It’s a common practice for customers to search the internet in pursuit of the best deals. Hence, to capture and retain customers, it’s vital to set competitive prices. Nonetheless, pricing products too aggressively can erode profit margins and jeopardize the sustainability of your business. The key lies in possessing precise information, allowing you to establish prices that maximize profits while remaining enticing to customers.
Monitoring the prices set by your competitors can provide valuable insights. It informs you when to adjust your prices to align with customer expectations when to consider price increases, and when maintaining the status quo is the best course of action.
Drawing from our extensive experience collaborating with major retailers and brands, we’ve identified common challenges and best practices to kickstart your competitive price monitoring strategy.
Determining Which Categories and SKUs to Monitor
The selection of categories and SKUs to monitor hinges on your business identity. Consider which products are closely associated with your store in customers’ minds. Identify the categories where you aim to excel and those where you primarily play a defensive role.
Identifying Competitors of Interest
The number of competitors to monitor varies depending on the categories you operate in. This list is dynamic as retailers frequently adjust their product assortments. Focus on competitors that customers will likely turn to for price-sensitive key-value items. Typically, it’s advisable to concentrate on six to eight competitors who closely resemble your business. Additionally, minimal online traffic for a specific competitor may indicate that their price changes don’t require an immediate response.
Determining the Monitoring Frequency
Major retailers utilizing dynamic pricing regularly scrutinize competitors’ prices for all their offerings. However, the frequency of monitoring depends on the product’s significance and price sensitivity. Key value items (KVIs) typically undergo review every two hours, while other products may be reassessed weekly or monthly. The decision revolves around the extent to which sales are influenced by an item’s price and the frequency of price fluctuations among competitors.
Establishing Matching Rules for Product Comparison
When comparing your prices with competitors, ensure that you evaluate identical products. Regardless of the category, you must define the product features or attributes most important to your customers. For instance, if you specialize in selling furniture, a complex product category, you may prioritize attributes such as material (fabric, wood, glass, leather) when comparing items.
Monitoring prices for millions of products manually is a daunting task. Fortunately, there are price monitoring tools available that offer reliable pricing information in real time. These tools provide the data needed to make timely adjustments to your prices, ensuring your competitiveness in the market.