossible to deliver in such fashion without basing your decisions on readily-available real-time data. Your customers are checking prices on a daily basis and it’s easy for them to compare them. With the dynamic pricing on the rise, the ability to effectively and quickly react to shifts in the market presents a significant and highly sought for competitive advantage. Real-time data equals real-time pricing, which means your business will stay at the forefront. Tracking millions of products on the web is impossible through manual methods, but fairly easy with automated solutions like Incompetitor who help base your pricing strategies on a regular basis.

incompetitor software

Incompetitor retail analytics software

The accuracy of automated solutions is another advantage over the manual process as it allows for simple pricing updates. Things like price drops and promotions can easily be missed with manual tracking, which is not the case with automated price monitoring. This also minimizes the ever-present human error factor which has the power to significantly distort the accuracy of your data.

An automated price tracking solution allows a better overview of your market. It helps you perform an in-depth market research with no limit to the offerings you want to track. Additionally, it can also help you identify new competitors, along with the ones you are already keeping tabs on.

And finally, we dare say it – it’s much cheaper, especially for businesses who cover a wide spectrum of the competitor landscape by ramping up the manual labor in order to cover as much as they can.

Final round

Due to the nature of the business environment, online businesses today need every technological advantage they can get their hands on, in order to successfully track competitors’ pricing. On its own, technology is making it necessary and possible, even imperative to be more competitive by having real-time insights. This turns automated solutions as clear victors in this case. The return of investment by using an automated price tracking tool is fast, easy and, as evidenced, benefits you in many ways. While manual tracking gets the job done, for the most part, on a very small scale, it’s being overrun by the modern exploits of technology. Plain and simple, the scope of work is bigger, better and faster, as well as more accurate.

Conclusion

For an e-commerce store that is looking to keep a close eye on its competition’s pricing, there are many benefits to using automated pricing solutions. They provide real-time insights into how its competitors are doing business and allow for the making of the right decision in the right moment. Obtaining detailed and accurate data on the prices of competitors makes the most of your pricing policy and increases the profit margins, allowing you to stay competitive in the long run.

How To Provide Better Pricing Than Your Competition Without Jeopardizing Your Brand

Regardless of the industry, a business operates in, even if it’s relatively new or small, a careful research will reveal two or more competitors. Their existence immediately changes the playing field. In a concentrated effort to gain that one step ahead, businesses adopt numerous competitive strategies to increase their competitive advantage. That’s all fine and dandy, but how exactly do you cope with your competition? The most usual suspect in the case of intense competition is the price war.

This post will focus on all of the points of that endeavor, like what causes it, how to avoid it and how to set better prices without hurting your brand in the long run. All in favor of your business growing, say aye.

What can you do?

From a strategic point of view, the best way to come out on top of a price war is to never start it in the first place. If that doesn’t make sense at first, allow us to explain.

If or when your competitors opt to cut down prices in order to expand their customer pool, don’t resort to the same measure. Instead, approach the situation with a different, opposite way by differentiating your product to attain customer’s value of it. Here’s why.

Customer segregation

Essentially, every market is divided into three segments or classes of customers:

  • upper class
  • middle class
  • lower class

Each class has different paying capabilities and perceptions. This is very important because battling through pricing with your competition is a race away from the finish line. Competing solely on pricing basis is an effective recipe for being at the very bottom of the competitive ladder. What you are doing is serving the lowest segment of the market by default when you lower your prices as a reaction to your competitor’s discounting move. We’ve talked before about the dangers of underpricing – it’s hard to pull off as there is very little room for profit margins.

The bottom line here is the more you lower your prices, the more appealing your offering becomes to the lower-class target market (the majority of the market) and less appealing to the middle and upper-class. If your ideal target market is the lower-class, that is perfectly fine and good luck to you, but allow us to ask you this – why settle for the overcrowded bottom of the market when there is plenty of room at the top?

Re-target your audience

In the eyes of the customers, the price is often an indication of quality and more often than not, the quality is perceived as lower when the price is lower. In case your costs don’t allow you to lower them in order to maintain satisfactory profitable levels with lower prices, then your best bet is to re-target your audience. This will position your goods to a wider appeal in a specific market segment.

This is when focus on comparative value comes into the picture. Creating perceived value can ease your customers into the higher price than your competition, and quite possibly convince them that your higher-priced offerings are worth it. Your business might choose to embrace a psychological approach in order to fulfill that notion.

Product differentiation

Let’s consider Dan Ariely’s example of the The Economist magazine’s subscription plans. Ariely, a behavioral economics expert and a highly successful author on the subject, notice that the magazine offered three subscription plans:

  • the web subscription – $59.00
  • the print subscription – $125.00
  • both – $125.00

Ariely conducted a study with 100 students. 16 chose the web option and 84 of them chose the combo package. Nobody chose the middle option. At this point, you might have concluded that, as web + print subscription package costs the same, the middle option is useless. Ariely removed it and presented the two remaining options to a different batch of students, 100 again (who doesn’t love round numbers?). The results showed that the least popular option (the web subscription) became the most popular, with 68% students choosing it.

