10 recommendations to optimize your pricing strategy
Learn more about, how competitive price monitoring can strengthen your price position and increase your profit
Today consumers are especially considering the product price before making a purchase. 90% of consumers experience delivery costs and the product price as the most important criterion for their buying process. It is crucial for modern firms to consider the price level, as it plays an important role for consumers and can potentially increase revenue.
It’s becoming more popular to apply pricing tools to create useful pricing strategies. We are on purpose writing pricing strategies in plural, as it is rarely the case that one pricing strategy can be applied to cover all your categories. The reason for this argument is that the competitive level and the level of price elasticity are very different from product to product, wherefore you need to use different pricing strategies to ensure the best result.
An example: The DIY industry is affected by a high degree of competition. The competition is happening both in physical stores and at online webshops. However, if you consider one specific category within the DIY industry, let’s say the category of lightning, then the competitive situation is very different, compared to the overall DIY industry. In this case, your primary competitors are for instance stores selling furniture, retailers and webshops selling lightening products etc. If you are on the other hand focusing on outdoor furniture, then the most common competitors are JYSK, IKEA and so on. This indicates that to survive in a market with a high degree of competition, it is crucial to apply different types of pricing strategies.
What is competitive price monitoring?
Competitive price monitoring is an important tool to master. If your business is facing a developing phase and experiences changes in its assortment, then it is necessary to ensure that you have an overview of your competitive situation.
Competitive price monitoring is perceived as a technology, strategy and method applied by your company to get insight into the level of competition in the market. By the use of a price comparison tool it is possible to plan your future pricing strategy.
The use of competitive price monitoring, also ensures that you can improve your marketing budget. You get an overview of your competitive position and can thereby place your marketing expenses more effectively.
How can your business apply competitive price monitoring effectively?
To ensure that you are applying competitive price monitoring effectively, is it first of all relevant to consider which competitors you want to analyze. Even though it is often assumed that primary competitors are most important to monitor, it is also very relevant to monitor the competitors who are following the same market trends as you.
Moreover, it is important to prepare the information you want to monitor. It is for instance relevant to get an overview of your competitors marketing activities, including campaigns and their appearance on social media.
Lastly, you have to consider which tool you want to apply to monitor your competitors. Price comparison tools, such as PriceShape, provide you with information about your competitive situation in the market. In addition, you get access to many different features including the option to create valuable pricing strategies and an overview of your competitors pricing history. It is impossible to collect all the needed data on your own and therefore we recommend you to use a strategic price comparison tool. By applying a pricing robot you get access to your competitors data.
10 recommendations to optimize your pricing strategy and increase your revenue
Based on 30 years of experience within pricing both on a retailer and B2B level, we have conducted 10 recommendations, which your firm can apply to optimize your pricing strategy and thereby increase your revenue:
You need to anchor your pricing strategy at the top level of your organization, and it has to be on the same level as the rest of your strategic decisions. Projects which are not included at the top level of the firm will rarely be executed 100%.
The pricing strategy of your firm has to be integrated within the overall strategy of the firm. You have to prioritize your pricing to ensure the best result. Pricing is not a simple decision and you rarely find a perfect solution. Often it is necessary to test the different pricing levels and measure their influence on your revenue. If you do this manually it is very time consuming and almost an impossible task to fulfill. By applying the best and most optimal digital tool you will be able to adapt your pricing strategies more efficiently.
The pricing strategy has to be implemented at all parts of your organization, as all departments have an influence on the price setting. This especially includes purchasing management, sales and marketing. To succeed, it requires that you are focusing on a thorough understanding and training of your pricing level. In many organizations you have to break through old habits and change your previous experiences, to ensure that you are including data driven decisions.
If you work in a bigger organization you should appoint a pricing manager, who has the main responsibility to perform and optimize the pricing strategy of the firm. It is important to control the pricing strategy on an ongoing basis, as it will create the best results.
Ensure to integrate a digital tool, which can improve your pricing strategy. This could for instance be PriceShape. Often retailers have experienced that the same product, which is priced identically, has been sold on different terms throughout 2 campaign periods. You will often find a good explanation for these external conditions. You are able to learn and react to these changes, if you are on an ongoing basis collecting the needed market information.
The price can no longer be seen as a fixed price. Earlier, the price changed on a weekly basis and was based on campaign periods/discount newspapers. However, many retailers and pure players have today implemented dynamic pricing, in order to ensure that the price will vary on a daily basis. Price transparency is becoming more and more important to master, and especially bigger websites such as Google Shopping, has changed the consumer behavior. Consumers are buying the cheapest products online, wherefore it is important to introduce dynamic pricing to ensure your competitiveness in the market.
Digital marketing is becoming more and more expensive, and therefore it is important to place your marketing budget on the products where you are most competitive. A competitive price is one of the most important parameters needed to convert a visitor into a customer. Therefore, it is important to integrate your pricing strategy in your digital marketing activities. It is necessary to include many tests in order to optimize your pricing level and it has been shown that your ROAS will be improved by 20-50%.
Pricing is a complicated task to master. It is important to test and learn on a scale where you are able to handle it. All companies and categories have different price elasticities and therefore you cannot find one true pricing strategy to apply. By applying a useful tool and dedicated internal resources you will quickly experience great results. It is beneficial to include dynamic pricing on your assortment to ensure the best solution.
The results of your pricing strategies have to be measured and communicated to the different levels of your organization, as showing the results are the best motivational factor.
To ensure the most optimal pricing strategy it is relevant to know the value of your products. Based on the value added to your products, you have to consider the price position you have decided. If your customers are very loyal, then it is possible to set a higher price – vice versa.
How can competitive price monitoring optimize your pricing strategy
In many companies pricing is based on the pricing history and the cost price on the product including a profit margin. This method is working for many companies, but it is not optimizing your revenue. Of course most firms have a way to monitor their competitors prices, but without a digital tool it is almost an impossible task to fulfill, as you have to monitor many competitors and products manually.
Competitive price monitoring and the implementation of dynamic pricing are both important elements to master, in order to ensure the most successful and profitable pricing strategy. Therefore, it is crucial that your firm prioritizes competitive price monitoring to create the best result.
By applying a price comparison tool it is possible to get access to your competitors price positions. PriceShape delivers a simple and user-friendly software, where you have the option to include dynamic pricing. Moreover, you get an overview of your competitors, so you are well-prepared to optimize your future pricing strategy and increase your revenue.