In today’s digital age of business, many long for a time when things were simpler. A time when the local Mom & Pop owners could take a quick visit to their competitor’s store and see what the competitor’s prices were. Those days were quickly lost once the big box stores came rolling in. In fact, small businesses seemed destined to disappear altogether only a few years ago.
However, the wider availability of newer technology may have something else in store for us entirely. The uber-competitive pricing and advanced strategies of the big stores have lost a lot of their mysticism, and the software capable of compiling large amounts of data and predicting future trends is becoming more affordable by the day. Although the majority of main street stores, with their high overhead and expensive leases, may never again return – the age of the small and competitive online retailer is upon us.
Advanced and affordable pricing intelligence software has allowed smaller businesses to compete, and succeed, in the cutthroat pricing wars that are taking place online. In many cases, a smaller more streamlined online business is able to outmaneuver larger competitors given the right data points and strategy.
What is Pricing Intelligence?
Simply put, pricing intelligence is the accumulation and understanding of the market-level pricing data and its variables. The modern age is awash in information – analytics and consumer data ranging from age and hair color to their favorite Beatles song – and how one is able to harness this data and build out a business strategy is what is making the difference between success and failure. Price tracking is the utilization of this data to optimize pricing to maximize competitiveness and profit simultaneously.
With that said, let’s first go through some of the reasons pricing intelligence has become so relevant before we get into its intricacies.
- Consumers are able to shop through a dozen stores almost instantaneously. Either just opening a few tabs or using a site that aggregates multiple offerings, consumers are able to immediately compare your prices to countless competitors.
- This increase in consumer knowledge has created increased aggressiveness from competitors. More stores are fighting harder to offer the better deals.
- This increased aggressiveness has forced major stores to utilize advanced algorithms. The big retailers change prices up to 50,000 times a month. Amazon is a very aggressive pricer, changing prices for some offerings every 10 minutes or so.
- These competitive prices allow anyone capable of keeping up with the trends to make a sale versus even the largest competitor, but it means those who cannot or choose not to will fall behind.
With the situation laid out, it’s easy to see why price intelligence software is becoming a must have if one wishes to stay competitive.
How Does a Price Tracking Software Work?
Pricing intelligence software will analyze the competitive landscape by a series of segments. Categories, Brands or any other relevant identity. The software will then analyze year’s worth of data to evaluate and pinpoint pricing opportunities.
The better software are able to see trends developing based on millions (billions?) of pieces of consumer data. These predictions allow you to lower your costs as demand falls and competitiveness increases, and to maximize your profit when demand rises. This is a precarious balancing act that is usually impossible without advanced insights.
The better pieces of technology should integrate seamlessly with your e-commerce platform, allowing you to keep your prices competitive 24/7.
How to Utilize All This Data?
This data can also be used to implement other dynamic pricing models such as Peak user pricing, segmented pricing, service time pricing, and time of purchase pricing. We won’t go too deep into these. Suffice to say these different pricing strategies can lead to much higher profits without sacrificing customer loyalty. Speaking of customer loyalty, price tracking won’t be enough to keep your customers coming back. You’ll need to keep reminding them of your existence, through the tedious working of maintaining your online presence. You can control your social media activity, but in order to achieve high ranking in search engine results, you’l need to look into agencies that specialize in SEO. They’ll be able to improve your ranking for your relevant keywords and search terms.
Segmented pricing, for example, lets you know which customers are likely willing to pay more for your service and allows you to tailor custom messaging and pricing directed at them – it may sound weird, but it is a strategy utilized by a number of industries and companies, most notably Apple and the entire airline industry.
Peak user pricing and Time of Purchase pricing take into account the time of day and the immediate demand for a service (think late night services and Uber’s peak time charge increases) and let you maximize your profit at the time of day when demand is at its highest.
I hope I was able to convey to you the importance that dynamic pricing will play into the success of your online business and to give you a handle on what to expect from these strategies. There is always more to learn on these subjects, and it is constantly changing and being updated. I implore you to continue to learn and ensure your business retains its competitive edge in the near future.
