It's important to have the right price for the product at the right time. Modern customers are price sensitive and it's not today's news, right?
Price intelligence refers to finding the optimal price for your products in the market. Intelligent pricing can be determined by data mining techniques such as observing market demand and competitors. It can also be said of competitive price monitoring.
This strategy offers businesses profitable growth and not having any pricing strategy will prevent businesses' ability to become more profitable. And they will see that their operations are inefficient in the long run. Online businesses can lose customers and it negatively affects brand image.
To understand why it's inefficient not to have intelligent pricing in eCommerce, we will discuss how not doing it hurts businesses. Then we will talk about its significant importance. And we will determine some tips to maximize your profit and growth in the long term.
How Will You Hurt Your Business by not Intelligently Pricing Your Products?
Decreased Perceived Value of Your Products
The perceived value of your products is determined by your customers. They decide mainly by price, quality, and brand image. Their perceived value directly affects their purchasing decision.
To understand this even further, let's put ourselves in customers' shoes.
We know that modern customers are price sensitive. The price itself is a powerful factor in purchasing. Disconnection between perceived value and price will cause customers to reconsider their expectations for the product and the actual value.
Business owners need to increase the perceived value of their products to get high profits and have a strong brand image. To do that, pricing your products intelligently can be the key idea.
Example: Apple 'Premium Pricing'
Think about Apple's high prices on products. This makes products more desirable to customers, right? A brand's reputation for quality, reliability, and good customer service are also factored in the emotional perception of the product's value. That's the main reason why brands like Apple can put higher prices than their competitors. Like Apple, many other brands try to establish 'premium pricing' to create higher perceived value.
But what about the other side of the scenario? If you price lower than your competitors while offering the same quality as they do, you will change the perceived value for both your products and brand. Customers might associate low prices due to low-quality products.
Pricing your products without monitoring the market and your competitors will end up decreasing the perceived value of your products.
Lower Sales and Profit Loss
Many customers simply Google the product they want to buy and research it on different websites. They are more likely to buy from one offering the best deal.
Offering an improved product that is competitively priced can increase sales and lead to higher customer loyalty.
But, misleading pricing policies can lead to loss of sales and eventually deviation from the target margin. Offering wrong prices in the eCommerce market can be hurtful in the long-term and none of the business owners want to live this. Unfortunately, many of them do.
Profit LossHow much should you charge for a new product? Charge it too high and you won't sell it. Charging too low is far more dangerous since you will make it too accessible and maybe seem like it's a poor-quality product.
Companies undercharge their products consistently. As statistics shows;
Over 80 to 90% of all poorly chosen prices are too low. Many retailers believe that underselling a new product is the best way to promote the product and drive volume.
Merchants offering low prices think that they can change the price after a while. But, once you reveal the price publicly it's difficult to increase it. Customers will remember it and believe me they won't react to it positively. And companies consistently undercharge their products even though they spend lots of money to develop them.
A low-pricing strategy can work for some companies. They do it to differentiate their products. But they are not a great idea for every business on e-commerce. This is because pricing without understanding and analyzing the market is too risky. And this is ineffective when merchants undervalue their products to low prices compared to market prices.
And actually, your customers may start to suspect a hidden defect and try to investigate the reason why the price is so low.
Inefficient pricing strategies can hugely prevent your business' ability to become more profitable and may decrease customer trust.
Lower Product Search Performance
Apart from keyword identification, and page optimization in eCommerce, the price can play a crucial role in higher ranking. You might lose visibility on search engines if you don't offer the right, competitive price.
Pricing can affect your conversation rate. Following a wrong pricing policy can lead to a low conversion rate to your website.
Let me tell you this, the more your price differs from your competitors, the more likely customers will buy from them. It does not matter whether you have more and better images, better website design, and offer a wider product range. When the price distance is wider, they are willing to buy from your competitors even if they charge a very high price versus yours.
Lose Big Share Of the Market
When it comes to making it worth paying and showing the value, it's mainly determined by the price itself. Some customers are looking for the value of the product. They are willing to pay the price when it's worth it. They want quality products and setting wrong, inefficient prices can make you lose many of your customers. Setting too low a price can send a message as your products are not quality enough for using it for a long time/can't survive for a long time. And that is not what they are looking for obviously.
Ones using intelligent pricing are not only gaining your customers. They are gaining a big share of the market.
Example: Amazon has a big share of the market
Amazon is one of the biggest leaders in eCommerce. How did they get there?
On Amazon, merchants know the importance of prices. Since there are many merchants on Amazon, pricing can be challenging in that marketplace. Merchants overcome this by using pricing strategies. They commonly use a dynamic pricing strategy. They are aware that intelligently charged prices can make you gain more visibility and affect the credibility of your business.
But knowing that there are plenty of B2B and B2C eCommerce stores going head to head with Amazon can change the game. Competitors on eCommerce can compete with merchants on Amazon and still be successful and have profitable growth.
Successful merchants are using pricing strategies by monitoring their competitors and market demand every minute. And at some point, other merchants need to accept that they will suffer from losing the market share and maybe can't even survive in this competitive world.
Why Is Pricing Intelligent Important?
Advancements of Technology Changed Customer Behavior
Advancements in technology changed customer behavior in the way they buy. This change affected the way online retailers sell in eCommerce. After COVID-19 people have drastically changed their shopping habits. People were forced to change their habits because stores were closed and eCommerce became an alternative way.
But eCommerce growing so fast has not been expected. There are millions of products, innumerable offerings in a huge range of items in the same category, and differences in terms of pricing. It's obvious that there is higher competition in eCommerce but first, let's see what has changed.
How is consumer behavior changing?
