Product prices are constantly in flux. Some customers buy regardless of the cost of the product. However, 85% of customers research prices before making any purchase.
“Pricing is a pretty simple and straightforward thing. Customers will not pay literally a penny more than the true value of the product.” — Ron Johnson, the former chief executive officer of J. C. Penney
If your competitors source products at lower costs, it becomes easier to pass those savings as discounts or spend more on advertising the products. To tackle this, you need price intelligence.
Price intelligence helps you determine the right price points for your products, know when to discount your products, and uncover trends in the market.
What is price intelligence?
Price intelligence is the process of gathering competitor price data to make informed pricing decisions for your products. It helps you ensure you do not lose market share to price wars or over/under price your products.
Data gathered through price intelligence tells you:
- When you are over or underpricing your products
- If there are better product deals out there that your competitors are leveraging
- The actions you can take to be more competitive in your industry
While the process may sound complicated, the insights gained can help push your brand towards growth.
Benefits of price intelligence
Implementing price intelligence offers several benefits to your business strategy, including:
- Improved competitiveness: By understanding the prices of similar products and services on the market, you can adjust your prices to remain competitive.
- Improved pricing decisions: Price intelligence provides you with the ability to see how your competitors are pricing their products, giving you the ability to make better pricing decisions that suit the current market demand.
- Increased profits: Equipped with the pricing data, you can know exactly when the demand in the market is higher, allowing you to maximize your profits while selling the same product and without spending more on marketing.
Components of price intelligence
The goal of price intelligence is to help businesses understand the pricing landscape and make informed pricing decisions. There are four main components of price intelligence
1. Market data
Businesses need to keep a tab on their industry’s micro and macro trends. This includes tracking the news for economic trends, upcoming recessions, and inflation.
You also need to gather details about average prices of goods and services, consumer spending patterns, and industry-specific demand trends. This data will help you determine your pricing strategy and implement the changes before time.
2. Competitor data
To make better pricing decisions, businesses need to understand what competitors are up to. This includes keeping a track of their prices, promotions, and new product launches throughout the year. You can use various tools like Prisync to automatically track your competitor’s prices.
3. Customer data
It is important to understand the needs and wants of your target audience. You also need to determine when the market demand is high to help you squeeze more profits from your store. This data can be gathered through surveys, focus groups, customer interviews, and price tests.
You can use Dexter to set up price tests in just 3 steps and gather statistically significant data to derive pricing insights. Customer data will help you understand how much your target audience is willing to pay for your product or service. It will also help you segment your customers based on their willingness to pay and better market your products.
4. Seasonality data
Seasonality will help you understand the demand for your product or service throughout the year. This data can be gathered by analyzing sales data, customer surveys, and through market research.
For example, if a store sells winter jackets, the sales throughout the year would be negligible compared to sales during winter. While winter jackets have a clear seasonality, you may need to collect and analyze month-over-month sales data to determine the peak seasons for your products. Here’s how you can collect and leverage seasonal data to implement a seasonal pricing strategy.
Seasonality data will help you determine the right time to launch new products, run promotions, and raise prices.
How to get started with pricing intelligence for your business?
Implementing price intelligence for your business requires a systematic approach. Since the data needs to consistently come into your systems, it makes sense to try and automate as much of the process as you can. Here are the five basic steps to get started with price intelligence.
1. Identify major competitors
Before you begin collecting price data, you need to know your major competitors. You can look for your major competitors by:
- Searching for your target keywords on Google, YouTube, and social media
- List out all the brands that talk about the target topic
- Filter the competitors by how big their website is (blog count), how many followers they have, and how active they are.
- End your search with 5-10 competitors depending on how large your niche is.
While researching competitors, also check the marketing channels they’re leveraging. To identify your competitor’s sales channels:
- Go to Google and type the competitor’s name
- Look for all the platforms where there’s a mention of that brand name
- Make a list of the social platforms for each brand
- Find the common places that majority of your competitors are already marketing or running ads on
The above steps will help you get a head start on your price research as well as your marketing strategy.
