E-commerce has changed the deal for buyers as one can now choose the best price for a product from several buyers. For this very reason, the e-commerce players offer competitive prices for winning more and more customers. However, the thing with competitive prices is that they affect profit margins as well. Therefore, e-commerce companies need to optimize the prices in such a manner that the trade-off is managed successfully and their business grows sustainably.
Pricing intelligence tools are the solution to this issue. It is a strategy driven by data that helps the e-commerce firms in monitoring the competitor’s prices and adjust their prices accordingly to maintain their market share. With the help of pricing intelligence tools, you can get a competitive advantage over others.
Here’s a look at how pricing intelligencework and some of the strategies that help in practicing it:
1. Identifying Your Competitors
It is helpful to know about your business competitors not only from the viewpoint of price optimization but also for learning strategies. It is to be understood that competitors are the businesses that serve the same target market as yours. They can be online or physical businesses or businesses that sell similar/ substitute products.
If you sell on Amazon, then you might know the price drops that go in real-time. Now, that is known as a dynamic pricing strategy. So, you need to know the changing prices of your customer in real-time. This can be done with the help of a good pricing intelligence system. WebDataGuru can provide such assistance with years of expertise and experience in serving diverse industries.
2. Understand The Price Dynamics
For optimizing the price levels, it is important to understand the price dynamics. The factors include:
- Understanding how your customers might react to price changes i.e., price responsiveness.
- Relation between products as some products are complementary to each other and their prices may be correlated.
- Knowing about the prices at which the customer is more willing to buy your product over your competition.
- How to price increase or price decrease will impact consumer behavior.
Pricing intelligence tools will help you minimize the risks of price dynamics and make your brand more accessible to the customers.
3. Data Extraction
Once you finalize the list of your competitors, you need to extract their pricing data as well. This can be done with the help of data collection services.
- A The data that you collect must be updated as they change often. Missing the opportunity to make a pricing strategy, will impact profitability.
- You should collect data on price responsiveness along with discounts and promotions being offered by the competitors.
- When you gauge the reaction of the market to these changes, it will help in deciding how the market would react to similar changes introduced by you.
- You must keep an eye on traffic and data on your website. This helps in keeping a tab on the customer preferences and creates perceived value for the product.
WebDataGuru is one of the best data extraction companies. You can get your data needs through and wait for the amazing results.
4. Pricing Analysis
- A You must consider any historical data or trends in the competitor’s data. This will help in determining which profit technique should be used at what time. For example, some businesses offer discounts during Christmas.
- The special trends in the data can be used for prediction analysis by machine learning models. The new information can be used for predicting new demands or trends that can help in setting competitive prices.
- The pricing data collected is useful for determining the initial price range for their product. This range will help them in figuring out the best and worst price for the product. They can further revise the prices till the time market responds favorably.
Advantages Of Price Intelligence Strategy
Price intelligence tools can help the business in achieving maximum profitable growth when used along with other price automation techniques. Some of them are as follows:
1. Automated Reporting Functions
It can be tedious to keep an eye on the data changes and it can also slow the businesses’ response time. Automated reporting functions can be built-in within the price monitoring system so that the firm can be alerted about any changes in the competitor pricing or promotional activities.
Running an eCommerce business is not an easy task. Being relevant and showcasing what’s best for your business is necessary when it comes to maintaining a good online presence. The price change is also one of the many factors that define your business life cycle. Pricing Intelligence tools can help you keep a tab on the functions in a fully-automated manner while you can focus on your business with a relaxed mind.
2. Tier-Based Pricing
For offering an unparalleled customer experience or getting the most out of the consumer surplus from the market, firms can implement tier-based pricing. In this strategy, the market is divided into segments with different variants of the product priced differently. This enables the customers to find a substitute by not having to switch to the competitors.
For instance, you can find some types of fabric conditioners made by the same company, but with a different price range to cater to all the demographics. This basically, helps you in reaching a bigger audience and being a mass brand.
The online market is more segmented as a user can apply a certain filter and your brand may be opted out. So, here you want to be present in all the price range at least two so that a customer buys your product marketed in a different segment ensuring an assured sale. Tier-based pricing is done by many companies irrespective of the industry. But mostly it is seen in the automotive business, real estate, and FMCG products.
3. Dynamic Pricing
This is also known as algorithm pricing. It is a fully automated pricing method wherein the algorithm places an optimum price on the product considering competitors’ prices, market trends, and stocks. This can prove to be helpful especially when a business deals in hundreds/ thousands of products on a routine basis. It is to be known that Amazon changes the price of its products every 10 minutes which helps it earn a profit by 25%.
Now if you are an Amazon seller, then you must keep track of the price change in real-time to gain benefit from the price changes. Pricing intelligence monitors the price changes on every online platform in real-time. This helps you in grabbing the opportunity to be the first product that the user might buy.
4. Price Elasticity
Price elasticity of demands is about the responsiveness of the quantity demanded by customers concerning a small change in the price. It has been observed that products with high-quality substitutes are more price elastic as compared to products that are products which have lesser substitutes as consumers become dependent on them. Price intelligence strategy can help the businesses in figuring out the responsiveness to the products in comparison to competitors so that they can price their products accordingly.
Is Pricing Intelligence Legal?
Pricing intelligence tools include extracting data that is available publically on business websites. It is considered legal in most countries if the data is not used for violating someone’s privacy. However, companies should be careful about using the data for pricing. There are some forms of pricing that break anti-trust laws of countries such as:
1. Predatory pricing
This method of pricing works by reducing the price of a product to such as extent that the competitors get thrown out of the market. This method reduces competition as well as leads to monopoly. This is illegal and hence companies should be careful when pricing their products lower than their competitors. Keeping a lower price doesn’t ensure sales. It just means that you are willing to offer a product at a price lower than your competitors. So, keeping a healthy economy means keeping a price which works for your business and not just concentrating on the competition.
2. Unlawful price discrimination
If a business offers a certain price only to specific customers, it is unlawful and violates antitrust laws. Unlawful price discrimination breaks the law and needs to be taken care of.
This is when businesses export their products and sell them at a lesser price in the international market as compared to the domestic market. This can be considered a case of predatory pricing. It is illegal as it might harm the producers in the export market.
Take Effective Action That Boosts your Business
It is 2022, and growing your business was never this vital before. The challenging times have made every business take a step back and think over distinctive methods to go digital in operations and selling. Pricing intelligence tools can help you define better pricing strategies and reach a wider audience. WebDataGuru is going to help you in doing that.
Contact us to know more and order a free demo!