Pricing analysis is one of the most critical components of the consumer decision-making process. Businesses need to be very practical in pricing their products to gain the desired profit. The modern retailer uses the might of competitive pricing to get an edge over his competitors. With the right competitive pricing strategy, you can understand the market trend-shifts and change your prices dynamically.
Pricing analysis: An essential component of the consumer decision-making process
The consumer decision-making process is quite complicated. But it is interesting too because they take several decisions in a few seconds and that also subconsciously.
Now, the real challenge for a marketer comes in. To find out ways to influence this decision-making process from the beginning to the end is the primary goal of any marketing campaign.
The above bar graph clearly illustrates that price is a vital factor for consumers. Here, the real game starts.
Pricing itself is a tricky business. For instance, if you price your products too high, your customers won’t even glance at it; and, if your price is too low, people will question your quality and credibility. Therefore, the challenge is to find the middle ground.
The question comes down to how you find the right pricing and turn the consumer’s decision in your favor.
The miracle word you are looking for is Competitive pricing.
What is competitive pricing?
This method is the secret formula of all those brands that have established a broad user base. It is an intelligent use of data for decision-making. Let us understand it with an example.
When you enter the market with a product, how do you decide its price? You look around, mostly, at your competitors. This step gives you some ideas. Depending on their and your quality and a few other factors, you decide your price.
In case your price is lower than your competitor’s and both your qualities are almost at par, there is a big chance that you will make the sale here. This process is the strategy behind competitive pricing.
By studying and analyzing your competitor’s price, you develop an understanding of the market and its trends. With this in mind, you try to decide prices quickly and on a large scale.
Why do you need competitive pricing to increase profit?
The answer lies in the terminology itself. Pricing analysis is a tool that increases your competitiveness.
Let’s take the example of an e-commerce site. Every retailer tries to list their products on top of the list. This listing is very dynamic. To compete, you need to change your price frequently. This process isn’t possible manually; that is why retailers use software for the purpose.
1. Competing for customers and boosting sales
It is essential to keep track of trends to get the desired profit. With data, you can look into your competitor’s promotions and product assortment. Knowing the trends and how your competitor is performing, you can plan accordingly and stay a step ahead.
You know that price is a crucial component of the consumer decision-making process. With this in mind, you can boost sales too by fixing optimal prices.
2. Optimizing your competitive pricing strategy and improving margins
One thing to remember is that competitive pricing doesn’t always mean lowering your prices. It’s about finding the right balance. By pricing your products very low, you might be giving away profit. Pricing software digs up products similar to yours. Also, it helps you price products to increase profit margins along with keeping up with your competitors.
3. Market trend analysis
A retailer performs well in two ways. Firstly, by keeping up with the trends and secondly, by bringing never-seen-before products. If you are in the first category, you have to look at the sale of products. The maximum and minimum price of the products and its respective sales will help you perfect your competitive pricing.
4. Improving product visibility
Along with SEO, navigation, and page design, visibility has a lot to do with product pricing. Nowadays, AI-based tools can suggest products to your customers based on calculated conversion rates. This step will keep them on your site for longer and even convert a few.
5. Inventory management
Sometimes you can be left with excess stock. In such times, you might have to liquidate them at zero margins. But competitive pricing helps prevent such situations. You can easily keep up the sale by fixing the optimal prices. Thus, you can keep the stock moving and generate sales.
6. Finding new customers
When you are looking for higher profit, you don’t necessarily improve your competitiveness. Profit, therefore, is the combination of volume sold and profit incurred on each. It is crucial to make optimal pricing choices while also satisfying them with product quality to attract new buyers.
7. Building a loyal customer base
Customers look for value, both quality-wise and monetarily. If your product does justice to both these requirements, your customers will come back to you the next time they want to purchase. Pricing analysis software can help you maintain easy-going prices for long. Thus, you can build and retain customer loyalty.
How is competitive pricing done?
Now that you have recognized your saviour well, it is time you also learn how to do pricing analysis.
1. Get yourself a software
The modern pricing analysis tools employ complex algorithms. With these algorithms, you can easily counter the challenges of time and scalability.
This software gathers product data from various sources. It shortlists similar products from a pile using its algorithm even if their titles or images don’t match. Even the website structure is no hurdle for this software.
Using the data, it studies the maximum and minimum price of a product and decides the optimal price of your product. With this optimal value, you can improve your sales along with staying ahead in the competition.
While choosing a tool, you should verify how well it performs web-scraping. This precaution will ensure that you get the best use of data to grow your business.
2. Design your pricing strategy according to insights
The data you get is varied and unstructured. To get relevant insights, you need to filter the data and analyze it. But how and on what basis?
You have to shortlist your direct competitors. If the target audience matches for you and another brand, then you two are direct competitors. Next, also identify indirect competitors. These are retailers that don’t focus on your audience. Instead, your audience prefers their products among other preferred retailers.
Now try to understand the strategy of your competitors. For instance, you can verify the frequency of sales, price variation during holidays, shipping options, and other promotions. Now, design your strategy with a few more perks, such as promo cards, than your competitors.
This way, your target audience will be motivated to make the switch.
3. Add the dynamic to your competitive pricing strategy
Now that your analysts have done the pricing analysis; it is time to set the ball rolling. The only challenge is to squeeze the time taken to collect data, filter it, analyze it, and implement the pricing strategy. Without this, the whole process falls short of nothing.
For instance, a price trend you see at the beginning of winter can’t wait until the end of winter for implementation. Therefore, timing is critical here.
Try Datahut’s competitive pricing solution.
We believe data is the solution to most of your problems. Those of you who don’t know the might of data are in for a surprise. With our smart data solutions like web scraping and pricing analysis, you will be able to circumvent all your business-related issues.
At Datahut, we follow your business closely and take steps that give you the desired results. To know what’s in store, contact us.