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Five Things To Consider When Defining Competitors For Price Monitoring

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Five Things To Consider When Defining Competitors For Price Monitoring
 
Whatever your resources, and whatever the size of your business, when you set out to create a price monitoring strategy, you need to decide at the very beginning what competitors you are going to monitor, and what competitors you aren’t. In many cases, it isn’t practical to keep a close eye on every single competitor you have, so it is a good idea to define competitors who will be monitored as part of an overall price monitoring strategy.
 
But, how is this achieved? What factors should be considered when defining competitors for price monitoring? In this article we will look at 5 things to consider when defining competitors for price monitoring.
 
 
1. Does My Business Have A Category And What Categories Do My Main Competitors Occupy?
 
Before you define the competition, you need first to understand how your business is defined, and how others are likely to perceive it. This will usually be determined by the main type of products you are selling. Sports shoes, for example will attract a number of categorisations, for example sports, apparel, shoes, footwear. When you identify the categories that apply to you can you then begin to focus on the competition, and you can use your own categorisation of your business to help, since most of your competitors will occupy the same or similar categories. Identifying these categories enables you to search popular ecommerce marketplaces for competitor products, so this is a very useful starting point for the creation of any price monitoring strategy.
 
This type of categorisation exercise also allows you to create a list of your direct competitors. These competitors will need more attention than other types of competitors like those selling similar products, but competitors who are selling at the same price points as you but don’t add any additional value to their products can be ranked lower as they don’t represent as much of a threat to your business.
 
 
2. Competitor Market Position, Performance And Quality
 
To define competitors for price monitoring purposes, you need to understand as much about their business operations as possible, which isn’t always easy to do, as an outsider, looking in. Nevertheless, a lot of useful information can be gleaned about a business from looking at their online “presence” and activity. This information should be used to judge important aspects of business operations like whether a business is frequently “out of stock” of certain products, and whether they use manual or more sophisticated methods of price monitoring.
 
Not every competitor is worth making a change to a pricing strategy for, even if they are offering a lower price. This may sound counterintuitive, but in the world of price comparison, it is very true. Some competitor businesses will not be capable of damaging your brand, or diverting a large number of sales away from your brand. In your price monitoring strategy, you need to differentiate competitors worth making substantive changes in relation to, and those you can simply ignore, or pay less attention to. In determining how much attention to pay to a given competitor, you will need to make a value judgment as to how this competitor is performing at selling its products. There are a number of ways to determine the quality and performance of a competitor, and then make these decisions on an informed basis.
 
When identifying competitors, your first task will be to identify the competitors who are most similar to you in terms of performance, sales and product type offering. These competitors are the most dangerous, and these will need to be monitored very closely as they have the most potential to damage sales of your products, and divert swathes of sales away from your brand, with sudden shifts in their strategy. The question of who is most similar will primarily be determined by who is selling the same products, or very similar products. A quick way to judge this will be to check a competitor’s product offering on Amazon, or to see what sellers crop up most often in Google or other search engine searches of keywords relevant to your own product portfolio.
 
One of the biggest and most significant measures of how a competitor is performing will be the traffic a website is receiving. You can visit website ranking sites like Alexa to gain insight into a competitor website and find out how much traffic is visiting on a monthly basis. Other ways to gain insight into how much traffic a website is attracting is to look at any videos that have been posted on the site or on related social media and check how many views, or comments, or shares these videos have achieved. Social media is another good measure as invaluable data, like how many friends, followers or connections a given business or brand has will be available to view publically. Social media can also be used to check the level and quality of engagement a competitor has with its customers. Looking at comments and posts allows you to judge how seriously this brand takes customer service, and what the general perception of the brand is among its target markets. Other ways a website will ‘give away’ a poorly performing business will be how frequently their blogs and social media accounts are updated. Businesses with solid sales performance understand the importance of keeping social media and blogs up to date, with interesting engaging content. If this isn’t happening, it is a red flag that reflects on their general performance as a business.
 
Looking at product reviews, and the aggregate quality of the product reviews will give you a good indication of how that brand is performing. Persistent negative reviews and scores should be flagged, and persistent positive reviews should also be noted, as these will allow you to judge whether a competitor is a real threat to your business. There may be patterns that emerge from reviewing data of this nature, for example, does a brand frequently get criticised for problems with product delivery, or are products arriving at their destinations, damaged?  
 
Another important measure of how well a competitor is performing is the quality of the experience they create for their customers through factors like optimisation for mobile sales. If a competitor has a website that isn’t optimised for mobile sales, this is a key indicator of its overall performance as a seller of the products it is advertising. This is because, any online retailer with a good sales record will understand that optimisation of mobile sales platforms is essential to ensuring a competitive position in the market, since most purchases of any product are made through mobile platforms and ipads. Sales through more traditional methods like a website displayed on a website have seen a sharp decline over the last five years. Competitors who don’t observe and react to trends like this aren’t worthy of a lot of attention, as they are not likely to be selling their products widely.
 
Another hallmark of a viable competitor is the frequency they react to the market and alter their prices, so you should always look to find out whether a competitor is likely to be using a manual method of price monitoring, or whether they have invested in more sophisticated price monitoring technology like price monitoring software. A competitor who is using manual methods to set prices will be slow to react to factors like seasonal demand, or to price changes from other competitors. Manual price setting also takes up a large amount of time so this will probably affect the overall performance of the business too. Manual price setting places any business, particularly an online retailer at a major disadvantage because they will be so vulnerable to massive, sudden losses of sales and market share, simply because of the speed of their reaction to pricing changes and trends. It is worth noting these kinds of competitors as low risk (and as such not worthy of much attention) since their businesses aren’t likely to be doing very well.
 
