While the most prevalent priority you might keep is likely your own business and its individual success, competitive pricing analysis and keeping tabs on your competitors can be the difference of success in your business. Price tracking other companies will allow you to make sure that you will continuously adjust correctly and stay relevant to what consistently keeps you meeting your goals.
We’re going to look at the reasons to use this tool and the benefits for your company to understand what they’re up against. Competitive pricing is a sweet spot of low enough to where your customers will choose you over your competitors but still high enough in the margin to keep your profit. Considering this is a moving target, a program to help you with this is helpful.
What is competitive pricing analysis?
In E-commerce pricing especially, competitive pricing is an essential aspect of a business. Being online means that you can take a look at your competitors in real-time all over the web. The analysis consists of the detailed and comprehensive study and evaluation of competitors’ pricing related to your company.
This kind of evaluation and analysis is helpful and debatably necessary in every single category of retail. It is incredibly rare to have a company that is in a sector with few rivals (or even a sector with few rivals, for that matter), so in absolutely every capacity, competitive pricing analysis is vital to the business.
Benefits of competitive pricing analysis
Avoid profit loss
A big part of utilizing this tool is ensuring that your company is not missing out on potential profit or, even worse, losing profit because they’re not tracking the market well enough. High competition can mean a tiny profit margin for the product, even if it is top-selling. Through accurate and complete competition analysis, you can find the position of your products within the competitive marketplace and correctly price to sell while still swinging a good profit.
Opportunity for growth
Price management can also allow you to find space in your sector or industry to grow and increase market share. Understanding your spot in the market helps your decisions become goal-oriented. Instead of just maximize profit, maybe consider with the help of monitoring prices, you might be able to slightly lower prices on one item to increase overall market share, maximizing your whole profit rather than just one item alone.
Staying in tune with competitors can help you efficiently adjust your price and justify the prices you are putting on products. This eliminates arbitrary price adjustment and allows you to stay up with other companies doing the same thing. Information is power and gives you the ability to adjust.
Monitoring weak spots of competitors
A price match analysis can help you determine where your competitors are falling short and allowing you to find weak spots in your competition. This can help you identify areas of opportunity in the marketplace and test out marketing strategies to reach those market weak spots.
Adjust your prices daily
Adjusting your prices as they change in the market is key to maximizing profit. The rule of thumb is to use data updated no later than two hours before making a price adjustment. Keeping your information up to date is critical to making an accurate and beneficial price adjustment. Additionally, product and pricing data should ideally be delivered to the internal system around every 20-30 minutes to make comparison analysis effective.
How to conduct a competitive pricing analysis
Considering conducting a competitive pricing analysis, there are a few steps to take in order to conduct one for your business. A true competitive pricing analysis is much more comprehensive than just checking your competitors’ social media and set prices of existing products before an adjustment. It adds live tracking, the ability to adjust throughout the day instead of just checking and trying to stay up to date.
First, you’re going to need to determine who your competitors are. This is the obvious first step because you don’t know what to react to or evaluate if you have no idea who you’re competing with. Decide which companies provide a similar array of products and who offers them at a similar price bracket as you. Look at your customer profile, the amount of time you’ve been an active company in the space, etc. Ask yourself questions like this and let that lead you to the profile of your competitors.
Next, determine what it is your competitors are offering. By this, we mean both in the product sense and in the value sense. Look at what they’re offering your common customer and decide what that means for your level of competition. What kind of company are they? What are they offering your customer?
Research your competitors’ pricing. Its fluctuations and its changes should also be taken into account. Consider discounts, how often they have a sale, how much they discount when they have that sale. These are all especially important when you’re carrying a similar inventory. Additionally, think about shipping costs. Take into account the shipping costs for these items and the effect the discount will have on the profit after both of those considerations. Expensive shipping is actually the number one reason why customers abandon a cart. This is why it can be crucial to make sure your shipping is (even slightly) less than the other vendors.
Analyze the marketing of your product versus theirs. How are they marketing this same product? Even if you think you have a better way of doing this, still examine what they’re doing. This should also help you learn the best ways to get your customers engaged in your product and marketing. Take a look at their content strategy and the kind of engagement they’re getting. Notice how they promote marketing content versus something more lifestyle/engagement post (if applicable.) All of these make a huge difference in the analysis.
Lastly, take into evaluation a SWOT analysis to consider their strengths, weaknesses, opportunities, and threats. This will help you with the broader “big picture” version of their company.
Price evaluation and price management can feel like foreign concepts if you’re not used to evaluating companies and figures in that manner, but it is so critical to the success of a business. Often, businesses will fail because they are so focused on only looking at their own problems and benefits that they forget to look around. You can learn so much from just observing the company in direct competition with you. By understanding this company, you can avoid common mistakes, miss missteps that they made, and improve the overall quality of that sector of the market.
Competitive pricing analysis is the next step in the competitive edge of your business, and there are so many reasons to spend the time and output on it; all you have to do is take an honest look at how your business stacks up to the competition and adjust accordingly.pricing strategies