As an eCommerce owner, one of the trickiest parts of staying in the market is “pricing the product right,” i.e., the prices should get you more customers, but also peaks the sale. You may have used a variety of strategies and deals like Buy One Get One Free deal, Thanksgiving sale, Flat 50% off, Minimum 60% off, Offer of the day to keep calling your customers back, but at times your competitor takes the pie.
The secret is Pricing Intelligence, and our post of today would talk about how as a retailer or online business could leverage Price Intelligence to gain a competitive edge in the ever-evolving dynamic pricing landscape.
What is Pricing Intelligence?
Pricing intelligence is a technique that involves monitoring, tracking, and analyzing the pricing data of a product and make an informed decision of updating pricing at scale and speed. So, Price Intelligence is all about
Constant price monitoring is not just about the current market prices of all your product but also your competitors’ product ranges. It also includes discovering historical trends, product reviews, and exploring the brand/category level indices. As an brand owner, you also need to monitor the retailer selling your brand — are they following the norms, like MAP policy?
Identifying Patterns and peaks
With raw data in hand, now is the time to structure and make sense of it. Identifying patterns of sale, peak and off hours of selling, the average price change, when you were out of stock and pricing matrix dictating the permutation of these patterns would help you in strategizing the pricing strategy. You might need the help of tools to present visually.
You have monitored the data, identified the patterns, and now its time to scale it up. So for example as a clothing brand, you are offering t-shirts, with the above two steps you have the data when would be the right time to persuade your customer to make a switch to your brand and why? You need to get then creative, yet practical and most importantly, dynamic to lure customers with your pricing strategy.
How To Put Pricing Intelligence in action?
As mentioned, Price intelligence is all about offering the best price to your consumer that can win his loyalty. The concept can be implemented in four steps as shown below –
With the use of web crawlers, you can quickly scrap the web data like the product, prices, model #, features, reviews, ratings, and other data of your competitors. Although it sounds so simple, the data you collected is very raw, unstructured, and a lot of redundant information would exist.
Also, the data collected should be readily displayed on your dashboard or should have the ability to integrate seamlessly with your Sales system. It would be good if you are using tools that provide you an excel as an output as sorting, filtering, and programming in an excel are quite easy, and it can handle large chunks of data.
Enrich the Data
Here comes the apple-to-apple comparison, so, for example, you are selling amazon kindle now the variants under this product would be needed to make an exact comparison. While for Kindle, it could be easy, comparing prices for stationery items or umbrellas and raincoats could be severe. Let’s take an example –
In an open ecosystem, if you have identified 14–15 sites as the direct competition but its not necessary that these 14–15 sites would be selling the exact brand or products of umbrellas and stationary. You need to broaden your horizon and look for the precise match just like kindle offerings, this makes it sturdy and hence matching is on the lower side. So what needs to be done to make Data Enriching or price matching efficient?
- Remove duplicates
- Remove redundant data
- Sort with brand name /model number
- Take into account the dimensions
- Explore data with the brands and their features
- Realign categories like a pen stand could be a part of gifting categories as well as stationery items
- Look for visuals
The exercise done in the steps above was to “determine the right price” of a product that wins you a customer and some revenue. But how do we determine the right price?
Determining the right price is like seeking answers to some of the questions like this –
- Are competitors changing their prices when stocks are low?
- Are my competitors changing the prices of their best selling items?
- How much dependent I am on social media promotions and campaigns?
- How does my average price compare to my competitors?
- Do customers wait for non-peak hours when the price is reduced?
Once all such factors and queries are listed with answers next is to make recommendations via the following methods -
- Rule Setting — Now is the time to set rules. So for example, if National Weather Service is predicting heavy rain in the coming week, set umbrella price to A, or if the competitor product goes out to stock fixed price to B. Such rules help in adjusting the prices dynamically with less manual intervention. Rule Setting can be achieved in the following three ways –
- Strategy Rules — They are a simple rule like offering the lowest or average in the market.
- Ladder Rule — Its place is above the Strategy rule, and it defines the relationship between two products/categories. Such as in Amazon, you might have seen a Subscribe and Save option if you go for a monthly subscription? That’s a ladder rule! Or purchasing in bulk could be another way of defining a ladder rule.
- Zone Rule — These are geographies based rules, just for example if you are in New Jersey the rental is a bit less then compared to New York. Same applies to online retailers, a particular product may be cheaper for a city and costlier for another based on tax, shipping, or other logistics. These fall under Zone Rule to track zip code level pricing(also known as store level pricing intelligence).
- Create a Price Model- A pricing model is a mathematical model that takes inputs like historical patterns, day, time, competitor pricing, year of manufacturer, shipping fees, social messages, recommendations, etc to convert and offer an apt pricing strategy for the product.
Execute, Realign, Repeat
Now is the time to execute or make the pricing recommendations live. Once the prices are live, it’s again time to recalibrate the rules, models you designed in Step 3 and then again executed them. You can also set Alerts, watchlist to get notified if a product is suddenly selling high or a watchlist of a particular product by EOD for you to identify the pattern.
Pros and Cons of Pricing Intelligence
We just saw what Pricing Intelligence has to offer, but the fundamental question remains unanswered — Why, as an eCommerce retailer, I need to look at the prices and its patterns? We give you three reasons on how it would help you –
Forecast Future Pricing
If you have a meeting at 10, based on your experience and data on how much time you need to commute, elevator and reaching the desk, you will calculate a start time. Ecommerce works on the same principle; if you gather historical patterns for product umbrella for the last 2–3 rainy seasons of yours and competitors, you will get the discounted prices, the time it peaked and also days on which maximum sale happened. Such data helps in strategizing your pricing strategy and building a positive ROI.
A Reality Check
So for your meeting at 10, you have a start time, but still, you check on Google maps for traffic, diversions and plan accordingly. Same goes for selling if you expected umbrella sale to go high this season, but with new announcements from the National Weather Service, rain is scared and umbrella/raincoats may not work out as planned. How do you shift your strategy in real-time? Price intelligence offers you such data and assists in making real-time changes to strategy by offering you a dose of real business and its sales figures.
Advanced planning to promotions/campaigns
Be it festivals or end of season sale, the discounting and promotions need to be planned. Price intelligence offers you help in making adjustments as compared to your competitor prices.
Alignment to Roadmap, Business Strategy and Agile planning
All the planning in an organization is done to achieve one common goal/mission, pricing the base of online commerce could help in achieving that goal. With better sales, are you trying to get maximum revenue? Or being a social entrepreneur, your sales are supporting the underprivileged or local artisans?
Recommendations, actions, and recalibrating the pricing strategy would help you in establishing a transparent process on what, when, why, and how it needs to be done.
Our next post would be in line with Pricing Intelligence, where we explore many strategies, categories and take a deep dive into it.
We at Agenty pricing intelligence solution for ecommerce; you just read how “raw data” can be converted into something that can turn up your sales. Would you like to try for it? Signup to try Agenty self-services tool or contact our Sales team here to request a demo.