Competitive Price Intelligence
Price intelligence – Wikipedia
Price Intelligence (or Competitive Price Monitoring) refers to the awareness of market-level pricing intricacies and the impact on business, typically using modern data mining techniques. It is differentiated from other pricing models by the extent and accuracy of the competitive pricing analysis. [1] The technique can be applied by companies seeking to optimize their own pricing strategy relative to their competition, [1] or by buyers seeking to optimize their purchasing strategies. [2]
Importance[edit]
Price Intelligence has become a table stakes requirement for retailers, for several key reasons:[3]
Increased consumer price sensitivity.
Increased aggressiveness from competitors. Retail giants change prices upwards of 50, 000 times per month. Amazon is the most aggressive with pricing, changing prices every 10 minutes or more often at times. [4]
Increased price transparency and showrooming. Increasing smartphone adoption has played a large role in the prevalence of showrooming. [citation needed]
There are several technology companies that specialize in using modern data-mining techniques to discover, match, extract and report on competitive pricing data. According to RSR Research’s 2013 annual pricing benchmark study that surveys retailers, 13% of retailers have fully deployed a price intelligence system. [5] Another 54% of retailers surveyed were either piloting, evaluating or exploring putting one in place. [6]
Price intelligence is used within retail organizations to adjust prices so that retailers are competitively priced. It is used in the corporate head office to shape the pricing strategy, as well as in the marketing department to optimize paid search campaigns, and also amongst in-store employees to help boost in-store conversions. [7]
Process[edit]
Competitive price monitoring typically involves the following steps:
Discovery – Finding the product pages on various competitor websites.
Matching – Determining through algorithms or human intelligence, whether or not the product matches exactly, or if it is a comparable product.
Extraction – Process of gathering the price, shipping information and availability data from the competitor website.
Measurable data quality – Adding the extracted information to a database and checking regularly for accuracy.
Reporting and Analytics – Ability to gain actionable insights from the data that has been gathered.
Applications[edit]
Optimize corporate pricing strategy: Retailers are using price intelligence to gain a better understanding of their price position in the market, relative to their competitors, and make strategic pricing changes according to real-data.
Improve in-store experience: Several retailers have taken price intelligence into their stores and empowered their in-store associates to ease the process of price matching requests. In March 2014, Wal-Mart launched Savings Checker. It allows consumers to check prices and get back the difference as a Wal-Mart Rewards eGift Card if another local retailer has any of the advertised sale products at a cheaper price. [8]
Boost pay-per-click conversion rates: Retailers are using price intelligence data in their paid search campaigns to throttle their ad spend based on price position relative to their competitors and in-stock availability. This application can result in up to a 64% increase in conversion rates according to a study. [9]
Repricing: Incorporating price intelligence into a pricing strategy is becoming more important to retailers, as 30% of them intend to engage in competitive monitoring in the next 12 months. [10] With the data retailers find through price intelligence, they can effectively reprice in line with competitors. [11] Repricing can be either competitor-based or value-based. While the former often increases revenue, it is also likely to cause price erosion. In contrast, value-based pricing tries to avoid a race to the bottom, by focusing more on bottom-line margin. [12] There are several technology companies that specialize in repricing and pricing intelligence.
References[edit]
^ a b
LiCalzi, Marco; Pellizzari, Paolo (2006). “The Allocative Effectiveness of Market Protocols Under Intelligent Trading”. In Bruun, Charlotte (ed. ). Advances in Artificial Economics. Lecture Notes in Economics and Mathematical Systems. 584. Berlin: Springer. doi:10. 1007/3-540-37249-0_2. ISBN 978-3-540-37249-3.
^
Aduda, G. T. (2007). Sohail, M. (ed. Budget monitoring and Price Intelligence Unit (due process): A mechanism for combating corruption in infrastructure delivery in Nigeria. Case study (PDF). Partnering to Combat Corruption. Leicester: Water, Engineering and Development Center, Loughborough University.
^ 2013 RSR Pricing Benchmark – Tough Love: An In-Depth Look at Retail Pricing Practices, Retail Systems Research:
^ Best Buy, Walmart, and Amazon repricing frequency
^ 2013 RSR Pricing Benchmark – Tough Love: An in-depth look at retail pricing practices
^ Tough Love: An In-depth Look at Retail Pricing Practices, Infographic
^ Angelica Valentine (2015)”Big Data’s Impact: Personalized Shopping Experiences”
^ Wal-Mart Savings Checker
^ 64% Conversion Rate Increase in Paid Search: Abt Electronics
^ 30% of retailers aim to do competitive monitoring in the next 12 months
^ Angelica Valentine (2014) “Dynamic Pricing in Real-Time: Where Online Retail is Headed”
^ Hidde Roeloffs Valk (2017) “Three Dynamic Pricing methods & how to implement them”
What is competitive pricing intelligence? | Netrivals
Price intelligence, also commonly known as competitive pricing intelligence, is a pricing methodology in which an e-commerce store defines its prices depending on the real market situation and according to several parameters or conditions set by the same is a methodology where prices are based on the competition and the market, and usually is used in very competitive verticals, where the number of rivals is quite large, and competitiveness among them is based basically on the products’ price. One competitor may apply a change in its prices, and thereupon, all other digital stores change their prices too to stay closer to the most competitive price. But, are you sure lowering prices is the best choice for you?
Price monitoring
First of all, you need to monitor competitors’ prices. It is way more effective when you automate the process instead of doing it manually; as manually, the level of optimization will not be enough, and it would be too expensive and exhausting. However, when you automate the monitoring process with some price optimization tool or software, you will be able to speed up and widen your capacity of collecting relevant data.
