Are you struggling to match your competitors’ prices in the ever-evolving environment you’re in?
Competitor price tracking is essential to remain competitive, but it is a rather tedious process.
Here, based on scientific research, you will find out how to monitor competitor’s prices like the pros do, and how to use this information to set the right pricing strategy at all times.
We will discuss the findings of a highly cited 2017 research on competition-based dynamic pricing to help you increase your revenue without having to cut your profit margins.
Read on to find out the tips that can help you get it right with competitor price monitoring.
Why Competitor Price Tracking Should be Automated
Online retail pricing transparency enables customers to easily compare prices.
This results in keen competition because the retailers are always seeking to outdo each other.
It is a big mistake not to pay attention to the competitors, as one may end up out of business.
The so-called “competition-based dynamic pricing” is used by advanced retailers: the prices are set in response to the competitors’ prices, which are monitored 24/7. Happens because with so many competitors and products, it’s impossible to do it manually even with an army of VAs.
Advanced retailers need to gather competitor data and feed it into their dynamic pricing models. Real-time market information helps the firm change prices in order to get the most revenue.
The researchers from that study we mentioned, were able to raise revenue by 11% of their test company, while at the same time maintaining margins; which is not something easy to do!
It is not enough to be a fast follower; one has to be a pioneer with data and technology.
So go ahead and track prices automatically, use our proxies to avoid getting blocked while scraping, set dynamic pricing, and out compete your competitors. No time to lose!
A Step-by-Step Guide to Track Competitors’ Prices
Step 1: Define your Market Positioning
First, it is necessary to determine the positioning of the brand in the market: is it a luxury brand, an affordable option, or something in between? The “Competition-Based Dynamic Pricing in Online Retailing” study indicates that this positioning determines your pricing strategy and entails the evaluation of customer tastes and decision-making patterns. It also reveals that the value offered by a retailer in terms of quality, service or features influences consumers’ decision.
Step 2: Study the competition like a maniac
Determine your direct competitors – similar businesses offering similar products/services and targeting the same audience. Consider their pricing strategies like dynamic pricing, coupons, and loyalty programs. However, not all competitors equally influence consumer decision-making. Focus on rivals with a large market share whose prices significantly impact your demand.
Step 3: Identify the Best Competitor and Products to Track
Choose competitors and products to track based on market share, product-relatedness, and competitive effects. The research studied baby-feeding bottles because product features are tangible and measurable for comparing performance. Tools to identify competitor websites and products include web scraping, price comparison sites, and market research.
Step 4: Get Real-Time Pricing Information
Tools to track and compare competitor prices in real-time include web scraping, APIs, or price monitoring services. The study shows that flexible online retail pricing and timely information help firms set the right prices and respond to market changes.
Step 5: Test The Pricing Data For Your Products
Cross-check the collected prices with other sources and conduct controlled trials. The study shows that using a randomized price experiment with a proper design can validate pricing data findings. This enabled obtaining actual price elasticity measures.
Step 6: Identify Problems And Adjust Strategy
Price monitoring challenges include wrong data, delayed updates, and misinterpreting competitor strategies. Ensure proper validation methods and correct monitoring techniques, and adjust your approach as needed.
Step 7: Make Price Monitoring Part of Daily Operations
Treat price monitoring as a core business process assigned to specific employees. The study’s successful real-business collaboration shows price monitoring should be part of daily activities. Implement it through dashboards and tools that provide the right, up-to-date data.
Benefits of Monitoring Your Competitors’ Prices
1. Measure price elasticities accurately to optimize margins
This paper also describes how a randomized price test can be used to estimate price elasticities without the bias of past sales data. You will be able to find out the price levels that will enable you to reach the desired margins on revenues for each product, taking into consideration its price elasticity of demand.
2. Respond to competitor price changes based on consumer behavior
Another factor that affects the most suitable price response strategy is the level of cross-shopping by consumers. Tools that can give alerts of competitors’ prices to enable you to match their prices or even beat them can speed up the process.
3. Differentiate responses based on competitor significance
Industry rivals are not the same in the level of interference with consumers’ decision making process. With the help of AI, web scraping and data mining, one can track competitor prices on a regular basis, study customers’ behavior, identify competitors’ strategies and vulnerabilities, as well as determine the proper price level for each product to increase the total revenue.
4. Incorporate competitor stock-outs into pricing decisions
Besides prices, monitoring stock-outs of competitors give valuable information on the consumers’ trends and their response to price changes. Own and competitor stock-outs are the most important source of variation used in the study to estimate its demand model. Competitors’ stock-out also reveals chances of capturing clients’ attention when rivals are out of the game.
5. Automate pricing decisions with a data-driven algorithm across channels
Compare collected prices with those from other sources and conduct controlled experiments. It is also possible to confirm pricing data conclusions with a randomized price experiment with an appropriate design, the study reveals. This made it possible to obtain actual price elasticity values.
6. Enhance competitive insights with frequent price experiments
Price reactions are more significant in the context of online retailing because consumers’ search costs and menu costs for retailers are lower than in other types of stores. According to the study, it is suggested that price experiments should be conducted on a regular basis to re-estimate the models and to adapt to the changing market conditions. During such days as Black Friday, Cyber Monday, and the like, brands go head to head in a pricing war. Monitoring tools give information on competitors’ activities and enable creation of automation rules to change prices round the clock, even when you are not physically present to do so.
7. Make a Price Monitoring Routine
It is necessary to state that price monitoring should be viewed as one of the most important business processes that can be carried out. The study we talked about so much emphasizes that pricing monitoring should be incorporated into the daily tasks of a business. It can be done easier with the help of dashboards, tools and some scraping knowledge.
Referenced article: Fisher, M., Gallino, S., & Li, J. (2017). Competition-Based Dynamic Pricing in Online Retailing: A Methodology Validated with Field Experiments. Product Innovation eJournal. https://doi.org/10.2139/ssrn.2547793.
