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How to Create a Competitor Price Monitoring Strategy

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How to Create a Competitor Price Monitoring Strategy
 
Articulating A Competitor Price Monitoring Strategy
 
Retailers are aware of consumers’ tendency to shop for the best price online but so many are unsure how to respond to this behavioral tendency. The worst thing you can do is to make pricing decisions in a vacuum without knowing what your competitors are charging for similar products. Whether you are giving your products a premium positioning in the market or going for the cheap, discounted sale, it pays to have a price monitoring strategy in place.
 
A good competitor price monitoring strategy acts as your own personal GPS that shows you what others are doing and how you can respond to take advantage of opportunities.
 
Below are 4 objectives to use as a starting point for what your price monitoring strategy should accomplish for your retail business.
 
  • Accuracy - Your price monitoring should deliver accurate and valid data
  • Timely insight - Price monitoring should give you actionable insights when you need them
  • Action - Where some ecommerce managers fall short is in monitoring price data without applying it in any way
  • Competitive Advantage - Set objectives about how you want price monitoring to translate into greater market share, or higher revenue, or some other meaningful business outcome
 
Next up, we cover the practical steps you will need to take to devise a competitor price monitoring strategy that delivers on all your objectives.
 
 
Step 1: Set Your Market Positioning
 
Market positioning is the first essential component in your price monitoring strategy. It will allow you to make sense of the price data that you are going to collect. There is nothing as unsettling as finding that every competitor you have is selling their products at a lower price than you. In the absence of a defined market position for your brand, you might well panic and think you should discount everything in your store.
 
You therefore need to take in price data in a way that lets you preserve your brand and what your brand’s value proposition is. Market positioning, however, goes beyond value propositions to another, even more comprehensive concept: brand DNA.
 
Successful brands often have a concrete brand DNA. No two successful brands have the exact same DNA. This means, by definition, that they won’t succeed by charging the same price.
 
Think, for example, about a high end sportswear brand like Nike. Nike sells a single pair of Air Jordans for $200 or more. According to Money Inc, some of the most expensive collectible Air Jordans have sold for well over $10,000.
 
Nike has a premium positioning and rather elite sportswear brand DNA. It’s not the same as throwaway fashion brands like Zara.
 
If Nike tried to charge typical Zara prices for its shoes, with the brand DNA that Nike has, Nike would quickly go out of business. 
 
Setting your market positioning places your brand at a specific point with regards to product quality, exclusivity, and, finally, price. With regards to price, for example, you can be in any of: 
 
  • Low
  • Medium
  • High
 
Get clear on this ahead of time so that you do not misinterpret or misuse price data to your own detriment.
 
 
Step 2: Study The Competition
 
The next step in creating your competitor price monitoring strategy is to identify and study the competition. In this process, we suggest coming up with 4 different lists of competitors based on different strategic relationships to your brand. 
 
  1. Similarly-Positioned Competitors - studying competitors with similar positioning as you do
  2. Very Different Positioning - studying those with very different positioning, these could be high end or low end of the market
  3. Most Important Competitors - defining your most important competitors, should be a smaller list of 5-10 that you think matter most
  4. “Foils” of your brand - defining your “foils”, competitors that are where you want to be and you can emulate to help you get there
 
Having granular lists that target different “types” of competition can yield much more actionable data than just lumping all competitors into one list. As you study these different groups of competitors, the similarities within each group will make it easier to identify patterns for each subset.
 
For example, you might be able to observe that, on average, the group of companies with similar positioning to yours is charging higher for products you sell.
 
Or you might uncover that the group of brands that are in the high end of the market, where you don’t compete, are selling your main types of products at a deep discount to attract deep pocketed clients.
 
Either way, studying the competition, ideally at a granular level, gives you insights into the competitive behaviour in the marketplace. 
 
 
Step 3: Identify Competitor Sites and Products for Monitoring 
 
For collecting the price data, we recommend going with a price monitoring tool that will help automate the process. According to TechCrunch, large retail companies such as Walmart and Amazon, with their commitment to low prices, have very sophisticated algorithms for price matching. You can easily get the main functionality you would need for your own brand, however, using a price intelligence tool such as Competitor Monitor’s own price monitoring software.
 
With your tool in place, you now need to identify the competitor sites, as well as select which products you want to price monitor. Price monitoring software automatically collects price data along with other data you might be interested in reviewing, such as:
 
  • Product descriptions
  • Product images
  • Reviews
  • Shipping fees 
 
Step 4: Test The Pricing Data For Your Relevant Products
 
You should also plan to test the pricing data that you get from competitor price monitoring. 
 
You can begin with a subset of data, for example, targeting your most important products. After your initial price monitoring setup, collect data for a period of time, say 2-3 days, or up to a week. 
 
Then go over the data to see the prices logged from competitors’ stores for products you sell. 
 
This initial data will help confirm that your strategy is delivering the right data that you can make use of. If any product is missing, add it to the set, and if any prices seem stale, you can check the settings in your pricing tool.
 
Once you are happy with the quality of data, apply the tool to your entire store or product catalog.
 
 
Step 5: Identify Problems And Adjust The Strategy
 
After testing your price monitoring strategy or running it for a while, you may encounter problems that make it necessary to adjust your strategy. 
 
For example, some products might go out of stock at competitors, or a competitor might change their website. In such cases, you need to evaluate the reasons why data is missing or inaccurate, and decide, for example, whether to drop the competitor from your price monitoring set. 
 
Evaluating and tweaking your competitor price monitoring will help keep your data relevant. You will then be able to look at the fresh data at intervals of, say, two weeks, to determine how your store should price goods to gain maximum advantage.
 
 
Step 6: Make Price Monitoring Part of your Daily Routine
 
If you are selling products in a competitive vertical, checking data at long intervals might be suboptimal. Your goal in such a market might be to review prices across the industry in near-real time. This requires monitoring on shorter time frames. 
 
Price intelligence software like Competitor Monitor will monitor daily price changes for you. The data is available in one easy to use dashboard so that you can see, at a glance, price changes from competitors. 
 
You can, therefore, make price monitoring part of your daily business management routine. The daily price updates will help you spot opportunities or the need to adjust prices based on what competitors are doing.
 
 
The Benefits of a Competitor Price Monitoring Strategy
 
Creating a competitor price monitoring strategy will put powerful data in your hands that can help you make your products appeal to more buyers. Getting there requires clarifying your brand’s positioning, identifying competitors worth monitoring, and making use of the right price monitoring tools. With an effective price monitoring strategy implemented, you will get weekly, daily, or even real time updates of important changes in the competitive landscape. 
 
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