In e-commerce, price is still most people’s top priority, however it’s more difficult than ever to compete based on price because customers can compare prices in seconds. In fact, there are tools and sites customers can use to do the comparison for them, making it even more difficult to be competitive when it comes to pricing.
With price comparisons being so easy now, most people are going to take at least a little bit of time to look at two or three different companies’ prices to get the best one. Faced with this ease of price comparison, every business has to ask itself: how do my prices stack up against my competition?
The best way to find the answer to this question is competitor price monitoring.
It’s crucial to collect pricing information from your competitors so you can get a better overall view of your market and reevaluate your pricing strategy when necessary. It also allows you to respond quickly to market trends, customer behavior, stock levels and what your competition is doing in terms of promotions, bundles, deals and discounts, in addition to their regular pricing strategy.
Competitor pricing data collection is a key component to your own price optimization process, which can be defined as having the perfect price at the perfect time to entice customers to choose you over your competition.
The one thing you need to have effective price optimization is data. You need a lot of data.
Monitoring your competition isn’t the only thing you need to be doing, but it should be part of your price strategy.
Data to collect
You should be looking at internal data, including:
- Your historical sales and trends
- Your promotions
- Your brand’s and products’ perceived value in comparison to your competitors (Are you considered a luxury brand or a budget brand, for example?)
And, you also need to look at external data, including:
- Competitors’ prices
- Time of year/Season
- Special events
Together, your internal and external data can help you spot trends and opportunities and develop an informed competitive pricing strategy.
Major retailers use internal and external pricing data all the time to alter their prices, often dozens of times per day. And they do it by collecting reams of data on their competitors.
Online ecommerce sites like Amazon, major airlines, car rental agencies, hotels and many more types of businesses collect huge amounts of data to influence their pricing in real time. Price data collection happens 24/7 so companies can be proactive rather than reactive. Your competition is likely thinking about monitoring you (if they aren’t already), so being proactive and starting the process of collecting data on them is like beating them to the punch.
Why you should price monitor
The most obvious reason to monitor competitors’ pricing is to use the information to influence your own pricing strategy, but there are other reasons to do it, too.
In addition to being able to see their prices, you’ll also be able to monitor your competitors’ inventory, what products they’re adding, what products they’re dropping, what their discounts are, how they handle shipping costs, etc.
You’ll be able to get a clear picture of the “Three Ps:”
Gathering pricing data on your competition can show you if any of them are ignoring the minimum advertised price (MAP) and gaining an unfair advantage by doing that. It can help you find optimal price points for your products based on real-time and historical data collected both internally and from your competition.
And, it will let you find where you sit in your market hierarchy, meaning it will show you if you are a high end brand in that particular market, a low end brand or if you sit somewhere in the middle. Knowing where you sit will help you market to your target audience more. If the data tells you you’re a higher end brand, you can market to the people who are willing to spend a bit more. If the data tells you you’re a lower end brand, market to the budget conscious consumer.
If you price too high, people will ignore you. Price too low and you’re not getting as much profit as you could. Competitor pricing data coupled with your own internal data helps you find the pricing sweet spot.
The Pricing Conundrum
You have a number of pricing strategies you can use. Some are pretty standard, like:
- Cost-oriented pricing:
- Adding a target profit margin to the unit cost to get a product price.
- Market-oriented pricing:
- Reacting to and predicting market and competitor prices.
- Consumer-oriented pricing:
- Finding the maximum customers are willing to pay.
- Vendor pricing:
- Adopting the manufacturer’s suggested retail price (MSRP).
Others are a little less conventional, such as:
- Prestige pricing
- Deliberately pricing higher than your competition. (Works well if you’re considered a higher end brand.)
- Anchor pricing
- Having set product prices for an item that customers can compare other items with for perceived savings. (Pricing a 17” laptop at $1,000 — the anchor — and a 15” laptop at $600 so the customer perceives greater savings on the 15” laptop, for example.)
- Charm pricing
- Having prices that end in 5, 7, and 9, which are perceived as being less expensive.
These latter three examples of pricing strategies are based on psychological pricing and there are a number of different psychological tactics you can try out. (Reducing the font size of prices, for example.)
No matter which strategy and tactics you use, market pricing should be in your pricing mix somewhere.
