Competitive pricing is a top priority for the online shopper. 87% of respondents in a global online shopper survey say knowing they get a good deal is important when choosing a retailer or a brand.
As soon as you acknowledge the fact that a superb shopping experience won’t bring you customer loyalty in an industry where consumer expectations have skyrocketed, you’ll realize that competing on price is not an option.
There is stiff competition on price and online retailers must equip themselves with the tools and the education necessary for data-driven efficient decision-making. That’s why in this post, you’ll learn:
In light of what you’ll learn, you’ll be able to build a solid pricing strategy aligned with your business objectives, increase your store’s visibility, acquire new customers and build a lasting relationship with them. Before diving into these, let’s understand what’s competitive pricing first.
Competitive pricing is a strategy where you take competitor prices as an important factor when pricing your products. Before moving online, businesses could survive without pricing intelligence and most of them used cost-plus pricing as their principal strategy.
In the digital landscape, however, prices are transparent. Shoppers easily compare prices from many websites using comparison shopping engines (e.g. Google Shopping). In fact, 79% of respondents in a survey say that they identify themselves as bargain shoppers. Meaning, searching for a good deal is an integral part of their buying journey.
The reason the modern consumer is significantly more price-sensitive than the older generations is that they simply earn less money yet more of their income is devoted to non-discretionary spending.
So, even if you provide the best online experience from flawless UX design to customer support, down to fast and free shipping, you still need to offer competitive prices.
Here’s how to do it.
If you don’t know your competition, the first step is to identify them. Google your products/service.
To make sure you’re not missing anyone out, you can use keyword research tools like SEMrush or SpyFu which’ll help you find and monitor your competitors, and web ranking tools like SimilarWeb that give you suggestions on which websites to track.
Once you identify competitors, the next step is to collect their price information. There are three widely used methods of price tracking in e-commerce.
Manual tracking takes over 9 hours for a small e-commerce company with 15 competitors and 50 products to track.
Regardless of the size of your business, manual tracking is unmanageable. Online prices change hourly or even minutely, so by the time you complete a 9-hour cycle, the data becomes obsolete.
An in-house price tracking system reduces the time you spend on pricing decisions by collating data for you.
Find a web scraping service or hire a team of developers to build an engine. It takes $244 on average for the initial setup, and the monthly maintenance costs around $177.
Last but not least, you can use price tracking software. Just like an in-house engine does, price tracking software automatically collects competitor prices and stock information.
Using a price tracking SaaS relieves you from the workload of building and maintaining software, and it doesn’t call for technical knowledge.
No matter how you collate competitor pricing information, keep in mind that this is a continuous effort which will improve your sales, profitability and competitiveness. Now that we fully grasp the importance of price intelligence, let’s learn more about its use.
Brand positioning refers to the consumers’ perception of your brand in comparison to your competitors. In other words, it’s where your target market positions your brand in their mind among other players in the market. Price positioning is just one aspect of it that must be aligned with your marketing strategy.
Think of Apple and Xiaomi. Apple’s successful branding has granted the company a very important advantage over competitors—loyal customers. iPhone users willingly accept the fact that they are paying a premium for the branding, design, and the emotional benefits they get out of possessing an iPhone.
Perhaps Xiaomi users don’t get emotional benefits from owning a Xiaomi phone since it doesn’t have a strong brand image—yet—but its users have access to the same technologies iPhone users have, at a much more affordable price.
So the difference between the branding and the marketing strategies of these companies are reflected in their price positioning. One is a premium brand with above-average prices, while the other is a more approachable brand with affordable prices.
As we’ve talked above, a big portion of e-commerce companies have more than several direct competitors. Meaning, what you sell can be found on other websites and you have to compete on price. Most e-commerce companies fall into this category. If you do so too, below-average prices will work for you.
Especially if you’re struggling with getting traction to your store, competitive offers will catch bargain hunters’ attention. Make sure you’re listed on comparison shopping websites. CSEs are an important traffic source for companies in the early stages of raising brand awareness.
If you’re selling premium brands only, remember that competitive pricing is not a driver for luxury consumers. Don’t price your products too below the market average.
As you collect competitor pricing data, you’ll notice that most online stores operate on tight profit margins. That’s because they know that the online shopper is not loyal to your brand, or someone else’s.
Since you don’t want to get left behind the competition, you need to be able to make price adjustments in time. For instance, when a competitor discounts, you must be able to quickly adjust your price. Or whenever there is an opportunity to improve profit margins—when a product runs out of stock in other stores, or when others are increasing prices—you should be able to act upon it. When you don’t, you’re leaving money on the table.
Here’s a missed opportunity. This store could increase the price and make --- more per unit. Most likely, they’re not even aware of competitor prices.
Pricing software automatically adjusts your prices to make sure they’re always competitive and to maximize profit whenever there’s an opportunity. You can set smart pricing rules like:
It also makes sure you’re not selling below cost or the desired profit margin.
Apart from this, pricing intelligence also gives you the ability to reveal your rivals’ pricing strategies in the long term. Looking at historical pricing data, you’ll notice patterns in competitor behavior.
For example, when they discount, the percentage/dollar amount of the discounts they offer, do they offer cross-category or category discounts, and other valuable information that will enable you to develop counter-strategies will be revealed.
Long-term data-driven planning is the key to long-term success.
Competitive pricing is a top priority for the modern consumer and competing on price is not an option for e-commerce businesses.
You’ve learned the three most commonly pursued methods of price tracking. Choose the one that best fits your needs and budget. Use the information you gather in making quick and effective price adjustments that give you control over your price positioning.
Analyze historical data to reveal patterns in your rivals’ behavior and develop counter-strategies to stay ahead of their game.
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