The narrative of the story is that the middle option was far from useless as it helped make a choice. In relation to our situation, customers have a hard time comparing different competitive products, which makes them highly susceptible to other influences. If the options are similarly priced, it becomes much easier to choose on perceived value.

Another way to get an advantage over your competition is to opt for competitive pricing. By taking into consideration what your competitors are charging for their products, you can either raise or lower your own prices in accordance with theirs. Naturally, you need to know when to adjust your pricing and how often to do it. Or, you can choose the dynamic pricing where a price is never firmly set. Instead, it changes constantly to suit the ever-fluctuating market conditions. There are various possibilities for your business to provide better pricing than your competition. However, only an in-depth evaluation of your business goals and your competition can reveal what price best works for your product.

How to know when and what?

It’s easy to say “price your goods smart” but what does that actually mean? Of course everybody wants to have a smart pricing that best reflects the customer’s willingness to pay in current market conditions. Nevertheless, it sounds and looks way harder that it is. There is a whole bunch of competitors vying for the same market share you are. With so many different products on display, it can be tough, almost impossible to stay ahead.

With the fairly recent expansion of big data analytics, you can make more accurate and faster price adjustments through pricing intelligence software. Through gathering and analyzing data about a particular customer or a group of them, a business can predict what price tag the customer deems acceptable to pay and adjust it accordingly. These software tools like Incompetitor and Inoptimizer provide high levels of automation, saving you time and precious resources that can be better used elsewhere. In addition, because the market fluctuates all the time, you have the option to create customized pricing rules which adapt to certain market trends and shifts.

price intelligence software

An example of Intelligence Node’s price intelligence software

Conclusion

If you ever find yourself thinking what are you going to do about the competition, remember that there are always choices. Providing better pricing requires a dedicated effort to finding that ultimate pricing sweet spot. It’s a constant process as markets never stay put in one place, which is why you need to constantly keep an eye on both your prices and competition. That means researching and researching means tons of data. Luckily for you, there are analytical tools that amass that data and turn them into actionable insights which can help you track your competitor’s prices and help you optimize yours so you are always on the right path – growing your business.

Too Cheap, Too Expensive – It’s All About Beating The Competition To It

As every business is unique, there are variances in pricing the products and services in every company. Not all of them incorporate strategies that aim to sell the highest possible amount (or all of it) of what they are selling, just so it could act as an indicator of company’s market performance or success. Rather, the usual approach is setting the pricing to sell the optimal amount of products and services you offer, all the while gaining maximum profit per each sale.
How you use your pricing strategy to determine the price of your goods depends on a number of factors. These include the ever-present competition, the price elasticity of what you are selling and, most importantly, the perception of both your existing and potential customers towards your products and services. This, in turn, affects your sales. It stands to reason that finding the right pricing strategy while retaining satisfactory sales volume might require some trial and error. In this post, we’ll explain how you can avoid some of the hit-and-miss situations and stay one step ahead of your competition.

Pricing smart

As every pricing analyst and expert knows, each product and service has an optimal price range based on what a customer will usually pay. As there are factors such as supply and demand that directly influence it, the pricing strategy will shift accordingly. In that regard, companies often employ two pricing strategies:

  • discount pricing policy or underpricing
  • premium pricing policy or overpricing

Impact of a discount pricing policy – underpricing your goods

While discounting may sound like a tempting idea, especially in times when the going gets tough, it’s important to remember that it can also hurt your business, most notably your cash flow. Decreasing the price of your product means you need to increase your sales volume in order to achieve the same profit. And, as most managers know, that can be quite tricky.

Underpricing is best suited as a short-term solution which can have a long-term impact, manifesting either in increased or decreased profits. Having a discount pricing policy set as a long-term strategy is a risky business and hard to pull off, mainly because there is a very thin margin for profit. In that case, a business needs to develop a continuous stream of large volume sales so its strategy could pay off in the end. Problems with this pricing policy might also suggest there are other issues or weaknesses in your business that force you to lower your prices in the first place, not as a part of an ongoing business strategy.

Impact of a premium pricing policy – overpricing your goods

In contrast, increasing the price of your product could significantly lower your sales volume, albeit retain profit levels. Introducing a premium pricing strategy means you attain a “higher price and margin, lower volume” approach which has all the potential to gloriously backfire. At their core, customers are wired to look around for the cheapest deal in most cases. As much as they care about quality, it seems they care more about their wallet. In the end, you could end up with an overpriced product that could sit on the shelf and collect dust.

What to do?

As the two strategies can have opposing outcomes, it can be difficult to pinpoint what exactly best suits your business. However, there are some things to take into consideration when defining your pricing strategy. Most notably – your competition (the post title kinda gave this away).