- Increased Digital Adaptation
- Change in Purchasing Behavior
How Advancement of technology affects merchants?
Merchants are struggling to get customers' attention. This is because there are thousands of merchants in the e-commerce marketplace.
Online retailers have to stand out from the competition to survive. They have to respond quickly to market changes and developments.
There is a need to get more information about customers to offer them a better service, personalized service. It can be beneficial to get insight from the complete customer journey to offer a personalized experience.
After this change and adaptation retailers know that things have to change from their side. To adopt this change and react to them fastly merchants need to do some changes in their operations, right?
To start that, it might be a good idea to know customers' prior habits before the purchase.
81% of retail shoppers conduct online research before buying. 59% of shoppers use their mobile devices in-store to compare costs or research deals and coupons.
We can say that offering some deals and coupons is effective for customers. By data mining, customer behavior, and offering personalized coupons businesses can get lots of benefits.
Ensure Profitability and Profitable Growth
The online market is growing very fast. Successful merchants get high profits and become leaders and gain a big share of the market. You might get high profit as well as they do. To do that price intelligence is inevitable.
Intelligent pricing significantly changes your market positioning because it helps you attain your business goals and objectives. You will protect your business reputation and brand image.
To adopt this strategy you need to understand both your customers and competitors. Today modern customers are way more willing to shop online.
Let's see some statistics about it;
Online shopping is growing so fast that the global online shopping market size nearly hit 4 trillion in 2020. And in the US alone, it is expected to have 300 million online shoppers in 2023.
There are thousands of potential new customers that can buy your products and there are expected to be more customers.
Observing the market and competitors themselves can positively change the scenario. It will give you a competitive advantage. This is because now you will know competitors' actions and your potential customers.
What You need to do
Finding a place in the market and increasing your rankings requires conscious effort. Being competitive results positively here.
Most times retailers dig deeper to find opportunities and weaknesses in the market. This requires an enhanced analysis of competitor behavior and market position.
Let's talk about some tactics for intelligently pricing your products.
Track Your Competitors
You know that you need to compete on price. But your price mainly needs to be charged by your competitors' prices. Successful competitors are charging their products competitively and they get high rankings and high profits.
To track your competitors, you need to work with competitor tracking software. You can track your competitors automatically. The engine will send you automatic alerts when there is a price change.
By using it you will save time and money while maximizing your profit.
Work with the Quality Data
Why do many business owners work with the data? They talk about it a lot and it has become overwhelming lately. There are thousands of pieces of data to track and you need to identify the ones that matter.
Let's make it fun. We will talk about working with quality data.
Data quality is a measure of data-based factors such as reliability. Businesses use it to manage data correctly and understand its value.
Make better decisions
With better data quality managers can make better decisions. Better decisions mean less risk and increasing efficiency in decisions. When outputs are more reliable, risk in decision-making can be minimized.
Increase in Productivity
When you have better-quality data your team can be more productive. This is because they won't spend time validating and fixing errors in data. So that they can focus on your main goals and objectives.
Better Marketing Efforts
Working with better data enables the marketing team to understand your customer segment better. When you know your customers you can create better marketing practices and get their attention. It's challenging to get customers' attention on eCommerce after this huge adaptation of digitization. So you can turn this situation to your advantage.
To get this even further let's look at some of the statistics;
35% of marketers say poor data quality impacts their ability to target consumers with the right digital ads.
Use Data Analytics to Boost Customer Acquisition and Retention
Understand the segment: Observe your customers. What did they purchase, when did they purchase and what is the frequency of purchasing. This will give you lots of insights. By using the data you will know that information.
Statistics show that;
Marketers see an average increase of 20% in sales when using personalized experiences. (Monetate)
80% of shoppers are more likely to buy from a company that offers personalized experiences. (Epsilon)
77% of consumers have chosen, recommended, or paid more for a brand that provides a personalized service or experience. (Forrester)
Then you can offer your customers personalized service.
Offering personalized experiences to online customers is more important. After COVID-19 customers' expectations have increased.
McKinsey research found that 71% of shoppers expect personalization. And 76% of customers get frustrated when they don't find it.
Quick Tip: Offer different prices for each segment.
Determine your customers' segments by observing their habits. And offer different prices for each segment. This can be beneficial.
Offering the right prices for the right people, personalized prices results in ensuring happy customers with less churn. Increases customer satisfaction. And results in enhanced higher profitability and profitable growth.
Use Competitive Pricing Tool
Pricing might be more challenging than many business owners think. It's not easy to find the sweet spot between the bottom line and connecting customers to make the purchase. But it's worth trying when it comes to high-profit margins and a powerful brand image, right?
We know eCommerce is a crowded market. There are thousands of merchants on eCommerce. Manually tracking price changes is not effective and also very time-consuming which you can't imagine.
To be more specific, let's see some statistics;
There are 1.8 million online retailers that operate in the US and 7.1 million globally.
It's difficult to handle all those changes manually.
There is no doubt that monitoring competition automatically will get your business to the next level. By using a pricing engine you can define price rules based on your competitors' prices or average market prices. And if you allow the system the price will change automatically. While you are taking data-driven actions you will be taking accurate and comprehensive decisions.
By using a competitive pricing tool you will be able to identify quick price changes and win opportunities. Right prices can help you win those opportunities in the short term.
Takeaways
- Lack of price intelligence will hurt your business in various ways. Such as loss of sales, lower perceived value and lower product performance in search engines are just a few.
- Price intelligence will help retailers to grow their business. They will understand other players in the eCommerce market and make data-based decisions.
- Price-intelligent software can help retailers to remain competitive. While they create quick, effective, and accurate strategies for their online businesses.