If you’re a retailer selling brands that are widely available, you’ve probably felt the bite of price comparisons. With all the competition out there, including from site like Amazon, consumers are spoilt for choice and will go where the price is lowest, all else equal.
How do you counter this? Well, we explain how you can track competitor pricing automatically and react in real-time.
#1. eCommerce Pricing Competition
You are competing in a market of 12 million players!
The global eCommerce market now contains more than 12 million online stores and this number is still growing at a rapid clip. Along with the developed markets, emerging markets from all around the world are also paving their way towards building a solid eCommerce infrastructure.
As a market grows, and when the early returns of first-mover advantages are exhausted, the competition starts to build up. Business must now fight to gain an edge in the market, which contains well-connected and well-informed consumers.
ECommerce markets all around the world are no exception to this basic fact and, as they grew, eCommerce companies of all sizes felt the need to remain one step ahead of the competition.
Why isn’t a product selling? What is the most ideal price? Pricing can help you unlock growth in your eCommerce business.
#2. Six Tips on Using Pricing to Your Advantage
What if I told you that you could raise your prices and still make more sales?
Most eCommerce stores never test their pricing. The manufacturer or wholesaler gives them a MAP and that’s where the prices remain. After all, customers always choose the lowest price, right?
While it sounds logical that customers always choose the lowest price, it’s still an assumption. Sure, in some cases customers might go for the lower price. However, according to some studies, there are times when customers choose the higher price more often than not.
In this post, we’ll look at some pricing strategies you can test on your store to make more sales.
2.1. Small Price Differences Can Have Big Results
When you price your products too similar you are putting your store in danger. Recent studies have shown that pricing products too similar to one another can cause the consumer to not make a purchase at all.
One study conducted at Yale University shows that if two similar products are priced the same, consumers are much less likely to buy either one, than if their prices are slightly different.
In another study, participants were given the choice of buying two different packs of gum, priced the same at 63 cents, or pass and keep their money.
Only 44% of participants chose to buy a pack of gum. The same experiment was tested on a different group, but this time the packs of gum were priced at 62 cents and 64 cents. This time an astounding 77% chose to buy a pack of gum!
Takeaway: Start off by running some small tests! For example, if you have two sweaters that are similar such as one with a v-neck and one with a crew-neck, differentiate the price between them very slightly and test what happens.
2.2. Psychological Pricing and Number 9
Walk into a store such as Walmart and you will see 9’s everywhere. It’s not just a cheesy marketing gimmick.
The number 9 is actually a powerful tool when pricing. You may not think that pricing an item at $30 instead of $29 would make much a difference, but time and time again tests have proven that it makes a HUGE impact. In fact, according to research by Quantitive Marketing and Economics, if you take two of the exact same products, but price one higher and ending in 9, the higher-priced item will outsell the same product that was priced lower!
A study conducted at the University of Chicago and MIT tested 3 prices for the exact same article of clothing. The different price points were $34, $39 and $44.
Can you guess which price point had the best sales? The $39 price point worked so well that the sales volume using this price alone outdid sales for both 34 and 44 combined!
Another study, by the University of Chicago, experimented on the price of margarine at a local grocery store. The price started at 89 cents, but when the grocery store reduced the price to 71 cents, sales improved 65%. When they further reduced it by two more pennies to 69 cents, sales went up an astounding 222%!
Another psychological effect is that we read from left to right. Therefore if we see an item priced at $7.99, we are more likely to say that the price is 7 instead of 8. This is often referred to as the “Left Digit Effect”.
Takeaway: Experiment with increasing the price of a product to the nearest 9. In other cases, you can try reducing it slightly to have it end in a 9.
2.3. Price Anchoring
People love to compare prices when shopping for products and having an anchor price allows them to do that. For example, if you are looking at two similar shirts, with one priced at $75 and the other at $150, the $75 shirt looks really cheap compared to the $150 shirt.
In reality, the $75 shirt is still quite pricey. Stores know this so to sell it they put it near an even more expensive shirt.
One common tactic you will see with price anchoring is commonly found on pricing pages for online services. Usually, when a company is selling 3 different options they will point you towards the middle option.
Of course, some people will always want the best and some bargain hunters will always want the cheapest option but having a middle option allows the customer to feel like they are getting the best value for their money. The higher and lower options function as anchor prices, pushing you towards the middle option.
Takeaway: If you’re having trouble selling a certain product, try out price anchoring and see if it makes a difference. Place it beside similar products that are significantly higher, and lower in price and measure the result.
2.4. Price Perceptions
In his book, Don’t Just Roll The Dice, Neil Davidson writes about price perceptions and says this:
“People base their perceived values on reference points. If you’re selling a to-do list application, then people will look around and find another to-do list application. If they search the internet and discover that your competitors sell to-do list applications at $100 then this will set their perception of the right price for all to-do list applications.”
You need to provide potential customers with a reason that justifies your higher prices because perception plays a major role in influencing consumer behaviour.
There was an interesting pricing experiment conducted by Richard Thaler involving two friends, a beach and beer. Two different scenarios were tested: In the first one, the friend was going to get beer from the only place nearby, a local run-down grocery store. In the second scenario, he was going to get beer from the bar of a fancy resort hotel. The beer was to be consumed on the beach, so the hotel’s fancy atmosphere was irrelevant.
