Agent Spotlight: Syed Faraz Ali, a Risk Analyst turned Operator from India
January 30, 2023
February 28, 2023
5
min to Read
Pricing Intelligence
Pricing intelligence is a critical component of any successful eCommerce business. With competition becoming fiercer by the day, companies need to keep a close eye on their competitors' prices and adjust their own prices accordingly to stay ahead.
However, manual price monitoring and analysis across different marketplaces and products can be a daunting and time-consuming task. That's where pricing intelligence tools come in handy.
But how do you measure the success of a competitive pricing intelligence tool? In this blog post, we'll discuss the key metrics to measure the effectiveness of a pricing intelligence tool and dominate the digital shelf.
A competitive price index is a metric used by pricing intelligence tools to compare the prices of a company's products or services with those of its competitors. The index is typically calculated by taking the average price of a product or service across all competitors and dividing it by the company's price.
The resulting ratio is then expressed as a percentage.
Let’s look at small-scale example.
Let's say that a company sells a particular product for $50, and there are five competitors in the market that sell the same product for the following prices: $48, $52, $50, $49, and $51. The average price of the product across all competitors is $50.
If we divide this by the company's price of $50, we get a competitive price index of 100%. This means that the company's price is equal to the average price of its competitors.
If the company wanted to increase its market share, it could use this information to adjust its pricing strategy. It could lower its price to $48 in order to be more competitive with the lowest-priced competitor, or it could raise its price to $52 in order to be more in line with the highest-priced competitor, while still maintaining a competitive price index of 100%.
By tracking the competitive price index over time, a company can monitor changes in its competitive landscape and adjust its pricing strategy accordingly. For example, if a new competitor enters the market and starts offering lower prices, the company may need to adjust its prices in order to remain competitive.
Likewise, if a competitor raises its prices, the company may be able to increase its own prices without negatively affecting its competitive position. This type of analysis is a key feature of pricing intelligence tools and can help companies make data-driven pricing decisions.
This metric refers to how often a company adjusts the prices of its products or services. A pricing intelligence tool can help a company determine the optimal frequency of price changes by analyzing market conditions, customer behavior, and competitor pricing.
For example, let's say that a company uses a pricing intelligence tool to monitor the prices of its competitors in the market. The tool identifies that one of the company's competitors has lowered its prices by 10% on a particular product. The tool also shows that customer demand for the product has increased by 15% since the price change.
Based on this information, the company may decide to lower its own prices in order to remain competitive and capture a larger share of the market. The pricing intelligence tool can help the company determine the optimal frequency of price changes by analyzing customer behavior and the impact of previous price changes on revenue and profit.
If the tool shows that customers are highly responsive to price changes and that frequent price changes are likely to result in increased revenue and profit, the company may decide to calibrate their tool to adjust prices weekly or even daily. On the flip side, if customers are less responsive to price changes and that frequent price changes are likely to confuse customers and erode customer loyalty, the company may decide to change their pricing much less frequently.
Price elasticity measures the responsiveness of demand to changes in price. A pricing intelligence tool can help you understand how elastic your products are by providing data on how sales volumes change when you adjust your prices.
The end-goal is finding the optimal price point that maximizes revenue and profit. If the tool finds that a product is relatively inelastic, the company may be able to increase its price without significantly affecting demand, thereby increasing revenue and profit margins.
To be more specific, price elasticity refers to the percentage change in demand that occurs in response to a one percent change in price.
For example, if a product's price is increased by 10%, and the quantity demanded decreases by 5%, then the price elasticity of demand would be -0.5. In this case, demand is relatively inelastic because a 10% increase in price only resulted in a 5% decrease in quantity demanded.
By understanding the price elasticity of your products, you can adjust your prices to optimize profits without losing too many sales.
This metric measures the percentage of website visitors who complete a desired action, such as making a purchase, filling out a form, or subscribing to a service. In the context of an eCommerce pricing intelligence tool, conversion rate can be used to evaluate the impact of pricing changes on customer behavior.
For an eCommerce company that receives 10,000 website visitors in a given month, 500 of those visitors might make a purchase. Their conversion rate for the month would be:
Conversion rate = (Number of purchases / Total number of website visitors) x 100%
Conversion rate = (500 / 10,000) x 100% = 5%
A robust pricing intelligence tool would track pricing changes against the company’s conversion rate. If the eCommerce company were to change the price of a product by 10%, for example, it can use its pricing intelligence tool to monitor the impact on conversion rate.
If the tool shows that the conversion rate increases to 6% after the pricing change, the eCommerce company can infer that the price reduction had a positive impact on customer behavior and may decide to make similar changes in the future.
Similarly, if the tool shows that the conversion rate decreases to 4% after the pricing change, the eCommerce company can infer that the price reduction had a negative impact on customer behavior and may decide to revert to the original price or adjust the pricing strategy in a different way.
Invisible helps companies leverage Competitive Pricing Intelligence by standing up custom automation tools and leaning on expertise in training AI tools.