In order to stay competitive in the market, you have to find that sweet spot that includes competitive pricing with profit margins. The retail market is highly competitive so you need to consider and try to ascertain three things to compete:

  1. Product differentiation – having a product that stands out in the market would allow you to employ a premium pricing strategy, thus not relying so much on sales volumes as long as you have the competitive edge.
  2. Customer value – the quality of your products and service, as well as the variation in the assortment, can sustain the “higher price, higher margin, lower volume” policy if you can readily meet your customers’ demands and expectations in terms of overall value.
  3. Price – this is the first indicator of your pricing policy and the one that gets the most attention.

Basing your pricing strategy on valuation (pricing research derived from actual sales history) can help you keep your listings aligned with market prices. To do so, your options are restricted to two methods:

  • Manual tracking
  • Automated solutions

When it comes to manual tracking, this is an option that provides nominally cheap(er) assessment of your competitor’s prices. Working in Excel is fine as you can focus on the competitors that matter to you the most on your own pace. However, the pace is the main issue at hand here. Prices are the most obvious form of competitive advantage and they are highly dynamic, thus it’s very easy to miss most of the changes. Time is vital and tracking large amounts of price data by yourself increases the chances of missing some of the data, thus jeopardizing the accuracy of your reports.

On the other hand, competitive intelligence software like Intelligence Node’s Incompetitor (product tracking) and Inoptimizer (price optimization) allows for a deeper focus on product and price data analysis through automation. It saves time and resources and offers analytical insights into market trends. Because the software does the majority of work for you, there is no problem with the scope of your competition tracking (usually, you can track millions of products without any hassle) so you can focus on those that compete both directly and indirectly with you. All in all, you can make more informed and accurate decisions in a timely manner, thus stay ahead of others.

Conclusion

Balancing between not harming the brand by lowering prices too much and not alienating customers with your higher prices can be tough. As some buyers will look for the best deal available, others are willing to pay more for a unique selection and better features and service. Finding that optimal middle ground requires researching your competition. Depending on your needs, that means utilizing either workforce or software to carry out the chore of keeping tabs on others. Be sure to cover all of your competitors with your analysis or you might miss on some of the opportunities and lose the competitive advantage you might have.

 

How often should you adjust your pricing?

Every business that seeks to achieve maximum levels of profitability needs to think carefully about its pricing. Specifically, it needs to think about how often to change its prices. Once you identify and set the best pricing strategy for your product or service, it can be quite tempting to hold on to it. We know how you reason and we empathize – you spent considerable time and effort to set it up, it works so why would you ever change it?

Well, you simply have to because every aspect of the market fluctuates. Your competitors, products, customer demand – everything. That being said, each aspect can have a direct influence on that ideal price you envision for your product. As with the majority of the price-related issues, there are certain pros and cons to adjusting prices on a frequent basis. Businesses need to consider both sides of the pricing equation before deciding on how often they intend to change their prices. The change can have a huge effect, both positive and negative, on you and your consumers so this is not something to take lightly. As always, we are on the job to make that decision as smooth as possible.

How often to adjust your pricing?

First, it’s important to know that there is no general rule of thumb when it comes to modifying your prices. This is because of the frequency of changes within the market. Just look at the data for Motorola Moto G Plus smartphone, an older model. In the first week of May, there have been five changes in pricing for it. In addition, the growth stage of your company can also play a role in the proceedings. For instance, a small business might want to adjust its pricing in order to increase its market share while a larger company with more experience doesn’t necessarily have to frequently adjust its pricing.

When is it okay to do it?

There are common reasons to both increase and decrease your price. When it comes to raising your prices, it’s okay to do it when…

  1. Your competition is charging more for less

If your competitors are cashing in on the virtually same product for slightly less of it, whether it’s the quantity or lower number of features or else, this is a signal that you can raise your prices. The key here is to accentuate the unique value your goods bring compared to competitor’s offering, especially if it’s a similar product at a higher price point. Customers are often willing to pay more but they need to know why your product is superior.

  1. Costs increase

When costs for the company increase, it’s rather normal to raise prices to offset the change in costs. This includes rising raw material, labor costs, changes in packaging and so on.

  1. Inflation happens

During inflation (or periods of it), companies need to raise prices to maintain profitability, particularly if the increase is significant. In such cases, it’s better to do it gradually and raise the price over time instead of making one quick and large increase.

Businesses might also consider lowering the prices when…

  1. The competition reduces its pricing

If one or more of your competitors significantly reduce their price, you may need to follow suit and do the same in order to remain competitive.

  1. You want a larger market share

If a part of your business strategy is increasing your market share, then you might want to decrease your prices to encourage customers to pony up the cash.

  1. Costs decrease

As costs regarding your product lower, you can opt to decrease the price as well. This might make your product and brand more competitive while improving the ever-valuable customer perception by rewarding loyalty.

