A valuable change is now bubbling in this world of predatory pricing.
Now, premium brands are reverting to pricing parity on both online and offline channels. The reason is simple. Businesses are trying to balance the dynamics between their online and offline stores. There are various other reasons, and Datahut is here to help you understand them. Read on to know how pricing parity gives you the chance to maximize your profits in an era of predatory pricing.
Understanding the background
Nowadays, shopping is shifting to online platforms. Furthermore, product price is increasingly becoming a decisive factor in consumer decision-making. This problem happens because brands are reducing their prices continuously to attract buyers.
Moreover, brands have resellers and how they deal with their resellers is crucial to product sales. For instance, a brand has three resellers on Amazon selling a product priced at $60. If these resellers have very different prices, then it impacts other sellers too. It brings in undue competition and also impacts the perceived trustworthiness of the brand.
A significant brand-reseller relationship has brands conveying their policies clearly and resellers who comply with the same.
Also, there is a chance that your online stores might dominate your offline stores. Various brands struggle to ascertain a balance between the two channels. Hence, brands that sell through online and offline stores have to focus on another dimension of pricing.
What is Pricing Parity?
You perform price parity when you value a particular product at the same price at two different platforms, such as Amazon and Walmart, Amazon, and your brick-and-mortar store.
Moreover, pricing parity has another critical dimension for businesses that are selling in multiple countries. You already know that the value of currency keeps changing. It can change over time in the same country and also drastically between two different countries. Therefore, when resellers think about price and profit, they have to think about currency fluctuations.
You may ask why. Let us understand this with an example. Let us assume that you price a product at $50. You intend to sell these in the US and the EU.
Since your manufacture in China, you will incur transportation charges for both the US and the EU; the export charges will vary significantly for the two economies. Moreover, you have to account for the difference in currency valuation in these two economies too.
Hence your profit margin changes due to both export cost and currency valuation. To meet your profit targets, you need to reprice your commodities.
Therefore, pricing parity becomes challenging in such situations. But you can change the liability of currency fluctuation to a harmless factor by leveraging data analytics.
Why is pricing parity important?
Before you understand how to perform pricing parity, it is important to answer why you should perform it in the first place.
1. Balancing between the models of online and offline store
Both online and offline stores work on two very different business models. Due to this, the requirements of both vary hugely. For instance, online channels operate through distribution centers, whereas offline stores require actual capital for store building and maintenance. Hence, a retailer should consider all these expenses and quickly fix product prices to easily reach the profit margin by utilizing online and offline stores.
2. Maintaining the brand-reseller relationship
Resellers are the life of any business. Apart from their job, they are looking forward to making a profit too. In such a competitive time, you can ensure that your resellers get the minimum operating price by maintaining pricing parity. This ensures their loyalty towards your business. Hence, you get a dedicated retailer network.
Moreover, resellers often compete with each other too. Any undue advantage that a retailer gets or exercises reflects poorly on other resellers. Their sales might go down, and this disrupts the brand-retailer relationship in the long run.
3. Quality assurance against predatory pricing
On several platforms like Amazon, many sellers practice predatory pricing. Sometimes, they tend to violate MAP policies. In turn, this violation impacts the reputation of the brand since meager prices signal unreliable quality. Hence, when you tend to practice pricing parity, you come off as a brand that focuses on quality.
4. Building a loyal consumer base
The business model one uses a lot to do with the geographic location and user preference. Certain people prefer going to the stores to find out about available offers and then compare it with the online offers. Only, after this, they make the buying decision. Therefore, the idea is to understand the preferences of your consumer base and then do product pricing.
You have to work on both platforms, thus, allowing both online and offline marketplaces to grow. You might also provide offers on specific platforms as per their preference. As a result, your consumer base will develop a liking towards your policies.
5. Region-specific business model to boost the regional supply chain.
Business strategies worked best when they designed as per the demographic and the region. This way, initially, you can establish trust amidst the consumers. Afterward, you can use data to change your strategies and control user sentiments. Therefore, pricing parity can allow you to tackle user sentiments in a much better way.
Secondly, you can explore the regional supply chain to handle consumer needs. Depending upon the accessibility, you can establish offline and online stores. On these platforms, you can vary the assortment as per the accessibility of products.
6. Promoting in-store research for new launches
Many brands conduct market testing through in-store tests. A brand that doesn’t have a right presence in brick-and-mortar stores suffers a setback here. Pricing parity is a significant factor in-store presence. Therefore, the only way to help yourself here is by practicing it.
7. Normalizing the playfield
Practicing pricing parity promotes fair play between competing resellers. It helps them compete and thrive.
8. Brand trust factor
If a brand prices their product on Amazon and eBay with significant price differences, it also impacts how your consumers perceive you. It impacts your trustworthiness, which then impacts your sales in the long run.
Moreover, now brands have MAP policies in place to control how sellers price commodities. The minimum advertising price allows sellers to compete positively. Furthermore, it promotes the company’s trustworthiness among its consumers.
How to achieve pricing parity?
Many factors drive customers towards you. When it comes to pricing parity, we have to fetch the right data and execute pricing across all our platforms.
We already know that the two channels we have here are online and offline. PIM or the product information management system is the database of all product information that you can imagine. Moreover, the ERP system or the enterprise resource planning system has similar data too.
Next, you can get the prices of the online channel by using web scrapers. You can determine the frequency with which you scrape, the websites you scrape, and the volume of data you handle with ease.
Therefore, the action plan is to get the offline channels’ data from the PIM or ERP system. Secondly, you can acquire data on online platforms through crawling. Then you compare these two prices continuously. When the two platforms’ prices change more than a threshold value fixed by the company, you can report it. Hence, you get the price changed.
The trick here is to repeat this frequently to maintain pricing parity.
Try Datahut for your pricing solutions!
Till now, we learned about how pricing parity can help you enter a market or revamp an existing one for success. The most crucial question here is – “how we perform pricing parity?”
The answer is data. Brands such as Amazon perform pricing analysis every 15 minutes. Through this, they ensure that enlisted products match their pricing standards. To compete with such giants, you need extensive research about user preferences and decision-making. Nowadays, data analytics gives you the benefit of speed. You can quickly analyze which products require repricing.
To understand what data can do for you, contact Datahut today.