2. Collect price data
You need to collect two types of price data: competitor data and customer data.
Customer data helps you understand the real value that customers will pay for your products while competitor data will help you keep track of the markets.
To collect competitor data, you can manually visit competitor websites and product listing pages and collect prices. You can also check for customer reviews to see if customers talk about specific pricing structures or any other gaps that your product fills. Price tracking and survey tools can help automate parts of the competitor price data collection. Prisync can help with tracking competitor prices and Typeform can help simplify surveys.
For customer data, you can use customer surveys or price testing. Survey data offers an indirect insight into the buying psychology of your customer base. Price test, on the other hand, directly offers information about the price that customers are willing to pay.
To run and automate your price tests, a price testing app like Dexter will be handy. If offers a simple setup that gets you started immediately and continues collecting data in the background without affecting your workflows.
3. Analyze the data
With data at hand, you need to look for trends and patterns. Your data should answer your questions, including:
- When are competitors offering discounts?
- Are they raising prices during peak times?
- Are there better deals on your products?
- Are competitors running ads profitably for a specific price range?
The answers to these will offer insights into the current state of the market and what action steps need to be taken.
4. Leverage insights to improve product offering
If you offer a product or service that someone can replicate with minimal investment and research (low entry barrier), competition and undercutting are inevitable. This is what we call a price war. Price wars are not sustainable as you’re creating products that are commodities.
When price wars are not feasible, for example, during Amazon sales, use price intelligence to identify gaps in the market and add value to customers’ purchases.
You can work on enhancing your customer service and improving delivery times, so a higher price tag is justified.
Alternatively, offer freebies or combine products into a bundle based on what other customers have purchased together. This will make your customers feel understood since you are providing products they’d otherwise buy separately in a single package.
5. Regular upkeep and maintenance
Implementing price intelligence requires regular monitoring of your competitor’s prices and adjusting your price strategy accordingly. Over the course of a year, you cover all the seasons and price fluctuations that will help uncover hidden details about your competitors’ pricing strategies.
Example: How AmazonBasics leverages price intelligence to disrupt industries
AmazonBasics is one of Amazon’s homegrown brands that operates majorly in the Home and Electronics category. Over 57.8% of reviews within this category belong to AmazonBasics making it the industry leader by a major chunk.
And AmazonBasics wins by undercutting the competition.
Being the data leader in ecommerce, Amazon has access to sales and margins data of thousands of sellers on their platform. With thorough data analysis, they are able to identify the evergreen products and the price range where each product converts best.
Amazon leverages these insights to source products directly from manufacturers at larger bargains compared to other brands on its platform.
This is possible due to the pricing data that Amazon has and the volume and scale of their orders. The data also helps Amazon determine the price range at which each product will yield maximum profit while converting just as well.
All this combined, AmazonBasics wins in the search results with the right pricing, images, and headline copy that entices customers to make the purchase.
While you may not have a large amount of data, gathering basic competitor and customer data can give you a head start in the pricing game.
The future of pricing intelligence and its impact on businesses
Price intelligence will continue to evolve. The process has rough edges related to data collection and analysis that technology can help smoothen out. Here are three things that could change and improve price intelligence methodologies:
- Automated and systematized data gathering through the use of powerful scrapers
- Use of big data analysis in price intelligence for better data gathering and analysis
- Machine learning algorithms to predict pricing trends
But while the technology is still in its early stages, utilizing price intelligence now will give an upper hand.
Lead your industry with price intelligence
The ability to make quick informed decisions is key to business success. With the right price intelligence setup, you can make better pricing decisions that help you increase your profits, get higher conversions, and raise the bar for the industry as a leader.
Though price intelligence needs upfront effort, there’s minimal maintenance required over the long term. The right tools to gather, track, and test your prices can help you collect data and analyze it consistently over time and uncover deep insights that would otherwise be hidden away.
Along with competitor pricing, it also helps to know what price your customers are willing to pay. You can visit here to install Dexter on your Shopify store.