  1. When you want to get rid of your inventory

Getting rid of your remaining inventory in favor of new versions of your product almost automatically means prices go down. Take hardware companies for example – every new smartphone model means the older one is cheaper. Or, if you are selling clothes, seasonal products like winter jackets and sweaters don’t have the same pull in April.

In any case, whether you want to raise or lower your price, the change must reflect your overall business strategy.

When is it okay to leave current prices?

There are also times when it’s best to stay put despite the market changes. This is strongly recommended in situations where shifts in the market don’t affect the greater part of revenue. Speaking strictly from a business standpoint, it’s always better to leave things as they are than rush or make a poorly planned change that diminishes your relationship with your customers or even worse, ruins your margins. This brings us to our next question…

How to know when the time is right for what action?

This is the trickiest part of the equation. Setting the price is a constant, ongoing process that requires tons of research. The math is simple – your company will make more informed decisions when backed up by research.

The past several years have seen a significant rise in technology use. It has effectively shifted the very core of price changes. Most notably, regarding our topic today, pricing optimization software helps businesses join all kinds of pricing data to form dynamic pricing methods that take into account a variety of factors like competitor actions, customer demand and more.

Think about it. There is a whole list of your products that require price optimization at a product level to stay ahead of the competition. The need to account costs, customer, and sales performance takes time and resources. With dynamic pricing, a company is able to adjust its prices on the fly in response to market demands. With the rise of big data analytics, price adjustments can be made much faster as time is of the essence. By collecting and analyzing data about a particular customer, a business can more accurately predict what price the customer is willing to pay and adjust it accordingly. Since automation is key here, you can also create customized dynamic pricing rules which can follow certain market fluctuations.

Conclusion

Your pricing strategy demands round-the-clock maintenance to keep your business growing. A new pricing strategy could perfectly align with the changes that have occurred since your last price update. It’s imperative that you research and analyze the market landscape on a regular basis and make price adjustments accordingly. The market doesn’t stay the same and neither should you. Bear in mind that prices should be adjusted only as often as your company’s objectives and goals dictate. Otherwise, you’re preaching to the choir and they’re not listening.

 

Your Competitors Already Know This About Your Pricing Strategy

Keeping an eye on what your competition is doing is a great way for growing your business. Identifying who they are and what they are offering can prove invaluable to make your goods set apart from the rest. It will enable you to set prices competitively and utilize all the elements of the marketing mix to the fullest. If you know or learn a few secrets on the way, all the better but the bottom line stays the same – the more you know about your competition, the more your chances for success grow.

The key part here is that, just like customer loyalty, this is a two-way street. The same way you know various information about your competitors, so do they about you. They are out there, “preying” on your customers, just as you are theirs. At least, you should be, which is why this post will highlight what the “other side” already knows about your pricing in order for you to remain competitive.

  1. They know the prices you charge

Obviously, without breaking a sweat. Your competition is legally spying you, plain and simple. They are everywhere. A quick glance at your website provides the basic information they need. They are following you through your newsletter and getting regular updates about everything, including price-related issues. The prices you charge might not fully suit your competitors and vice-versa but they do offer a good glimpse into what your business considers under competitive pricing. However, the price tag alone doesn’t say much without deeper analysis as you leave a significant amount of data online, ready for scooping. And that means…

competitive pricing

Example of competitive pricings Image source: Website Magazine

  1. They know which of your products sell

Naturally, there are some products that sell better than others, making for certain product groups that generate the larger part of revenue. For that matter, calculating the demand for these products is essential as the result is a list of the products suitable for price benchmarking. This is a far too big of a game to leave anything as is. Through the magnifying glass, your competitors are tracking your goods that are most in-demand or being promoted, as well as your fast-selling products in order to optimize their own product site positioning. They can easily benchmark their prices versus yours and adapt their strategy if needed because they are constantly watching you and know the breadth and depth of your catalog.

  1. They tap into your social media

Social media is a powerful tool and a treasure trove of information if you know what to look for. We’ve already mentioned signing up to a newsletter and receiving information directly to inbox. Relevant social communities like Twitter and Facebook offer means to your competitors to stay in the loop regarding discounts, promotions, special offers and anything that gives a clue about your pricing. It’s a cheap and easy way to spy as all they need to do is follow and observe. Inconspicuous social presence on competitor’s social pages can also help identify how your customers react to prices by sifting through their comments, particularly the ones that are directly related to pricing.

  1. They go through the checkout process

Playing secret shopper (albeit, in an online form) is a good way for your competition to compare things such as price, products and customer service on the spot. It’s also great for your competitors to gather insights into the complete checkout process, including cart abandonment and what offerings customers receive at what prices. This form of “spying” can raise internal operations on a higher level by acknowledging both the good and bad side of the experience..

