Launching a new product involves many critical decisions. One of the most important decisions may be pricing. Should you sell your product, say a premium merino wool coat, for $199 or $299? What price for a monthly gourmet coffee subscription will attract customers while still ensuring profitability?
Price intelligence offers valuable insights to help you determine the ideal price for your product and helps keep your prices flexible. This adaptability allows you to adjust pricing as the market evolves and maintain your competitive edge.
Here’s how to use pricing intelligence to uncover competitor pricing tactics and boost your profitability.
What is price intelligence?
Price intelligence refers to collecting, analyzing, and using data on competitor pricing, market trends, and consumer behavior to inform your pricing strategy. It involves advanced tools like price monitoring software, and techniques like price elasticity analysis to track and understand the factors that influence pricing in your market.
Whether you’re selling sandals or skin care, price intelligence provides a clearer understanding of the competitive landscape, enabling data-driven decisions to refine your pricing strategy.
Benefits of price intelligence
Price intelligence offers many benefits if you want to stay ahead in a competitive marketplace:
Better pricing strategies
Price intelligence data about market trends and your competitors’ prices can help you implement better pricing strategies. By analyzing this data, you can identify opportunities to improve your prices, maximize profitability, and maintain a competitive advantage.
Sean Frank, the CEO of Ridge, a company that sells wallets, men’s rings, and travel gear, urges founders of direct-to-consumer (DTC) brands to think carefully about pricing and margins before getting started. “For example, a dog bed is $50, maybe $100,” Sean says on the Shopify Masters podcast. “But you can only have around 10 dog beds on a pallet, so the logistics cost is going to be really high.” Since wallets are a smaller product (with lower logistics costs) at a similar price point, Sean’s pricing strategy allows for higher margins.
Under Sean’s leadership, Ridge has captured 1% of the global wallet market, surpassing the $100 million revenue mark. He’s achieved this by considering the financial viability of Ridge’s pricing strategies. “You used to be able to make DTC work with 60% margins,” he says. “Now I think you need a minimum of 80% margins.”
Market advantage
By analyzing your competitors’ pricing strategies, you can identify opportunities to differentiate and attract customers through strategic pricing to gain a market advantage.
For example, a sporting goods retailer could use price intelligence data to find that its main competitor offers a popular running shoe model at a 20% discount. This insight might prompt the retailer to adjust its price from $100 to $95 to stay competitive and attract more customers.
Increased profitability
Price intelligence helps identify optimal price points and pricing models, which can increase customer loyalty, recurring revenue, and profitability.
Imagine you own a pet supply ecommerce store, and your price intelligence data reveals many customers repeatedly buy the same brand of premium dog food. Using this information, you could introduce an ecommerce subscription with a 10% discount for monthly deliveries, alongside your one-off pricing model.
Dynamic pricing
Dynamic pricing software, powered by price intelligence data, enables real-time automatic price adjustments based on market demand, competitor prices, and your desired price position. A dynamic pricing strategy ensures your prices remain competitive and attractive to potential customers.
Say you own an online swimwear store. Using dynamic pricing, you could automatically adjust the price of a popular $50 bikini, increasing it by 15% during peak summer months and decreasing it by 10% in the offseason, thereby boosting your annual sales revenue.
Buyer happiness
Competitive prices align with customers’ preferences and expectations, improving customer satisfaction and reward long-term commitment to your brand.
If you run a subscription-based meal kit delivery service, price intelligence can guide you to implement a tiered pricing strategy. For instance, customers who commit to a six-month subscription would pay $10 per meal, while those who commit to a 12-month subscription would pay $8 per meal.
How to implement price intelligence effectively
- Choose the right price intelligence software
- Identify key value items (KVIs)
- Set up automated price monitoring
- Collect, integrate, and analyze data from multiple sources
- Implement dynamic pricing algorithms
- Monitor, analyze, and refine your pricing strategy
Here’s how to implement price intelligence and improve your pricing strategy:
1. Choose the right price intelligence software
When selecting price intelligence software, consider factors like the depth and accuracy of the competitive data, ease of integration with your existing systems, and the support and training the vendor provides.
Popular price intelligence software options include Prisync, Competera, and Omnia Retail. These tools monitor and analyze competitor prices, market trends, and consumer behavior, providing actionable insights to inform your price intelligence strategy and make data-driven pricing decisions.
2. Identify key value items (KVIs)
Price intelligence involves identifying your key value items (KVIs), or the products or services that have the greatest impact on customers’ perception of your overall value.
For instance, if you run an electronics store, your KVIs might include popular smartphones, laptops, and televisions, as consumers are likely to research and compare these items.
Focusing your efforts on monitoring and optimizing prices for your KVIs, rather than tracking competitive pricing data for every item in your inventory, can yield the most significant results in customer attraction, retention, and profitability.
3. Set up automated price monitoring
Automated price monitoring is crucial for an effective price intelligence strategy, enabling you to keep a constant pulse on the market and quickly identify opportunities or threats. Automated price monitoring can track competitor prices and promotions in real time, allowing you to swiftly adapt your pricing strategies.
If you sell fitness equipment and notice a key competitor has discounted a popular treadmill model, automated price monitoring can alert you, prompting you to adjust your pricing accordingly to maintain market share.
4. Collect, integrate, and analyze data from multiple sources
To gain a comprehensive understanding of the competitive landscape and make informed pricing decisions, gather data from a wide range of sources, including competitor websites, marketplaces, brick-and-mortar stores, and industry reports.
Software like Competera and Dealavo makes it easier to collect, analyze, and compare data, integrating it into your price intelligence platform to create a centralized repository of retail pricing information.
Examining data from multiple sources can reveal market-level pricing intricacies, like regional variations, seasonal trends, and consumer preferences, all of which can help you fine-tune your pricing strategy and stay ahead of the competition.
5. Implement dynamic pricing algorithms
Price intelligence software’s dynamic pricing algorithms can automatically adjust prices in real time based on seasonality, stock levels, and competitor pricing. This saves time and resources, enables quick responses to market changes, improves profit margins, and reduces inventory carrying costs.
Dynamic pricing algorithms explain why prices for seasonal items like Christmas decorations and Halloween candy fluctuate. During peak holiday seasons, when demand is high, prices increase. After the holidays, businesses heavily discount or clear out the remaining items as demand decreases.
6. Monitor, analyze, and refine your pricing strategy
Continuously monitoring market data and competitor price movements allows you to refine your pricing strategy, ensuring your business remains competitive and profitable.
For example, a fashion retailer might notice a competitor introduced a new line of eco-friendly clothing at lower prices, prompting it to adjust its pricing and marketing strategies.
Similarly, a home improvement store might discover a competitor is offering significant discounts on power tools, leading it to bundle its tools with complementary accessories to create more valuable offers for customers.
Price intelligence FAQ
What is a price intelligence tool?
A price intelligence tool is a software solution that collects, analyzes, and presents pricing data from various sources to help businesses make informed pricing decisions.
What is the importance of intelligent pricing?
Intelligent pricing is important for businesses to remain competitive, maximize profitability, and adapt to changing market conditions by making data-driven pricing decisions.
How can AI optimize pricing?
AI can optimize pricing by analyzing vast amounts of data, identifying patterns, and making real-time, dynamic pricing recommendations based on factors like competitor prices, demand, and customer behavior.