Another key indicator that needs to be watched out for is how often a product goes out of stock on a website, and how long it takes for a seller to restock. There are lots of sellers online and they will set products at a certain price, but if you delve further into their website, you will see that although they are selling a product at a certain price, there are long periods of time where product price will be irrelevant, because the product concerned cannot be delivered.
 
 
3. Continuous Review And Evaluation Of Competitors
 
The performance of competitors is always changing and as such, as a competitor monitoring competition, the definition of who your main competitors are will also be changing. An effective price monitoring strategy will need to stay on top of this continuously shifting terrain, and take account and make allowance for when new competitors enter the market, and when competitors are no longer as threatening as may previously have been the case.  
 
 
4. Promotional Activity And Discounts
 
Review and evaluation is also vital on an ongoing basis to identify when offers and promotions being run by competitors are damaging sales of your own products. It may be that a certain competitor is selling products for the same price for 9 months of the year, but over Christmas they reduce the price, or offer promotion codes on social media or their website, which will enable customers to reduce the price of the product at the checkout. Competitors will often rationalise that since Christmas is a particularly busy time of the year, and more sales of many types of products is to be expected during this period, running a discount promotion during this period is likely to attract new customers who would previously have been loyal to other brands. Moreover, these types of competitors are particularly damaging, because they are hard to spot. Ostensibly, their pricing might remain the same since the discount will only be available at the point of sale when products are being checked out.
 
Other promotional activity (like offering free postage and packing) that is hard to identify in the first place needs to be something businesses are on the look out for. A “free postage and packing” offer will not ostensibly reduce a product price, however customers will be quick to work out that products with free postage and packing are cheaper in overall terms. If a competitor monitoring strategy doesn’t log, review and constantly evaluate competitors who regularly run these kinds of competitions, they are in danger of seeing large-scale revenue losses after they have taken place, when there is nothing that can be done to mitigate the damage.
 
 
5. Remember Price Isn’t The Only Relevant Factor - What Competitors You Can Allow To “Undercut” You In Terms Of Price
 
There will always be a group of competitors whose pricing strategy will not be a threat to the sale of your products, irrespective of how low they decide to set their prices. These competitors should be given less attention in your overall pricing strategy as they pose a lower risk to your sales performance, but you should also have the confidence to set your prices higher than these types of competitors. There is no bigger pricing strategy “fail” than selling a product more cheaply, when customers are prepared to pay more for it.
 
Some competitors may continuously sell poor quality merchandise. Some may have an appalling customer service record, with issues continuously raised in reviews and on social media. Others may have been embroiled in ethical controversies such as where and how their raw materials are sourced.
 
Groups of competitors who you have evaluated and identified as not having a high throughput of traffic through their website, or who don’t have a solid history of positive product reviews, or who don’t have a website that is fully optimised for mobile sales are likely to repel customers, and as such, you as their competitor may decide to set your pricing higher, taking account of this.
 
Conversely, some products and brands will be able to “command” a higher price because of particular features of the seller, for example a solid brand with a long history of sales in the area, expertise in the area products are used within, or an ethical approach to supply chain management or sourcing of raw materials.
 
Spotting which competitors provide awful customer service, or those who can’t get their products from A to B reliably and without complaints from customers may be forced to sell their items cheaper, just to stay in business. If your products are good quality, and your business is not plagued by the same problems, then you need to be prepared to price your products accordingly – given that customers are not just buying a product, they are also buying the whole experience of buying products with you. If your business has invested in guaranteeing a good customer experience, and you have the reviews to evidence this, then customers will be prepared to pay more to ensure they receive a quality experience from you as a seller.  
 
 
Five Factors To Consider When Defining Competitors For Price Monitoring
 
This article has focused on five of the most important factors a business should consider when defining competitors for price monitoring. These factors have been identified as follows:  
 
(i)              Does my business have a category and what categories do my main competitors occupy?
(ii)             Competitor performance and quality
(iii)            Continuous review and evaluation of competitors
(iv)            Promotional activity and discounts
(v)             What competitors you can allow to “undercut” you in terms of price
 
 
When a business uses these guidelines to shape their overall price monitoring strategy, they will be able to conduct price monitoring much more efficiently and effectively.
 
As the article has shown a big theme in defining the competition involves gathering as much information about competitors and their business operations as possible. This extends to their overall online “presence”, their logistical operations, reviews, frequency of price changes and their social media activity.
 
One of the biggest factors to note in devising an effective price monitoring strategy is to be able to sort out competitors who are worthy of more attention, from those who can be given less attention. Businesses with effective price monitoring strategies are therefore not just monitoring price, they are monitoring the level of threat that a business represents. This can be judged from the overall performance of the business concerned, and this measure will then give an indication of what attention to pay to that competitor’s price, and their pricing strategy. By being selective in this way, and “ranking” the level of threat any given competitor poses before investing time and resources into adjusting prices in response to their prices, a business will be able to focus the lion’s share of their effort on those competitors that pose the greatest risk to their business, and they won’t waste time on competitors whose pricing doesn’t really matter because they aren’t good at selling their products anyway.
 
 
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