Beat them at their own game

To either side’s benefit, pricing is a tangible, observable source which can provide a lot of information about competitors offerings. Since they are fully aware of your products, know the prices and have a solid understanding how you set them, why not do the same?

Everything we’ve said so far about your competition can be said about you. In the global e-commerce market, there are literally millions of sellers that seek their fortunes online. As the market shows no signs of backing down in terms of growth, the competition builds up even more. Coming up with a competitive advantage is harder than ever so you might want to consider using competitive intelligence. Competitive intelligence (CI) consists of multiple layers regarding everything your competition and market represents. It’s one giant learning process about all the things that both directly and indirectly affect your business. But how does it affect your pricing in this case?

competitive intelligence

Using competitive intelligence software to stay competitive

Your competition leverages modern technology to stay on top of you. It’s that simple. This includes being proactive on the Internet and “following” you around, but more importantly, using advanced, yet accessible technology.

For many businesses, it is still a standard practice to rely on a team of people performing manual searches of rival products and prices. This naturally implies that businesses need to invest valuable time and money that could be much better employed in improving other stages of their business operation. As we mentioned before, there are thousands (probably more) of your counterparts around the globe in your industry. Identifying them, especially the ones that are your direct competitors, and then identifying their pricing is a long and arduous process. Let’s not forget that prices are not set in stone which makes the task all the more difficult (as it weren’t difficult enough before). So, what can you do?

Instead of relying on manual price tracking, companies use fully automated competitor price tracking solutions. These software suites help e-commerce businesses track competitor prices automatically, instead of relying on resource-heavy manual operations. There are pricing intelligence tools such as Incompetitor and Inoptimizer that put real-time competitor pricing and positioning data at your disposal. These tools will make sure you are constantly in the loop and able to access the data and trends that will ultimately allow you to make vital pricing decisions. That way, you’ll be able to track your competition in real-time and utilize what you learn in order to keep your business one step ahead.

Competitive intelligence software provides an accurate assessment of how products and services are performing on the market. With the help of the data that your competitors are going to collect via competitive intelligence software, they can effectively boost their sales and conversion rates, know the real position in market without spending huge amounts of time, money and manpower.

Still, when you set roughly the same prices as your competitors, then you slowly lose any differentiating factors. The focus shifts to what you are offering and if you can offer more and/or better features at the same time, it’s a win-win scenario. If not, you need to find a key differentiating factor. This can be anything from the unique value your product brings (highlighting why customers should buy from you and not your competitors, practicality of it, etc.) to things like packaging, customer service and more. Catering to prospects through your product’s benefits and the problems it solves is a sure-fire way to turning them into buyers.

Conclusion

If there’s a silver lining in this story, it’s that you can never appreciate enough the importance of analyzing your competition. It can help you form pricing strategies that will capitalize on opportunities and reduce the impact of threats from competitors. They already know so much about your prices that it would be foolish, to say the least, not to use yourself what’s practically handed over to you. You only need the key to open that door and the key is competitive intelligence.

Everything you find out about your competitors is valuable, especially prices. They can tell you if there are any gaps in the market you can effectively exploit, indicate whether consumers are saturated in certain areas of the market so you can make assessments and much more. It’s all easier said than done which is why you need help, preferably in the form of pricing intelligence software than can track millions of products and produce real-time insights. Also, if there is any aspect of your goods you can improve, go for it as that just might be the key differentiator, along with the pricing intelligence tools, you need.

Pricing Benchmarks: Where Do You Stand?

Let’s start off with the basic definition – what are pricing benchmarks? It’s the process of comparing your prices to the prices of the competition in a specific market segment. Why, one might ask, blissful in ignorance. The answer is very simple – because understanding your pricing and your position among your competition is of critical importance to a thriving business. This is especially pertinent to pricing managers and analysts who are trying to stay on pace with persistent fluctuations in the e-commerce ecosystem. Armed with this knowledge, a business is effectively positioning itself in the marketplace so that the target audience is thus willing to choose and pay for its products.

That is certainly not an easy feat to achieve. This post will explain the nuances of price benchmarks and provide a more detailed look into the inside machinations of the process.

When do you use pricing benchmarks?

The need for pricing benchmarks arises, for the most part, when a business opts for the competitive pricing strategy. Just by observing other businesses in terms of their popularity and the quality of their offerings, a business is able to utilize pricing benchmarks to set a price for their own products, all the while keeping in mind the market position as related to its competition.

Of course, using pricing benchmarks while balancing competitive pricing with profit margins is only one way to facilitate it into your business operations. A smart business will use it to analyze and identify both new and existing ways to improve its pricing methods, as well as implement processes that help scale and grow the brand’s presence.

How to use it?

