Calculating prices is still a major challenge for many online retailers and manufacturers. Because of increasing competitive pressures, they are forced to compete for customer attention through competitive prices. But beware that when everyone gets cheaper, in the end there’s not enough left for anyone! To survive on the market, it is important to define and consistently implement an intelligent pricing strategy. Today we show you which mistakes you should absolutely avoid when optimising prices and how you can optimally exploit your valuable margins.
Error #1: Price adjustments too infrequent
As analysis from the Federal Association of ECommerce and Mail-Order (bevh) of the current economic and business climate in the German online and mail-order sector in 2016/2017) shows, 38 percent of companies surveyed stated in 2017 that they would dynamically be adjusting the prices of their products and services. Dynamic pricing was also found to be in planning for 10 percent of respondents. However, this also implies that 52 percent do not adapt their prices at all. And the frequency of adjustment is unfortunately also negligible, with 70 percent of companies adjusting their prices only irregularly or as required. In 2016, this figure still remained at 82 percent. Some 13 percent of retailers and manufacturers also stated that they adjust prices once per day – and this figure has not changed at all since 2016. The proportion of more frequent adjustments has, however, trended upwards. Price changes two to three times per day are now carried out by 13 percent of respondents – a significant increase compared to 2016 (3 percent). More often than two to three times per day, only 4 percent of companies now adjust their prices – a slight increase over 2016 (3 percent). The most frequently cited reasons for adjustment are the pricing behaviour of competitors (36 percent) and the ordering habits of customers (26 percent).
Considering that Amazon alone alters prices millions of times per day, online retailers and manufacturers need to adjust their own prices much more frequently than “irregularly or on demand” in order to keep up with these fluctuations. The most effective adjustments come when you consistently orientate yourself to the market, which now leads us to the second mistake.
Error #2: Ignoring the market
For consumers, price comparisons among different retailers and on different portals have long since become part of everyday life. As a study by idealo shows, 97 percent of consumers compare prices on the Internet at least occasionally. At the same time, some 82 percent of 18-24 year-olds and 93 percent of over 45 year-olds consider price a decisive purchasing criterion. Monitoring your competitors has therefore become unavoidable for the retailers and manufacturers in eCommerce. Always keep an eye on market prices and consistently align your pricing to those current developments.
An intelligent software for price monitoring and market analysis on the Internet will establish the necessary transparency for you. It also helps you to determine prices optimally, allowing you to see, for example:
- Which prices your competitors ask at which time for those products you also carry in your product line.
- Where pricing campaigns are taking place and how they influence prices and product ranges.
- Which retailers offer how many of the products you also carry in your product line.
- How differently customers evaluate these products from various retailers.
- If available, an indication of the delivery time and cost of shipping.
- Which of your products have pricing increase potential.
With the enormous number of products available in eCommerce, there exists no manual solution for the appropriate evaluation and optimisation of your own prices to your competitors. Using intelligent analysis tools, on the other hand, you can always keep an eye on the market and react to it quickly. See “Error#3″ for more information.
Error #3: No intelligent analysis tool
When it comes to price optimisation, the almost infinite number of online shops and products presents retailers and manufacturers with a huge, inconsistent mountain of data. And this mountain has to be be conquered.
Many companies still lack the appropriate infrastructure. The processes for setting and dynamically adjusting prices are often not clearly defined and a systematic price monitoring does not take place. These companies should be regularly monitoring basic pricing metrics just to remain competitive. In addition, there often lacks a valid data system, which automatically collects and analyses necessary information about competitors. All of this begs for innovative technologies that can process competitive data efficiently.
With clearly defined responsibilities and processes for pricing, together with an intelligent, competitive analysis tool such as blackbee, you will be creating the conditions for perfect price optimisation and optimally exploiting your margins.
Would you like to learn more about our blackbee software? Contact us now and arrange a personal consultation!