In order to get a global picture of the market in which you operate, it is necessary to do a price tracking of the competition in those similar and/or identical products that both you and your rivals offer. Monitoring the prices of your rivals manually means a great investment of time and money, since tracking the web is a tedious task. To do this efficiently and save time and money there are automatic monitoring tools.
How does it work?
Price monitoring system works through “connections” These can be:
- Automatic: From the EAN code, the application tracks the identical products of the competitors and groups the connections directly.
- Semi-automatic: If your competitors’ products do not have any alphanumeric labeling system, the software suggests connections by comparing images, text or similar characteristics. You must always accept the proposals to be added as connections.
- Manual: By copying the URL of a product advertised on the web you can make a manual connection to add it to your competitors.
After you have chosen the rival products to follow, you can start tracking prices, to know where your products are in relation to the competition. Doing a price analysis of the competition will allow you to know where your vertical is, if the conditions of your competitors with suppliers are better than yours or anticipate possible changes in the market.
After analyzing and following the prices of the competition, it is time to design a pricing strategy to succeed in your vertical. When implementing pricing, always consider the three main metrics: Price Index, Profit Margin and Conversion Rate. We recommend playing with all three rather than focusing on one, as they are related. Don’t forget that you should never have a negative profit margin in pursuit of a higher conversion rate.
If you are new to the market, a convenient pricing strategy to use would be one of penetration. It consists of entering aggressively by offering your products at low prices in order to quickly increase your market share. Over time, prices will stabilize until they reach that planned initial price.
Thanks to the analysis resulting from tracking the prices of the competition, you will be able to identify the elasticity of the products in your vertical so you can adjust the profit margin without fear of not being profitable and efficient.
If you want to differentiate your product from the competition, using strategies based on price and what you can offer are your guidelines. Offering a different product from your vertical – craft, ecological, new – may justify a higher price. At the same time, if this strategy is used correctly, you will make consumers perceive your store and your products as “premium” thus improving the conversion rate of your products.
Dynamic pricing is another tool within the price monitoring application that allows you to update the price of your products with rules you have pre-set. These rules could be for example to make your items always 8% cheaper than a specific store or to modify the prices whenever a profit margin of 20% can be obtained. Based on these rules, the software suggests a correct price for your products, which is updated according to the price fluctuation of your competitors.
In addition, these rules can be saved for use in certain time periods. In some markets the seasonality is very marked and these rules would not make sense to apply them during another part of the year.