Now we get to the interesting part. Clearly, price benchmarking is a rather valuable tool in determining prices to achieve greater value. It also enables to assess the competitiveness of market rivals, identify any performance gaps in their operations and accentuate their strengths and weaknesses. But while the language here is quite pleasing and exciting, how is the whole process actually achieved? We have two words for you – competitive intelligence.

general pricing benchmarks

The end goal of price benchmarking is to closely follow the pricing policy and strategy a business sets. From a competitive standpoint, it aims to be in line competitors in the industry, especially those considered to be leaders. This is a huge feat to accomplish and requires large amounts of time and effort to identify the actual pricing used by those competitors and the reasons why they use those prices. That being said, it’s clear that competitive intelligence is an enormous vast field of information that takes lots of time to convert it into usable insights. As time is short and precious in today’s fast-developing business market, competitive intelligence tools assert themselves as the best option by far. There are a few reasons why:

  1. Real-time data

As previously mentioned, rapid developments in the business world create quick changes that can make all the difference in the end. That is why real-time insights are so important – they provide a current view of the state of the market so that you are always aware of what your competition is doing, thus providing you a highly sought-for competitive advantage. Real-time data also effectively addresses the question of accuracy as it reflects actual prices across the marketplace with constant updates.

  1. Competitive market and competitor data

The data provided with competitive intelligence tools is highly relevant and detailed. When we say detailed, let’s just say that we are talking about millions of products on the web. That way, you are able to monitor competitor prices real time and, with a wide coverage like that, map and compare similar products in your competition to optimize your prices.

  1. Automation

What good would this data be if you had to manually set and sift through it? Very little, we say,  which is why high levels of automation are necessary for successful operations in these matters. Competitive intelligence tools can completely automate competitor benchmarking, allowing you to save time you can use for other matters.

intelligence node screengrab

An example of Intelligence Node’s competitive intelligence tool

Add in the myriad of other things like data comparability, easy integration, multilingual support (any decent software will cover as many languages as possible to allow price benchmarking across different markets irrespective of the catalog display language) and so on – you get a complete picture why competitive intelligence tools are not only a credible and valuable option but must-have today.

The benefits of pricing benchmarks

  1. Determine ideal pricing

Pricing benchmarks validate the pricing strategy and policy a business chooses, compared to market best practices and other pricing models. It also identifies all the reasons for the given price such as costs and other expenses incurred by the competition.

  1. Enter a new market with appropriate pricing

Entering a new market with price benchmarking ensures the operation is feasible in the first place. As it includes cost estimates of operating in specific locations, price benchmarking provides an overview of the financial viability of such undertaking.

  1. Helps with price optimization

Because the process reflects actual prices, it makes sure you are competitively priced at all time – not underpriced or overpriced (coupled with an intelligent competitor price software, you’ll be able to seize on the customer demand to fully optimize your revenue).

  1. Save time

The simplest facet of pricing benchmarks, the time-saving aspect cannot be underlined enough. It gives you more time for other important processes in your business operations, not to mention that with pricing benchmarks through pricing intelligence, there is no need for detailed research on your own to establish what customers are paying for.

Conclusion

Pricing benchmarks help determine what your audience is willing to pay for the products and services you offer, as well as monitor what your competitors within the industry are able to charge. For a business looking through a competitive lens, there is no better way to gradually adapt and improving their offerings. However, the process can take time which is why a company should consider choosing a software solution that basically does the work for you.

Competitive intelligence tools provide data about both the competition and the market, while simultaneously saving you money and time with minimum risk. Price benchmarking is an ongoing process as prices regularly change. In order to be successful, a business needs to reflect the shifts in consumer preferences with their own prices, which is all the more reason why competitive intelligence tools with real-time data are the way to go.

 

It’s All About (the) Pricing Strategies

On its own, pricing is a complex subject that requires thorough understanding, yet it is massively important. If you set it right, the sales and profit will flow. Get it wrong and, well, you know, you’re doomed, to put it mildly. Your pricing affects everything, from profit margins and sales to brand positioning and market share. So, what’s the trick? How do you implement a pricing strategy that conveys everything you want to stand for as a company while bringing in profit in the process?

Businesses have the luxury to choose from a variety of pricing strategies, depending on the goals and objectives they set. Of course, none of those matter if they are not based on market research and customer demand. It is vital to understand who is your target audience and competition, only then will you be able to utilize an effective pricing strategy. Not every price you determine needs to produce maximum profit margins.

Without further ado, here are some of the pricing strategies that businesses often employ in order to determine the prices on their products and/or services.

1. Premium pricing

Premium pricing strategy allows business to set their prices higher than the competition. It’s great for a small business whose niche is selling unique goods, as well as for the times when you are first in placing a product on the market that has a specific competitive advantage. Premium pricing strategy can be a good choice for businesses entering a new market and trying to cash in the early days of a product’s life cycle.

In order to justify the premium price, a company must create a perceived value of its product or service. Every aspect needs to support the notion of the premium price, including packaging and marketing efforts in order for the customers to perceive the product as worth its prices.