Brand loyalty isn’t what it used to be, so optimizing prices is absolutely key to maintaining profitability. And to optimize your prices, you need to collect competitor pricing data.
How you should price monitor
Automated web scraping tools are virtually the only way to keep up to date with all your competitors’ prices in real time. They save you time and effort, they eliminate data entry errors and they collect more data than a person ever could hope to gather.
Web scrapers can extract pricing data hourly, daily, weekly, monthly or at any other interval you feel is important.
Once you’ve found a web scraper you like, start the process of gathering competitor pricing data.
Step 1. Identify Your Competition
If you are in ecommerce, it can seem like you’re competing with everyone. And, in some ways, that is true. But, some competitors are more direct than others.
Find your most direct competitors by:
- Searching for products that you sell with some other important keywords, like location, for example, and see what businesses come up.
- Use website analysis tools to find your top competitors. Buzzsumo, SimilarWeb, and SEMrush are some of the most popular ones and they can give you details about both your direct and indirect competitors.
- Dig further into your findings by checking websites and social media accounts of the competitors you identify.
Develop an internal process to identify your competition and use it to continually identify new competitors as they emerge.
Step 2. Identify Your Competitive Assortment
Your competitive assortment is the subset of products that will give you the best data points when comparing your prices with competitors. This doesn’t need to be everything you sell.
Choose your competitive assortment based on your best sellers, what is currently in demand, and which products are most searched for.
Your competitive assortment can be identified using the Pareto Principle, which posits that roughly 80% of your sales come from 20% of your products. You want to identify that 20% to use.
Once you’ve identified these products, organize them into categories by SKU for easier comparison.
Step 3. Determine the Frequency
You’ll need to decide how frequently you want to monitor competitor prices and scrape web data. Ecommerce powerhouses like Amazon do it on a near-constant basis while smaller businesses generally opt for less frequency.
How often you want to scrape data will depend on your product line, your competition, your market, the situation you are in (struggling to stay afloat vs. comfortably No. 1, for example). You can scrape as often as every minute all the way up to annually.
Find the frequency that works best for you. The fresher the data, the more useful it will be.
Step 4. Gather the URLs
Gather all the relevant product URLs from your competitors and import them into your scraping tool. You can also scrape an entire website if you prefer to do that. Keep the data you need, discard the data you don’t need and create a report that fits your requirements.
Step 5. Analyze the Data
Take the data you’ve gathered on your competitors and run it through your chosen analytics processing platform. BigML is a popular one. These analytics tools will help you identify trends, make informed predictions, compare pricing strategies and evaluate how your prices stack up against your competitors.
To automate this entire process as much as possible, you will require:
- A data extractor (i.e. a web scraper)
- A script that directs the extractor to scrape data at the frequency you prefer.
If you want, you can set up automated schedules that monitor multiple competitors at the same time. You can even scrape data that goes beyond just price points. You may want to also monitor competitors’ reviews, ratings, specs, product information, etc. This extra information can give you a more well-rounded picture of your competition.
There is also stock availability to keep track of, along with historical trends and historical price averages. You can set alerts for whenever one of their price changes. Do what you need to do to keep on top of your competition’s price strategy.
Research has shown that only 25.6% of businesses take competition prices into account when they set their own prices. That means you can use competitor price data collection as a sales advantage over companies that don’t use it.
Competitive pricing is imperative for success in today’s ecommerce landscape. Your pricing strategy should include data from your costs, your products’ perceived value, the market’s demand, your cash needs, your competition’s pricing and much more. It’s only with these large amounts of data that you can get a whole picture of the competitive environment and find your optimal price.
Ecommerce pricing fluctuates rapidly. Prices rise and fall within minutes. Ignoring your competition will only lose you customers, cost you revenue, decrease your profit and tarnish your reputation.
Your two-step plan to successful data-driven pricing includes:
Competitor price data monitoring is one of the most important tools at your disposal and influences your strategy to a high degree.
Collecting data on your competition’s prices need not be difficult or time consuming. If you find it challenging and frustrating to use a data scraping tool and not getting accurate results consistently, you can consider hiring a full-service data provider such as Ficstar to fulfill your competitor price data collection needs. By utilizing the power of advanced web scraping technology and deep expertise in web data collection from such a service provider, you will have up-to-date information on your top competitors and it will help you develop a pricing strategy that propels you to the top of your market.