A targeted competitor pricing strategy is one of the most powerful strategies for ecommerce stores to outcompete their competitors while still keeping sustainable margins. Unfortunately, many ecommerce stores implement this strategy in a sub-optimal way by not making it targeted, and instead simply blindly following and undercutting competitor prices, which is destroying margins and will not be sustainable in the long run.
A well implemented competitor price strategy requires high quality, accurate pricing data, and a very sophisticated understanding of your products, categories and customers price perception to ensure that you only invest (lower) prices and margins on articles that have a significant impact on your customers price perception, or a significant demand uplift driven from price changes (price elasticity).
Grindbyte offers multiple tools that allow you to implement this strategy in the same way as some of the top retailers in the world.
There are many different pricing strategies out there, some are more sophisticated than others. As we work with our clients we frequently see a ladder of sophistication starting from:
At first glance it may appear as if 3. and 4. is similar, however there are very significant business implications of one versus the other. Strategy 3 is essentially a raise to the bottom, where the business owner simply price down articles "just because" their competitor did it. There is very little sophistication, reasoning or business sense in doing so other than "winning" with the lowest price, and its often not sustainable from a gross margin perspective.
Strategy 4 instead first identifies what subset of articles within your assortment that you must be competitive on, either because customers care about those products, or because those products have a very significant demand uplift driven from price changes (e.g. you decrease price by 5% and increase volume sold by 15%), you then automatically monitor your key competitors and ensures that these items remain competitive, while the majority of your assortment still ensures healthy profit margins.
This strategy ensures the best of both worlds where customer still get value by seeing price decreases in their most valued products, while the business can still be sustainable with overall healthy margins across the full assortment.
The way to ensure that a competitor pricing strategy is sustainable, is to ensure that the articles where you decide to undercut your competitors are targetted and have a reason for their price investment. This ensures that you are competitively priced on the 20% of products that drives 80% of customer value perception, but still have sustainable margins across your assortment.
So what do we mean by targetted? How do you know which articles within your ecommerce store or retail business that should receive price decreases and price investment versus which ones shouldn't?
They key here is to combine your competitor price monitoring with other tools and analytics such as Key Value Items, Price Hygiene Rules and Category Roles. These concepts allows to to have a more granular and fine grained pricing strategy where you can define rules to undercut competitor prices on some items, while still keeping margins high on others.
Grindbyte's data platform offers all of these tools. Simply sign up and integrate your ecommerce store with our data platform using one of our existing integrations (e.g. Shopify, WooCommerce, Prestashop, BigCommerce etc) or contact our sales team if you are in need of a custom enterprise data integration.
By combining all of these tools together you will be able to setup a strategy similar to:
This is a sophisticated strategy that require a quite deep understanding of your business, your products, your customer purchase behavior and your competitors. They depend on a lot of tools that automate this process and makes it managable. As we've worked with clients across retail industries and continents, we've seen the following common mistakes when it comes to competitor price monitoring and strategy:
Learning from the common mistakes identified in the section above, how does Grindbyte circumvent and resolve some of these issues? The Grindbyte competitor monitoring platform is using Machine Learning & Natural Language Processing to get a better understanding of a competitor website and their content.
This means that unlike some of our legacy competitor that depend on manual matching of products that are time consuming to define, and frequently break due to changes on competitor websites, our platform have less of a dependency on the website itself and instead have a better understanding of the true meaning of each individual product.
This means that we can easily monitor millions of unique products, but also automatically match them to your own assortment and tell you which of your competitor products that are most similar to yours.
The result of this is that you can do competitor pricing at scale for very large assortment with a lot of automation.
Grindbyte offers a competitor price monitoring tool where you can simply subscribe to your competitor websites, and Grindbyte will automatically monitor it on a daily basis and give you updates on any price changes implemented, and how we recommend that you adjust your own prices to the changes your competitor is doing.
Start by signing up to our platform, integrate your ecommerce store using one of our existing integrations (e.g. Shopify, Prestashop, WooCommerce, BigCommerce etc) alternatively contact our sales team for a custom enterprise data integration.
Next step, go to our competitor monitoring section and select which ones of your competitor you want to monitor. After that you just have to wait for our software to gather price insights and product matches, and you'll soon have an automated feed of price updates coming in from your competitors.
By leveraging a sophisticated competitor price monitoring software, you are able to transition from a more basic pricing strategy based on margin targets or gut feel, to a customer focused pricing strategy where you maximize your customers perceived value from your ecommerce store, by ensuring that their most valued products are competively priced.
This means that instead of having 30% margin across the board, you can have 15% margin on a subset of products that drives customer engagement and value perception, and 40% margin on products that make up a significant portion of your sales, but that are less important in the eyes of your customer as they browse the internet and compare prices between you and your competitors.
In the end this leads to increased market share, increased volume, improved customer value perception and increased overall profit of your retail company.