The Definition Of Price Intelligence
A good starting point for us would be The Oxford English dictionary definition of (Price) Intelligence, which is “the ability to acquire and apply knowledge and skills”.
Extending this definition to pricing begins to provide us with a more specific understanding of a price intelligence system as being,
“The gathering of market prices to provide visibility and understanding of competitor price positioning, allowing companies to benchmark themselves against competitors in the markets they operate in.
Imagine the scenario – You are a retailer selling widgets, you have 3,000 different widgets in your product range and you recognise that in order to remain competitive you need to keep an eye on what your competitors prices are for the same or similar products. Let’s assume you have 10 primary competitors who sell a similar range of widgets as you, that means in theory you would have to price track 10 competitors x 3,000 products = 30,000 prices. To make things even more challenging you would ideally need to price track your competitors every day and what if you have 10,000 products and 30 competitors ?. So price intelligence using competitor price tracking is one of those easy concepts to understand but quite difficult to achieve on a systematic and reliable basis.
The Process Of A Price Intelligence System
Typically the gathering of data is often done on an ad-hoc, manual basis. Retailers will often check competitor prices in response to customer feedback or a slowdown in sales, i.e. sales of a particular product have declined significantly and you go online and check what prices your competitors are selling the same products for. The problem with this reactive approach is that you don’t know how long your competitors prices have been at this level and you might have been losing sales for weeks as a result. You also have no ideal how many other competitors and competitor prices have moved and as a result you price position in the market overall.
So clearly the ad-hoc, manual approach doesn’t really work, it’s far too time consuming and expensive to do this kind of work manually. Thankfully there are price intelligence solutions out there that use technology to automate the collection and analysis of competitor prices, that provide retailers the necessary visibility that allows them to take a more pro-active approach to price management and price optimisation. Insitetrack is an example of this.
Why it’s so important
Increased consumer price sensitivity, Increased competition from aggressive retailers and increased price transparency for consumers all conspire to create a very challenging market for retailers. The economy may have turned the corner but consumers remain price sensitive with retailers responding with never ending promotions and discounts. Fuelled by technology changes including mobile devices and unlimited amounts of web information at their fingertips, consumers are very clearly in the driving seat with almost unlimited choice. Price may not be the only factor that consumers consider but it’s certainly up there and at the forefront of their minds. Whether you do it manually or use technology, price intelligence and having visibility into market prices and competitor prices is no longer a ‘nice to have’ but an essential element to any retailers strategy.
Key Benefits Of Competitive Price Intelligence
A reliable and accurate price intelligence system- provides you with the visibility that allows you to benchmark and position your pricing relative to competitors and gives you the ability to set your price accordingly. Having the right price (as opposed the cheapest price) will allow you to maximise your sales and margin ratios.
A reliable and accurate price intelligence system- will identify margin opportunities through price increases where your prices are lower than they need to be.
A reliable and accurate price intelligence system- will allow you to optimise your marketing investment by using the data in paid search, affiliate and marketplace sales channels.
A reliable and accurate price intelligence system- will uncover competitor prices that make no sense, for example prices that are below your cost. This can be valuable data that can help you negotiate better deals with your suppliers.
Whatever you pricing strategy may be and however you position yourselves versus your competition, price intelligence and the systematic tracking of competitor prices is a vital part of any retailers overall business strategy. Tracking competitor pricing manually is virtually impossible for the majority of retailers. Fortunately there are price intelligence tools like Insitetrack that can fully automate the collection, analysis and response to competitor pricing, allowing retailers to maximise sales and margins by optimising price points based on market data.