In the dynamic world of eCommerce, establishing competitive pricing can be the difference between a business that is thriving and one that struggles to stay afloat. Among the many pricing models and strategies that eCommerce businesses can use, price benchmarking has proven to be a valuable tool.
Despite its benefits, many businesses grapple with the challenges of implementing price benchmarking effectively. This article provides an in-depth understanding of price benchmarking, the challenges involved, and how automated tools can help overcome these challenges and achieve pricing intelligence.
What is price benchmarking?
Price benchmarking, or competitive price analysis, is a strategic process that businesses use to compare the prices of their products with those of their competitors.
This strategy goes beyond a basic price comparison; it involves a comprehensive evaluation of the market and competitive landscape. By considering factors such as the quality of the products, the market presence of the business, market trends, and customer preferences, businesses can set prices that are competitive, profitable, and attractive to their target customers.
For instance, consider an eCommerce platform selling smartphones. Through price benchmarking, they would compare the price of a particular smartphone model on their platform with its price on other competing platforms. They would also consider factors like product warranties, customer service quality, and delivery speed, among other aspects, to establish a price that offers value to the customers while ensuring profitability for the business.
Price benchmarking vs. price monitoring
Price benchmarking is often confused with price monitoring, but it’s important to understand the differences.
Price monitoring is a passive process that involves observing and tracking the prices of competitors’ products over time. It’s similar to keeping an eye on the competitor’s storefront and noting any changes in their pricing. This information can be used to react to market changes and ensure that the business has competitive pricing.
Price benchmarking, on the other hand, is an active and strategic process. It involves not just observing but analyzing competitor prices, market trends, and other relevant factors to determine the optimal price for a product. While price monitoring provides data, price benchmarking involves interpreting this data and using it to inform strategic decisions.
However, both these processes involve gathering competitor data through various mediums.
Top 5 challenges of price benchmarking
This section highlights some challenges that pricing managers may face while conducting price benchmarking.
1. Complexity and variety of data
One of the major challenges in price benchmarking is dealing with the complexity and variety of data. Online retailers need to collect and analyze data from multiple sources, including different eCommerce platforms, social media, customer reviews, and more. This data can be unstructured and inconsistent, making it difficult to draw meaningful insights.
Bright Data offers an automated solution called Bright Insights that can fuel your price benchmarking process with real time data on competitors and the market. The platform offers:
- Real-time price monitoring of competitor’s SKUs
- Data analytics of multiple competitors and multiple data types
- Track competitor pricing for their products and services
- Monitoring competitor product catalogs to help you improve yours
- Monitoring consumer sentiment toward your brand
- Conducting detailed research on competitor and market data.
2. Time-consuming process
Price benchmarking is a time-consuming process. It involves collecting data, analyzing it, comparing prices, and making strategic decisions. For businesses with a large number of SKUs or those operating in fast-paced markets, keeping up with price benchmarking can be challenging.
3. Dynamic nature of prices
In the eCommerce world, prices are continuously changing due to various factors, such as changes in demand, promotional activities, and competitor actions. This dynamic nature of prices can make the process of benchmarking challenging as the data collected can become outdated quickly.
4. Differentiating between similar products
When benchmarking prices, businesses often encounter the challenge of differentiating between similar products. It can be difficult to ensure that you’re comparing apples to apples, especially when dealing with large product categories or unique product specifications.
5. Understanding the impact of non-price factors
Price is just one factor that influences a customer’s purchasing decision. Other factors, such as product quality, brand reputation, and customer service, also play a role. Understanding the impact of these non-price factors and incorporating them into the benchmarking process can be challenging.
For instance, some smartphone customers might be willing to pay more for a faster delivery or for damage insurance.
How automated price benchmarking tools can help
Implementing an automated price benchmarking solution can help businesses overcome these challenges and harness the power of a competitive pricing strategy.
1. Streamlining data collection and analysis
Automated tools, such as web scrapers, can efficiently gather large volumes of data from diverse sources. They can handle unstructured and inconsistent data, transforming it into actionable insights.
2. Saving time
Automation eliminates the need for manual data collection and analysis, significantly reducing the time required for price benchmarking. Businesses can focus more on strategy development and less on data management.
3. Keeping up with dynamic prices
Automated tools can track real-time price changes, ensuring that businesses have the most up-to-date information for benchmarking. They can even set alerts for specific price changes, allowing businesses to respond promptly.
4. Precise product matching
Advanced automated tools use algorithms to match similar products accurately, ensuring that businesses are comparing like with like. This level of precision is often difficult to achieve manually.
5. Incorporating non-price factors
Initially, the actual prices of finished goods are calculated by considering cost estimates, however, later, other factors are also taken into account while balancing competitive prices.
Automated tools can also take into account non-price factors like product reviews, ratings, and brand reputation when benchmarking prices. They provide a holistic view of the market, helping businesses set prices that reflect the total value of their offering. For instance, an effective automated solution will have built-in social media scraping capabilities to make sure no data is left out of the pricing strategy.
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