2. Penetration pricing

In the instance of penetration pricing strategy, a company is looking to establish its presence by entering the market and offering lower prices (sometimes at a steep discount)  than their competitors. The reason why is to attract customers away from the competition, which often results as an initial, albeit calculated income loss.

The point of penetration pricing is to raise brand awareness and brand loyalty in the crowded market and stand out so that in the long run, a company can effectively raise its prices that actually reflect their true market positioning.

3. Price skimming or milking

In the third P of pricing strategies, price skimming acts as a way for a business to leverage their competitive advantage and maximize their sales on new products and services. Contrary to penetration pricing, a company initially sets a higher price, then gradually lowers it as competition begins to catch on and offer similar products or alternatives.

The primary benefit of price skimming is a strategic approach to gain maximum revenue advantage on early adopters until it lowers prices to cater to more price-sensitive groups. It can be highly useful for smaller businesses who can cover the developments cost of their unique product, all the reaping the benefits of perceived exclusivity in the early stages.

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4. Psychological pricing

Psychological pricing strategy is more of a technique that plays on the customer’s emotional perception (thus the name) of the price, down to the small details that can make a difference. It’s a widely used strategy that is one of the favorites by many marketers.

As an ever-present example, a product with a $99 price tag is cheaper that a product of $100. That is clear as a sunny day but in the mind of a buyer, $99 is psychologically “less” than $100, possibly due to the fact it has one less digit (as in our example) or that consumers have a tendency to pay more attention to the first number on a price tag than the last. In essence, you are creating an illusion of enhanced value (cheaper price) for the consumer.

5. Economy pricing

Finally, something that doesn’t start with a p. Economy pricing is often used by large companies, especially in the food market, like Wal-Mart and Target, as it aims to attract a particular segment of the market – the price-sensitive buyers. In this case, companies reduce their marketing and production costs to a bare minimum in order to maintain low prices.

This strategy is not suitable for businesses that lack the large sales volumes which are needed to stay profitable with low prices. Instead, they can opt for discounts tailored to most loyal customers to cement their patronage long-term.

price strategies

The balance of price and quality in pricing strategies (image source: SlideShare)

6. Bundle pricing

Bundle pricing is a great way for small businesses to sell multiple products for a slightly lower rate, convincing buyers that they are getting a bargain as compared to purchasing each item individually. The main point of bundle pricing strategy is that it increases the customer perceived value while also providing an effective way of selling unsold items that are stored for far too long.

The strategy is most effective for businesses that sell complementary products, that actually have something to bundle. It makes the entire shopping process a bit easier by bundling similar items together (although, when was shopping ever anything but easy?). However, it’s very important to remember that the profits earned on the higher-value items must cover the losses you take on the lower-value product. Otherwise, it’s all for naught.

Honorable mentions:

  • Optional pricing – offering optional extras together with the initial product to maximize revenue. For instance, an airline company will offer an optional extra such as a window seat or a printer company will offer extra ink cartridges with it.
  • Product line pricing – different products within the same product line have different price points. An example would be a smartphone company offering different models within the same product line but with different features (bigger, thinner, sturdier, etc) or a same room type in a hotel having different rates due to amenities and facilities.

Conclusion

Choosing a right pricing strategy for your goods can be a rough, often intimidating process without the right facts because so much depends on it. Hopefully, this post explained some of the most used strategies today and their effectiveness. The four P’s (premium, penetration, price skimming, and psychological pricing), along with the economy and bundle pricing each have an approach that suits particular companies. Pricing your product follows the overall strategy of your business. Performing market research and competitor analysis will help you find that pricing sweet spot and cater to the psychology of your customers.

If you found this useful and you’d like to learn how to take your pricing strategy to the next level, we invite you to download our free 20 secrets to designing the best pricing strategy eBook. Click below to take advantage of this opportunity.

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Fear? Not If You Use Competitive Intelligence The Right Way!

Holding your ground in today’s business environment can be scary. The competition is huge, the technology is advancing and consumers are becoming more savvy and demanding. This all forms a highly competitive market whereas competitive advantage can be as easily lost as it was gained. Businesses “live” in a world where information is widely available than ever before. Each day, there are massive amounts of data generated that just waits for it to be gathered, analyzed and used for best purposes. However, it often just floats around, which brings us to the word of the day (actually, two words): competitive intelligence.

In essence, competitive intelligence (CI) is understanding and learning about your products, customers, and competition, as well as every other facet of business in order to make strategic decisions based on knowledgeable insights. It a learning curve about everything that affects one business, from the tiniest details to global-like situations so it stands to reason there may be instances where CI is not used to the best of its abilities.

Theoretically, that’s all fine and dandy, but as we favor a direct and practical approach, here’s what competitive intelligence can do for your business.

