Competitive pricing refers to the strategy of setting prices for products or services, using competitor prices and promotions as a reference. It can be crucial for any retailer or brand looking to gain an advantage over competitors, whether it’s beating them on product prices, or establishing themselves as a premium alternative. It allows businesses to position their products more effectively as they work to stop competitor promotions from swaying consumers who are seeking the best deals and instead take market share for themselves.
Price is always one of the biggest factors when consumers make a purchase, especially during the current cost-of-living crisis. The perception of fair pricing also helps retailers to strengthen their brand reputation with customers. This builds customer retention as loyalty grows, which can lead to long-term profitability. For a brand, having visibility of competitor product prices and promotional activity can support conversations with key stakeholders as they navigate their own positioning, keeping them competitive without damaging profit margins.
A competitive pricing strategy can help a business to stay relevant in the face of market trends and activities. Regularly monitoring and adjusting product pricing can ensure a company stays ahead of emerging pricing trends as they match, or even beat, competitor offerings. The ability to make fast, proactive, data-led pricing decisions is crucial for helping businesses adapt to any unexpected changes. Especially as consumer preferences and market trends can change quickly.
By analysing the market regularly, and by looking at product price history, a business can determine the optimal price point to remain competitive while maintaining a positive profit margin.
When building a competitive pricing strategy, there are three distinct types.
Each type brings its own advantages and disadvantages. For instance, a lower price point could attract a wider array of customers during peak periods as shoppers search for bargains. However, if you are selling a premium product, this may diminish the brand’s quality in the eyes of the target audience. Alternatively, matching the prices of competitors can help to avoid losing market share, but it could take away from future promotional activity as the depth of discounted cuts will be shallower.
The goal of competitive pricing is to strike a balance between attracting customers with competitive prices and maintaining profit margins. Used in conjunction with the analysis of market dynamics, customer behaviour, and previous competitor activities, a company can optimise its decisions to be in line with existing plans and trends.
Implementing a competitive pricing strategy can offer huge advantages for your business, including:
Increased market share: Offering competitive prices can attract customers away from competitors, allowing you to gain a larger share of the market.
Enhanced brand reputation: Fair and competitive pricing strategies can build trust with customers, leading to a more positive brand image and increased customer loyalty.
Adaptability to market changes: Retailers that stay up to date with market trends and activities can quickly adjust product prices to stay ahead of competitors.
Higher profitability: While competitive pricing may involve slightly lower profit margins, the increased sales volume resulting from attracting more customers can lead to higher overall revenue. The use of high-quality product data also means you can implement the correct pricing decision that strikes the right balance between promotion appeal and margin.
Competitive advantage: Consistently monitoring and analysing competitor activities allows retailers and brands to identify opportunities that can differentiate them from rivals and give a competitive advantage.
Price intelligence software that provides visibility of historical product prices is crucial when developing a competitive pricing strategy. It provides valuable product price and promotion data with premium versions (such as Acuity Pricing) showing additional information. As a result, users can understand competitor activity in real-time while using product price and promotion histories to understand previous competitor movements.
By delving into price histories across competitors, businesses can identify competitor patterns, trends and, most importantly, opportunities to shape pricing strategies and forecasts. Used in combination with their own sales data, retailers and brands can better understand the impact pricing changes have on their customers, sales volumes, and overall profitability.
Without competitive price intelligence data tools, the only viable alternative is direct observation, which is slow and time-consuming. Although sometimes first-hand observation can give insights directly, the additional time spent browsing through websites or physical stores is unsustainable in a market where pace is paramount. During key shopping windows, like the build up to Black Friday, price changes are more frequent. This means manual checks cause important pricing decisions to be based on inaccurate data while competitors react in real-time.
Price intelligence tools provide accurate, real-time product, price and promotion data to businesses, allowing them to adjust pricing quicker, and saving time.
In a fast-paced landscape, speed and precision make the difference. A competitive pricing strategy can be the key differentiator in a competitive industry. Businesses can both navigate the complexities of their own product pricing, but also give themselves the space to stay ahead of their competitors as they react and negate promotional activities and price drops in the market. Executed well, retailers and brands can continue to win spend while protecting profit margins.
At Acuity Pricing, our price intelligence data provides confidence through clarity.
Click the button below to book a demo with one of our experts now.