By “competitors”, we refer to your direct competitors. However, you can also track indirect competition, if afterwards, the data collected is going to be useful for some particular purpose, such as optimizing prices, for instance. By having your rivals adequately identified, you are going to confirm the fact that existent competitiveness over the internet is real and severe.
Furthermore, the fact that users choose where to buy basing their decision almost uniquely on the value of the product, without considering other assets of your e-commerce service, makes it extremely necessary to set up a price intelligence methodology.
Define a pricing strategy
Once you have started monitoring the prices of your direct competitors, you will be able to visualize what is the state of the real market situation and how is it changing. With all this, you can design a proper pricing strategy that fits in this situation and among your competition’s prices.
Thanks to these tools, you are not only tracking rivals’ pricing but also making a competitive benchmarking analysis. You can obtain relevant data, reports, and analysis that will help you understand the market’s fluctuation and how to optimize your products’ prices.
Segmentation & competitive pricing
Due to some specific functions (such as report’s creation or product’s segmentation) this type of tool enables you to focus on several particular products, categories or brands; to get the most out of those top-selling products that have more chances to be optimized in your e-commerce.
As we already explained, competitive pricing intelligence bases its suggestions depending on competition’s prices and according to the parameters set by the same e-commerce. These parameters or rules can be applied to one (or more) category, brand or product list.
Imagine you want the products of a certain brand to be 5% cheaper than your direct competitors’, and also, you want to have the profit margin respected until 15%. The software will calculate the new price automatically.
Then, you are not only capable of offering competitive prices inside your vertical, but also of making sure these prices will be set according to your criteria. Thanks to this tool, your minimum profit margin will not be affected by a drastic price decrease.
After confirming the new price, the software will update the latest data automatically into your e-commerce store’s feed, so you do not have to do it manually one by one.
These price intelligence tools are crucial to improve your competitiveness, understand the market’s situation, identify your rival’s pricing strategy, and improve your positioning among your rivalry’s ranking.
Competitive Pricing Definition – Investopedia
What Is Competitive Pricing?
Competitive pricing is the process of selecting strategic price points to best take advantage of a product or service based market relative to competition. This pricing method is used more often by businesses selling similar products since services can vary from business to business, while the attributes of a product remain similar. This type of pricing strategy is generally used once a price for a product or service has reached a level of equilibrium, which occurs when a product has been on the market for a long time and there are many substitutes for the product.
Key Takeaways
Competitive pricing is the process of selecting strategic price points to best take advantage of a product or service based market relative to mpetitive pricing is used more by businesses selling similar products, since services can vary from business to business, while the attributes of a product remain mpetitive pricing is generally used once a price for a product or service has reached a level of equilibrium.
Understanding Competitive Pricing
Businesses have three options when setting the price for a good or service: set it below the competition, at the competition, or above the competition.
Above the competition pricing requires the business to create an environment that warrants the premium, such as generous payment terms or extra features. Rather than compete on price, the business must compete on quality if it hopes to charge a premium price.
A business may set the price below the market and potentially take a loss if the business believes that the customer will purchase additional products from their business once the customer is exposed to the other offerings. The profitability of the other products can then subsidize the economic loss incurred on the below-market priced product. This is also known as a loss leader strategy.
Lastly, a business can choose to charge the same price as its competitors or take the prevailing market price as given. Despite selling an equivalent product at an equivalent price, the business may still attempt to differentiate itself through marketing.
Premium Pricing
For a business to charge an amount above that of the competition, the business must differentiate the product from those created by competitors. For example, Apple employs the strategy of focusing on the creation of high-end products and ensuring the consumer market sees its products as unique or innovative. This strategy requires not only improving the product or service itself, but making sure customers are aware of the differences that justify the premium pricing, through marketing and branding.
Loss Leaders
A loss leader is a good or service being offered at a notable discount, at times resulting in a loss if the products are sold below cost. The technique looks to increase traffic to the business based on the low price of the aforementioned product. Once the potential customer enters the store environment, shifting to the role of customer once the decision to purchase the loss leader is made, the hope is to attract them to other store products that generate a profit. Not only can this attract new customers to a store, but it can also help a business move inventory that has become stagnant.
At times, loss leader prices cannot be officially published as a minimum advertised price has been set by the manufacturer. The practice is also forbidden in certain states.
Competitive Pricing and Price Matching Offers
When a company is unable to anticipate competitor price changes or is not equipped to make corresponding changes in a timely fashion, a retailer may offer to match advertised competitor prices. This allows the retailer to maintain a competitive price point for those who become aware of the competitor’s offer without having to officially change the price within the retailer’s point of sale system.
For example, in November 2014, Amazon projected price changes to approximately 80 million items in preparation for the holiday season. Other retailers, including Walmart and Best Buy, announced a price-matching program. This allowed customers of Walmart or Best Buy to receive a product at the lower price without risking customers taking their business to Amazon solely for pricing reasons.
Frequently Asked Questions about competitive price intelligence
What is competitive pricing?
Competitive pricing is the process of selecting strategic price points to best take advantage of a product or service based market relative to competition.
What is the value of competitive intelligence?
Competitive intelligence is important because it helps businesses understand their competitive environment and the opportunities and challenges it presents. Businesses analyze the information to create effective and efficient business practices.Jul 1, 2021
What is an example of competitive pricing?
Competitive pricing consists of setting the price at the same level as one’s competitors. … For example, a firm needs to price a new coffee maker. The firm’s competitors sell it at $25, and the company considers that the best price for the new coffee maker is $25. It decides to set this very price on their own product.
