Product pricing is one of the toughest and at the same time one of the most crucial aspects of business operations – both to brands and e-stores. Price optimisation and smart price management are the factors which actually make a great difference in terms of profit and revenues generated by companies. We can reach out for various pricing strategies – and one of them is competitive pricing. How does it work and how to use it effectively?
What is competitive pricing?
Competitive pricing is a product pricing method based on the prices of one’s competitors. In practice, it boils down to searching for optimal price points with reference to other products available on the market. It allows companies to position their products both in line with market trends and set their price level which is lower or higher than the one of their competitors. Thus, a brand, depending on the strategy adopted, may build an economy or premium brand, while the seller is able to optimise the offer against their competitors. The competitive pricing method is mostly applied when there are already substitutes of the marketed product available on the market and it is easy to compare the offers.
Price monitoring versus competitive pricing
We have discussed in more detail in several other articles, how to effectively monitor the products of a competitive brand and what are the benefits of it. Running an online store or being a producer, it is not only crucial to monitor their own prices, but also to keep an eye on what competitors are offering – comparing yourself with other market players makes it easier to optimise your offer. It is best to obtain the relevant data via price monitoring automation as it is not only difficult to monitor manually all online stores and sales platforms, but also less accurate and time-consuming. For example, the Counter Price tool in Dealavo helps to generate comprehensive and complex price reports in an easy to analyse form, which may prove a true revolution in your price management process.
How to use competitive pricing?
Competitive pricing is an effective way to price the new products. The key advantage of this method is that the brands who had entered the market earlier, have already tested certain price points and most probably have already figured out the optimal level. Moreover, thanks to this, you may start to optimally position your products price-wise against competitors.
Considering stores, in order to optimise the profits, it is, however crucial to be able to change the prices instantly, adhering to the current market situation. What comes to the rescue is Dynamic Pricing – a tool that allows for price automation in line with the changes to what competitors are offering. By applying it, you speed up the response time to the actions taken by other players. Introduction of dynamic prices is an important step towards effective price management and maintaining the competitive advantage. Producers may also use the price automation tool, using it as an automated system, helping them to price their own products based not only on the competitors-related data, but also internal information from their own online store.
If you seek a proven tool to effectively monitor your prices and to assist Dynamic Pricing, contact us. We will introduce you to all the features of the Dealavo platform which will best satisfy your business needs and we will identify ways to effectively manage your prices, and help you to maximise your profit.