Pricing a product can be a challenge when running a business whether in E-commerce or brick-and-mortar stores. Having competitive pricing can make a world of difference. It can be a highly effective pricing strategy when it’s done correctly.
But what is competitive pricing anyway, how can you use it and what are the benefits? If you are interested, keep reading. We will explain it all down below.
In this blog article, we will give you a definitive guide on competitive pricing from A to Z.
Let’s dive in!
Competitive Pricing
It’s a pricing strategy in that you track your competitors’ prices while setting your pricing. It’s a very useful strategy to understand your competitors and also your target customers. This is because you can gain insights from your competitor’s pricing strategy. And for customers, the price is considered one of the most influential factors in purchasing decisions.
Statistics show that one in five people check their mobile devices to compare a price while shopping at a store. And when it comes to online shopping, customers are hunting for the best deal.
For these reasons avoiding competitor price tracking can be a huge mistake. You can create a spot where your customers cannot decide whether they should purchase from your store or not. Competitive pricing can help you strengthen your competitive edge, create a better brand image and increase your number of sales.
Now, we will explain how to use a competitive based pricing strategy.
How to Use Competitive Pricing to Boost Profit Margins
1. Find Your Competitors
To practice competitive pricing, first, you need to find who your competitors are. Do market research. Take a look at the market and find who is selling the same products or services as you do. Then, identify your main competitors. Online marketplaces such as Amazon, platforms like Google Shopping and Shopify stores have taken the competition to the next level. You can realize that some online stores are very competitive when it comes to pricing. Therefore, you should be ready for price wars.
After identifying your competitors, it’s time to make a list of them. Go to their websites and product pages. Look how they present their products. Ensure that you check their pricing as well.
2. Track Competitors’ Prices
The next step is collecting competitor pricing information. But since E-commerce is growing day by day, and you can have more than several competitors, tracking prices manually can take lots of time and effort. Even if you do so, your team will be working with lots of spreadsheets which is very possible to make mistakes.
Remember that, in Ecommerce, online prices change far more frequently than you can manually keep track of. And this takes us to the next step!
3. Automate Price Tracking
You can use competitor price tracking software that can inform you when your competitors change prices. You can see where you position your business in the market.
In highly competitive markets, automating your pricing can ensure higher profits. This is because competitive pricing strengthens your competitive advantage. And since you will make data-backed decisions, you will be ready to compete with your rivals anytime!
You can also set smart pricing rules based on market prices for your products. Such as:
- My price would be $5 higher than the cheapest competitor’s.
- My price would be equal to the most expensive competitor.
- My price would be $20 higher than the most expensive competitor.
You can do it however you want to position your products in between your competitors. Remember that you need to ensure your smart pricing rules will lead you to maximum profits!
4. Optimize Your Pricing
Finding the optimum price points can ask for some effort. You need to test various price points and observe how your customers react to those price changes. You can also realize that a new price can lead to a price change for competitors’ pricing.
After working for a while in pricing, you will find a sweet spot where your customers are happy to buy and you are happy to sell. To find that price point in competitive-based pricing, you need to test and make a pricing analysis for your products.
5. Observe Your Customers’ Behavior
In the last step, you will observe how your customers react to your price changes. You can notice an increase in your online store traffic but end up with low sales. Then, keep testing different price points.
You should remember that your pricing should be reasonable to your customers. When they find your price is affordable for a product, they will not hesitate to make a purchase. Ensure that you always keep track of your customer’s actions when they visit your website.
Benefits of Using Competitive Pricing Strategy
It offers increased revenue and market share. A competition-based pricing strategy helps online businesses to have a greater market share than competitors. Since some customers are hunting the better deals they can find your competitive pricing as the best deal.
It gives a great advantage of maximizing profits. A competitive based pricing strategy has a great potential to boost profit margins when it’s done correctly. Working with data-backed solutions can be very helpful for a competitive pricing strategy.
It benefits the speed of new online businesses. Competitive pricing intelligence is a great strategy for businesses that want to enter the market quickly. They can simply assign competitive prices for their products and start competing with their rivals.
Takeaways
A competitive pricing strategy is a great way for online businesses to increase their market share, reach more of their target customers and maximize their profit margins. If you follow the points we have mentioned above in the article you can take your business to the next step with a higher number of sales. Hopefully, this article will help you to offer competitive pricing with data-backed solutions.
This post is a guest post written by Türker Yiğitalp from Prisync.