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Competitors: can’t live with ‘em, can’t live without ‘em – nor would you want to. After all, the markets with strong competition frequently signal the markets with the greatest demand. While you definitely don’t want to be alone in the race to the top – a sign that perhaps your niche is a little too specific – you also want to be sure that you beat those running beside you.
Online store Everything Truck Parts, a seller of hard-to-find parts, learned this the hard way. Not performing a regular competitive analysis was a major setback for the brand, specifically when it came to pricing. And they aren’t alone in needing to evaluate competitors based on pricing. In fact, in a Q1 2014 RIS survey, more than 73% of online stores cited competitive pressure as one of the most important factors that goes into price changes.
73% of online stores cite competitive pressure as one of the most important factors that goes into price changes.
For Everything Truck Parts, however, performing a proper pricing analysis was nearly impossible. Sites selling truck parts maintain inventory upward of 1,000 SKUs, a task too tedious to perform manually.
Knowing the stakes at hand, the team worked to find a competitive intelligence solution to either lessen the manual work required or fully automate the process of staying up to date on competitor pricing.
Competitors are always just a few clicks away, which is why competitive awareness and analysis are so critical.
“[Automated competitive analysis] allows us to increase our customer base, product offering, sales and profits all with a very positive return on investment,” said John Moore, owner of Everything Truck Parts.
The process behind an automated competitive analysis solution is relatively simple:
- The product performs an automated pricing analysis of company outlined competitors
- With insight into competitor pricing, the company determines unique pricing rules for product categories in line with a competitive strategy
- The product then operates on the store’s backend to automatically update prices based on the competition and the company’s own customized rules
Automated price comparisons are a great way to benchmark against your competitors and incorporate business intelligence into your pricing strategy. Online retail doesn’t exist in a vacuum and treating your online space and competitors as though they aren’t there is an easy way to lose customers. Competitors are always just a few clicks away, which is why competitive awareness and analysis are so central to ecommerce success. In order to be a viable option in the eyes of consumers, online retailers must either have prices that are comparable to competitors or validate a price premium by providing additional value.
Under-pricing your products based on your competition isn’t necessarily a best practice.
Keep in mind, though, under-pricing your products based on your competition isn’t necessarily a best practice. Pricing influences customer preference in multiple ways. Just take a look at Apple prices vs. Android. The two brands have two very different pricing strategies that work well in combination with the overall brand experience.
3 Steps to Determining Your Pricing Strategy
Once you identify your top competitors, it’s time to put that information to work. Competitive intelligence can come in handy in three ways, all of which help to inform your pricing strategy:
- Awareness: Monitor the competition to get the full picture of what you’re up against. How are your competitors priced and what products do they carry? If your pricing is vastly different from that of your competitors’ or if you don’t have the top products shoppers are looking for, you could be at a disadvantage and may need to rethink your pricing or product offerings.
- Automation: Based on the knowledge you gain, you can take action. Priced too low? Bump up your prices to pull in extra profit. Priced too high? Either lower your prices to fit in more with the competition or provide added value that shoppers love, for instance free shipping, periodic discounts, unique products, or anything that makes you stand out from your competitors.
- Analysis: How have your sales and profits performed since you implemented price changes? Does your brand experience and pricing strategy compliment one another? Move forward with only the most effective strategies that maximize your ROI, and consider the rest part of the trial and error process.
Does your online store have a great success story with pricing strategies or business intelligence automation? Let us know in the comments below and your company’s story may be highlighted next.
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