The popularity of shopping comparison platforms like Amazon and Google Shopping is increasing the pressure on eCommerce companies to monitor the prices of their competitors, and adjust their own prices in real-time to stay competitive around the clock.
Price intelligence is becoming a big buzzword these days. But what are you going to do even with the most comprehensive price intelligence data in the world? Match your competitors’ lowest prices worldwide? Great idea if you’re tired of life! But otherwise, you’ll need a little more strategical thinking…
Optimizing Prices Intelligently
As a Chief Revenue Officer, your goal is to improve the profitability of your organization. You’re not only looking for more orders, but also for substantial margins. You’re looking for the optimal price points to generate as much profit as possible from the customer flow that your marketing efforts are bringing to your company.
Matching the prices of your competitors might be a sound strategy if your competitors have a sound pricing strategy themselves. Otherwise it can be a real disaster. And matching the prices of a given competitor only makes sense if your customers are actually comparing you to this competitor, doesn’t it?
Think of your own behavior when you’re buying online. Suppose that you’re looking for an electric toothbrush, for instance. Are you going to google 电动牙刷 to see whether you can get it cheaper from a Chinese retailer? I guess not. But your Chinese customers will.
The actual competition situation is a subjective one, it vary a lot from one customer to another. That’s why pricing intelligence tools that only give you objective information about your competition won’t help you take the right decisions.
Crowdsourcing Pricing Intelligence
There is a simple solution to this problem: Ask your customers! Oh, don’t ask them directly – people are so bad at analyzing their own behavior. But perform experiments on your website, run A/B split tests every day, and measure how a price shift is actually impacting your sales. Your customers do compare prices, and if you see that you’ve got a big increase in sales with a small price reduction, you know that you’ve matched the price of one of the competitors that really matter.
With the right technical setup, you can let the crowd – your customers – perform a price intelligence survey for free every day. Not an objective one, which has little value to drive decisions anyway, but a subjective one, which corresponds to the competition situation as your customers are actually perceiving it.
Geographical Market Segmentation
We’ve run such crowdsourced price intelligence reports on hundreds of eCommerce websites of all sizes, analyzed tons of data and came to this simple conclusion: Knowing the physical location of your customers is the key to setting the optimal price points. There are obvious reasons for that:
- The degree of competition vary a lot from one city to another. Think about local retailers.
- The standard of living vary as well, even within a single country. Think income inequality.
- Online shoppers hate shipping costs! They won’t buy outside of their region without a good reason.
The secret to boost the profitability of your eCommerce is to display different prices on your website depending on the physical location of your customers, and to run and analyze split tests every day to find out the optimal price points in every location. That’s easily done with managed pricing tools.
Segmenting your market geographically, even within a single country, unlocks a huge potential for growth. You don’t have to match your competitors’ lowest price worldwide to stay competitive. It is sufficient to match the prices of those competitors that your customers are actually comparing you to in a given location.
This simple technique can improve the profitability of your eCommerce dramatically. Are you ready to try it out? Or do you have some concerns about using it in your company? Let us know your thoughts!