As strange as it might seem in the computer age, the pencil-and-paper approach to intelligence gathering is hardly extinct.
Competitor Price Monitoring has been around in various forms almost as long as retail itself. This is primarily because whether you are running a consumer electronics store or a neighborhood lemonade stand, your customers will likely flock elsewhere if they can conveniently get the same products at a lower price.
Traditionally, brick-and-mortar retailers have sent employees into competing stores with a checklist of key products for price comparison and then decided if their pricing needed to be adjusted accordingly. Retailers can now outsource this cumbersome task to mystery shoppers or retail data collection companies; however, they still can’t avoid putting people “on the ground” since not all stores put all their prices online.
Conventional wisdom among store-based retailers has been that only physical visits to competing stores will produce the most meaningful competitive data. Indeed, that method is still important, but brick-and-mortar retailers also need to include online price monitoring on their radar. With very few exceptions, online retail prices now reflect in-store prices.
Only caring about pricing data from physical stores is like pretending your customers don’t know about the Internet. You need to be thinking about pricing the way your customers and competitors think about pricing. You need to be looking at the same numbers they are.
Amazon is making price changes more than a million times a day. Walmart and Target evaluate the pricing on their Key Value Items (KVIs) every two hours.
By gathering online prices, retailers can regularly and accurately monitor all targeted competitive products instead of focusing on a select few. Without the limitations of physical store price-checks, there is virtually no limit to the number of SKUs that can be monitored online across any number of relevant competitors. Online price monitoring gives retailers a holistic view of the marketplace – including comparisons of the original product price, the MSRP, the promotional price and the price with and without shipping.
According to a recent online shopping study by WorldPay, a global payment company that processes transactions in 120 different currencies, 56% of customers will abandon their shopping carts when presented with “unexpected costs” like shipping or taxes at checkout.
It is critical to make sure you always monitor competitor prices with shipping included. There is a wide variety of shipping policies online:
There are many other shipping factors to consider when trying to understand the psychology of your customers. Most free shipping policies do not include large or bulky items, such as furniture or lumber. Many retailers will also offer free delivery to any of their stores for customer pickup. Lastly, Amazon Prime offers “free” two-day shipping for $99 per year.
For smaller purchases, a discount of a few dollars will be neutralized if the shopper needs to “give the money back” at checkout in shipping costs. Most people are even willing to absorb a minimal convenience fee – paying a small amount more – if it means getting their purchases now.
Customers who showroom in physical stores pay close attention to how shipping affects their bottom lines for online purchases. Make sure you’re paying close attention, too.
To learn more about the latest pricing strategies and technology, 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.