Thaler found that invariably subjects would pay more if they are told that the beer is being purchased from an exclusive hotel rather than from a rundown grocery.
Takeaway: Find ways to make buying from you store feel exclusive (and follow-through). Offer a superior shopping experience through strong branding, good design, usability and customer service.
One specific way to enhance perception is to offer a seamless cross-device shopping experience.
2.5. Minimalist Pricing
In the Journal of Consumer Psychology, researchers found that prices containing more syllables seemed drastically higher to consumers.
The more simple a price sounds, the less expensive it feels. A study was conducted with these three exact same prices: $1,499.00, $1,499 and $1499. Although all three prices are exactly the same, the extra syllables and commas make the first two prices sound and feel more expensive. Not only does this happen when spoken out loud but also when read to one’s self.
Another factor is the currency sign. Researchers at Cornell University tested 3 different formats at St. Andrew’s Café. The first had the price listed with a dollar sign before the number; the second had the price without a dollar sign, and the third had the price with the word “dollar” spelt out.
They determined that when the menu prices were listed with the dollar sign, customers spent less. But when the dollar sign was absent, they were more likely to spend more. The theory is that when you take away the dollar sign, the emphasis is no longer on the price but rather the product.
Takeaway: Experiment with removing currency signs, commas, and omitting decimals and cents where possible from product prices.
2.6. Sales and Discounts
When you run a sale do your customers know about it? Even small sales can be enough to entice someone to buy a product that they may have had their eye on for a while. Sending out emails and spreading the word through social media outlets are great ways to let your customers know of upcoming sales.
When you run a sale do you show the before price? It is very frustrating to consumers when they don’t get to see what kind of a bargain they are getting, even if it’s a small one.
Takeaway: When discounting products, always show the before price and emphasize the sale price. Your eCommerce platform should allow you to simply cross out the old price and display the sale price. You should also be able to show the customer the dollar amount they are saving or the percent.
in eCommerce, there are several competitive forces that come into play, and in this article, we’ll be going through one of the most important and effective forces – Pricing. There are already several pricing strategies with proven ROI in the market. However, all these strategies should go hand in hand with proper competitive intelligence.
#3. The Rise Of Price Competition
Due to the rapid penetration of comparison shopping websites, consumers can now find the best deals on the products they want with just a few clicks. This has increased the price of dynamism and competition in the market and changed the way consumers buy their products.
However, most eCommerce companies have failed to adapt to this change. Typically, businesses would have to manually track price changes in the market but this is both frustrating and time-consuming.
In order to solve this problem, we now have a new breed of software companies providing fully automated competitor price tracking solutions, like Prisync. These solutions help eCommerce businesses track competitor prices automatically, instead of relying on resource-intensive manual operations.
#4. Best Practices For Competitor Price Tracking
Just like any other business strategy, there are best practices for tracking your competitors’ prices.
4.1 Product Assortment And Competitor Selection
First of all, you can’t track anything. You need to prioritize certain products to benchmark against your competitors. There is always a product segment which carries the big chunk of your sales, so those should be prioritized. For eCommerce companies already utilizing price tracking software, the ones who focused on their top 500-5000 SKUs, even if they carry over 100,000 products, gained the biggest benefits.
Similarly, the selection of competitors is also important. This requires some analytical market research, which should take into account competitive forces like SEO rankings, brand recognition, and so on.
As soon as the product assortment and competitor lists are generated, you need to find products listed on your competitors’ stores that match your own portfolio. This needs to be done just once, and the product links found can be batch imported into the database of the price tracking solution you use. Some solutions come with product matching algorithms to help you with this. Once your list is generated, things get automated at the back-end.
4.2 Price Updates And Stock Availabilities
After mapping all products for each competitor, the price monitoring begins. Tracking only the price information can be sometimes misleading because some retailers list products that are actually out of stock with a price tag on. Therefore, it’s important to take into account product availability along with the prices.
Another major factor affecting the usefulness of automated price tracking is the frequency of data retrieval. This depends on the market you are in. If prices change on a daily basis, you’ll need to track it very frequently.
4.3 Notifications, Alerts and Actionable reports
Obviously, for price tracking to be useful, you’ll need to set up notifications or alerts whenever there’s a change in price on a competitor’s site. You can set up email alerts for you or your team whenever your solution detects a price change. The moment a new alert comes in, you need to act upon it. This could mean offering a discount on your product to match the competitor’s price.
There is also another layer of price monitoring and that’s spotting historical trends. This helps you analyze your competitors’ overall pricing strategies for certain brands or categories. In order to do that, the competitor price tracking tool you pick should be able to create historical data in charts, similar to a conventional analytics tool like Google Analytics.
If you want to do a deeper analysis, you can calculate the average price for each product in the market and then compare that to the relative position of each competitor. You can repeat the process for brands and categories.
4.4 Integrations and APIs
If you want to take things one step ahead and get more out of your competitor pricing data, you can do that with your solution’s API. For example, if you have a price match guarantee on your site, you can create a custom function to automatically update your prices to match the market price available on the market. You could also pass your data on to other apps using Zapier or Segment.io.
#5. Don’t Get Beaten On Price
To conclude, competitor price tracking is no longer a hassle for Commerce companies or let’s say it should not be. With automated solutions like Prisync, you can save tons of man-hours and ensure that consumers don’t leave your store for lower prices on a competitor’s site.