1. Focus on what you want to know

Finding out everything about every competitor in the marketplace is a good idea, but not particularly effective if you want quick results in today’s fast-paced business environment. A better choice is to focus on a few specific business segments or problems whose understanding and addressing is key to company’s success. That way, the aim of your intelligence operation will be to collect information to help resolve the matter that matters to you the most. If that requires monitoring large companies for openings in the market, so be it, but try not to dilute your efforts too much. Collecting information for key strategic decisions and identifying new competitive threats is usually an ongoing, day-to-day operation in which you always need to have your goal in sight.

2. It’s not solely about your competition

We know what you are going to say – it’s precisely called competitive intelligence, not business intelligence or market intelligence or whatever adjective you want, therefore, it must be all about competition. Still, CI is a multi-layered business discipline that branches out like a tree from the earth. The focus of competitive intelligence in not on your rivals alone, it’s on the market as a whole and everything that makes it a highly competitive battleground.

 

demand for information

Source: B2B International

Failing to recognize the full value of competitive intelligence leads away from greater strategic flexibility. Using CI, a business can quickly adapt to market fluctuations and, if necessary, change its business strategy. For an example, we’ll use Pratt and Whitney, an aerospace manufacturer whose commercial engine division utilized CI by looking at all market aspects in an effort to stay competitive against its rivals, especially GE and Rolls Royce. As a result, the company deployed a highly successful breakthrough agenda for their new Geared Turbofan (GTF) engine, which wouldn’t be possible it P&W looked at each competitor separately.

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Let’s get into specific details about what CI enables:

3. Perform win/loss analysis

A win/loss analysis requires surveying two groups of people

  • new customers
  • prospects attracted by competition

Why? You want to unfold and understand the reasons for their actions. During these interviews, it would be highly beneficial to ask your customers the motives for looking for your product and the reasons why they chose (or didn’t choose) your company, if they went with a competitor’s offering. Gaining insight from these simple, yet valuable questions will provide you with an understanding of your product among customers, competition’s selling points over your product, as well as what features are necessary to change or implement.

In 2015, Nestlé’s popular Maggi noodles had to be recalled from India due to containing a whopping seven times more lead (no big deal) that allowed. Up to that point, Maggi’s sales accounted for a quarter of Nestlé’s $1.6 billion sales in India, with the food giant having a 63 percent market share. The subsequent five-month ban of Maggi cost Nestle $277 million in sales with a half a billion dollars of damages to the brand name. However, Baba Ramdev, a famous local yoga guru and an owner of the growing local consumer goods company in India, launched a competing product (Patanjali noodles) to a great success. The key was catering to what people wanted to the product was marketed as a healthier option than Nestlé’s, while also having a lower price to incentivize sales.

4. Use competitive intelligence tools

CI presents a vast field of data that takes a considerable amount of time to sort out into actionable insights if you do it manually. Time matters greatly in today’s business operations which is why there are competitive intelligence tools that automate the process and provide real-time results. Therefore, a company should opt for a software solution that provides data about both your competitors and market, all the while keeping your budget in place and minimizing risk. What these tools offer are

 

  • Competitive market and competitor data (product tracking, industry trends, etc.);
  • Real-time intelligence;
  • Market gap minimization;
  • Predictive “what if” scenarios;
  • Time-saving through minimal human intervention;
  • Recommendations and more.

CI could also present you with potential problems regarding your sales approach, which you should discuss and coordinate with your sales team to correct.

Conclusion

Competitive intelligence, at its core, means learning as much and as quickly as possible about one’s industry in general, competition and market in order to be able to anticipate and face numerous challenges head on. In order to use competitive intelligence the right way, businesses must use it for insight management, not as a tool to search and distribute information. It allows a direct access to input into company’s strategic plans, smartly tapping a vast amount of external data to remain competitive.

CI has the power to be a facilitator of strategic advancement and change. Optimally, it will breed an organizational culture that relies on modern tools that provide real-time intelligence to deal with real-time challenges of ambiguity and prevailing competitors. It’s not enough to gather data and employ it, but rather to use it the right way as shown in this post.

If you found this useful and you’d like to learn how to take your pricing strategy to the next level, we invite you to download our free 20 secrets to designing the best pricing strategy eBook. Click below to take advantage of this opportunity.

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Be Sure To Avoid These 5 Strategic Pricing Mistakes

Pricing strategy is rightfully one of the most heavily debated aspects of any business. No matter what your product is or where you lie within your industry, your price point will inescapably be among the biggest questions you have to consider. Continue reading “Be Sure To Avoid These 5 Strategic Pricing Mistakes”

What is Market Price & How to Set it for Your Product

Regardless of what type of product you’re selling, you know you need to set a price to sell it. Knowing that you need a price is the easy part. Determining your price – well, that’s where things get tricky. It can be difficult to price your products because if you go too high, you may scare off buyers. And, if you go too low, people may doubt your products’ quality. To help you price your products, let’s explore the subject a little further, shall we? Continue reading “What is Market Price & How to Set it for Your Product”