A company’s pricing tactics can prove to be invaluable to gain a competitive edge in the industry. In the online world, pricing is often the most significant factor that affects the purchasing decisions of customers and determines their perception of the organisation. According to this McKinsey report, optimising pricing strategies can improve sales returns by 2-7%. A survey by market research firm Aytm claims that almost 80% of retail customers check their alternatives before making a purchase. Hence, it is imperative for firms to track their competitors’ prices, promotions and trends to weigh in on their own.
The practice of monitoring the prices of industry competition to gain an advantage is a familiar one, and one need only turn to the raging battlefield of online retail to find the same. While manual tracking gets the job done, they do not scale well and cannot scale effectively. The advent of Dynamic Pricing and Optimisation has led to an increasing number of firms employing monitoring software to augment their algorithms. Accurate pricing information enables these firms to price products high enough to maximise profits, while low enough to maintain their customer base.
Which products should I monitor?
To begin constructing a price monitoring strategy, firms must define their business and competition. Products that a company has to offer are diverse, and they must often decide which SKU’s (Stock Keeping Units) to prioritise. The products that drive the perceived value of the company the most are called Key Value Items. Focusing on these items and pricing competitively helps the company boost its public image, while holding profit margins.
Who is my competitor?
It is also impossible to monitor every single competitor in the industry. Picking and choosing the right firms can often make or break a strategy. Tracking companies with similar inventories and assortments is a good start. Including brands that customers turn to for their price sensitive KVI’s is also a must. It is inadvisable to choose brands that do not have comparable market share, as pricing strategy will be incomparable. For example, Alibaba can afford to undercut smaller brands due to their high customer base and high volume sales, owing to high market share. Finally, low traffic websites should be avoided.
Should I do this everyday?
Retailers must choose how often to monitor prices. Companies like Amazon monitor and change prices millions of times a day, while other niche retailers can afford to do so at a much more sedate pace. You must also decide strategies for each product separately based on various factors. KVI’s should be reviewed more often, while other products can be assessed every few weeks. Price sensitivity in the market also plays a role, and static products may be reviewed far fewer times than dynamic ones.
The final step is to find and crunch the appropriate data. Pricing history, discount trends and promotions are to be monitored. In addition to pricing, stock availability and sales should also be analysed to provide a better understanding of the competitors’ strategy. Firms often use Machine Learning and Big Data algorithms to crunch the numbers and output optimal results.
Using competitor price monitoring software helps in improving efficiency by automating practical insights. Through the data gained, an e-commerce manager can gauge the current demand in the market for a product and make forecasts accordingly. One can stay up to speed with industry trends while cutting down on targeted expenditure like advertisement spending. The continuous analysis of the price monitoring results pave the way for the production of items and pricing strategies which are both relevant and customer friendly!
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