Adjusting your prices to the competition often becomes an extremely complex task, especially where conserving profit margins is concerned. Thanks to competitor price monitoring, online retailers can compare the prices of the other brands, allowing them to make more accurate decisions when crafting their own pricing strategy and remain competitive with their main competitors.
The main objective of competitor price monitoring is not to sell cheaper, but rather to conserve and increase your profitability despite changes in costs.
When selling online in today’s market, it’s possible to adapt your prices without reducing profit margins by following these tips:
- Use criteria to choose which products to change the price of. This may seem like the simplest process, but choosing the wrong product could significantly harm the brand’s profits. The key to positioning your brand as having the best price without reducing profits is by having products that are staples in the market or those that enjoy growing interest.
- Offer cumulative discounts and limited offers. If the price adjustment is due to a specific need, this shouldn’t be a motive for changing the product’s permanent price. Faced with a temporary incentive, the customer will find it more attractive if you offer cumulative discounts for purchasing several units.
- Consider whether the price is appropriate for the medium and long term. Analysing the prices of the competition should serve to rectify a dynamic pricing strategy in the medium term. This will allow the brand to be recognised as having the most attractive price based on the conditions under which the product or service is sold, and the increase in transactions will compensate for the price adjustment.
- Cross-sell with other products. This sales strategy consists in offering your potential clients a product that is similar to the one they’re going to buy. The objective is to increase the total on the receipts to compensate for the price adjustments.
You must keep in mind that, before making the decision to change the price of a product, it’s essential to analyse the number of customers that would be affected by that change and what monetary figure their transactions would translate as. Those clients are willing to pay that price for the product. When making this decision, they must have seen other factors in the brand such as customer service, product quality, performance, or even the warranty provided by the vendor.
In this case, if you want to earn customer loyalty, it’s advisable to execute other added service strategies to counteract lower prices. One very simple and effective way to reward a client for their purchase without suffering a loss of revenue is to include shipping and return costs or offer an additional discount towards a future purchase.
But how can we choose the correct pricing strategy? Let’s review the advantages and disadvantages of the different strategies to analyse which best suits each situation.
The low price strategy
Implementing this strategy involves achieving a particular strength, which is attracting customers since the consumer values price as the main factor in their purchase decision. But this action isn’t always as favourable as you may think since on many occasions it destroys profitability. The customers can even begin to become suspicious of the low price. They might begin to doubt the quality of the after-sales service, delivery dates, etc.
The high price strategy
This type of strategy is, a priori, the least popular. If the consumer perceives the brand as inaccessible to them, it can produce a lack of interest. But, implementing this strategy can significantly contribute to improving the image of your eCommerce business.
The medium price strategy
This strategy consists of offering a price in line with the needs of the consumer and the current market. In other words, a price similar to that of the competition. Though sometimes, this might give your eCommerce business poor visibility.
Choosing one strategy over another depends on the situation that each retailer and brand finds itself in. It’s always advisable to try and be dynamic when executing pricing strategies.