|Whether you are trying Pricing Intelligence for the first time, have experienced it but are trying dynamic pricing for the first time or have experienced both but are looking to switch vendors, here are some helpful questions to ask yourself as you get started.
Knowing which categories and SKUs you should focus on depends on how you define your business. When customers think of your store, which items do they instantly associate with you? In which categories are you expected to attack and in which ones should you merely play defense?
There is no one-size-fits-all answer to this question. The number of competitors to monitor will depend on the categories and this list will keep changing as retailers add and remove new items to and from their assortments. The only competitors you should care about, however, are the ones your customers would likely turn to for price-sensitive Key Value Items (KVIs).
For a department store, the multiple lists of competitors to monitor will be different for shoes, electronics, apparel, etc. It’s also important to note that there is no universal list of KVIs – this also varies by individual store and can only be determined by studying your customers. A good rule of thumb is focusing on the six to eight competitors most similar to you.
How Frequently Should I Monitor/Change Prices?
Some major retailers using dynamic pricing are regularly checking competitors’ prices on every single item they offer. Frequency depends on the item’s importance and price sensitivity. KVIs are typically reviewed every two hours, while other products are reassessed every week or every month. Ultimately, the decision keeps coming back to how dependent sales are on the price of a given item and how often competitors are changing their prices.
What Are My Matching Rules to Compare My Products with My Competitors’ Products?
When comparing your prices to the competition, it is essential that you make sure you are comparing the same products. This is called product mapping.
Appearances can be deceiving. Take a look at the food scales below.
Comparison of two products with the same UPC
On first glance, with the exception of the silver tray, they appear to be the same scale: Same UPC code, same size, same digital screen and same base. So why does Wasserstrom.com’s version cost 60% more than the model on Amazon? When there is a large price differential between the same item at different retailers, an automated mapping system can alert pricing analysts to investigate further.
It turns out that the chrome food tray on the right is approved by the National Sanitation Foundation (NSF) for meeting the public health standards for schools and hospitals. The plastic one on the left does not share that designation.
Within your chosen category, there will be many discrepancies like this when comparing similar products. You can’t always depend on UPC codes or model numbers for product mapping. Sometimes there are no universal numbers, which is the case for generic or private label products.
Regardless of the category, you need to define which product features or attributes your customers care about most. For example, if you are selling furniture – a notoriously difficult category to match – you may decide that the kind of material (fabric, wood, metal, glass, leather) is the most important attribute when comparing items. Or it may be the number of drawers or the dimensions.
To learn more tips for how to get started with a pricing intelligence technology solution, download a complimentary copy of our new eBook, “Pricing Intelligence 2.0: The Essential Guide to Price Intelligence and Dynamic Pricing,” for retailers and brands.
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Mihir Kittur is a Co-founder and Chief Innovation Officer at Ugam. He oversees sales, marketing and innovation and works with leading retailers and brands with insights and analytics solutions around their category decisions to improve business performance.