But where we provide even greater value is in preparing data for these tools: we lean on DNA in data scraping to glean competitor insights in near real-time. Then, we feed these insights into a custom pricing intelligence tool.
Finally, we manage your product feed, optimizing product listings to boost products’ search engine visibility. It’s a true end-to-end pricing solution.
Interested in learning more? Check out our pricing intelligence solution today.
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Pricing intelligence is a critical component of any successful eCommerce business. With competition becoming fiercer by the day, companies need to keep a close eye on their competitors' prices and adjust their own prices accordingly to stay ahead.
However, manual price monitoring and analysis across different marketplaces and products can be a daunting and time-consuming task. That's where pricing intelligence tools come in handy.
But how do you measure the success of a competitive pricing intelligence tool? In this blog post, we'll discuss the key metrics to measure the effectiveness of a pricing intelligence tool and dominate the digital shelf.
A competitive price index is a metric used by pricing intelligence tools to compare the prices of a company's products or services with those of its competitors. The index is typically calculated by taking the average price of a product or service across all competitors and dividing it by the company's price.
The resulting ratio is then expressed as a percentage.
Let’s look at small-scale example.
Let's say that a company sells a particular product for $50, and there are five competitors in the market that sell the same product for the following prices: $48, $52, $50, $49, and $51. The average price of the product across all competitors is $50.
If we divide this by the company's price of $50, we get a competitive price index of 100%. This means that the company's price is equal to the average price of its competitors.
If the company wanted to increase its market share, it could use this information to adjust its pricing strategy. It could lower its price to $48 in order to be more competitive with the lowest-priced competitor, or it could raise its price to $52 in order to be more in line with the highest-priced competitor, while still maintaining a competitive price index of 100%.
By tracking the competitive price index over time, a company can monitor changes in its competitive landscape and adjust its pricing strategy accordingly. For example, if a new competitor enters the market and starts offering lower prices, the company may need to adjust its prices in order to remain competitive.
Likewise, if a competitor raises its prices, the company may be able to increase its own prices without negatively affecting its competitive position. This type of analysis is a key feature of pricing intelligence tools and can help companies make data-driven pricing decisions.
This metric refers to how often a company adjusts the prices of its products or services. A pricing intelligence tool can help a company determine the optimal frequency of price changes by analyzing market conditions, customer behavior, and competitor pricing.
For example, let's say that a company uses a pricing intelligence tool to monitor the prices of its competitors in the market. The tool identifies that one of the company's competitors has lowered its prices by 10% on a particular product. The tool also shows that customer demand for the product has increased by 15% since the price change.
Based on this information, the company may decide to lower its own prices in order to remain competitive and capture a larger share of the market. The pricing intelligence tool can help the company determine the optimal frequency of price changes by analyzing customer behavior and the impact of previous price changes on revenue and profit.
If the tool shows that customers are highly responsive to price changes and that frequent price changes are likely to result in increased revenue and profit, the company may decide to calibrate their tool to adjust prices weekly or even daily. On the flip side, if customers are less responsive to price changes and that frequent price changes are likely to confuse customers and erode customer loyalty, the company may decide to change their pricing much less frequently.
Price elasticity measures the responsiveness of demand to changes in price. A pricing intelligence tool can help you understand how elastic your products are by providing data on how sales volumes change when you adjust your prices.
The end-goal is finding the optimal price point that maximizes revenue and profit. If the tool finds that a product is relatively inelastic, the company may be able to increase its price without significantly affecting demand, thereby increasing revenue and profit margins.
To be more specific, price elasticity refers to the percentage change in demand that occurs in response to a one percent change in price.
For example, if a product's price is increased by 10%, and the quantity demanded decreases by 5%, then the price elasticity of demand would be -0.5. In this case, demand is relatively inelastic because a 10% increase in price only resulted in a 5% decrease in quantity demanded.
By understanding the price elasticity of your products, you can adjust your prices to optimize profits without losing too many sales.
This metric measures the percentage of website visitors who complete a desired action, such as making a purchase, filling out a form, or subscribing to a service. In the context of an eCommerce pricing intelligence tool, conversion rate can be used to evaluate the impact of pricing changes on customer behavior.
For an eCommerce company that receives 10,000 website visitors in a given month, 500 of those visitors might make a purchase. Their conversion rate for the month would be:
Conversion rate = (Number of purchases / Total number of website visitors) x 100%
Conversion rate = (500 / 10,000) x 100% = 5%
A robust pricing intelligence tool would track pricing changes against the company’s conversion rate. If the eCommerce company were to change the price of a product by 10%, for example, it can use its pricing intelligence tool to monitor the impact on conversion rate.
If the tool shows that the conversion rate increases to 6% after the pricing change, the eCommerce company can infer that the price reduction had a positive impact on customer behavior and may decide to make similar changes in the future.
Similarly, if the tool shows that the conversion rate decreases to 4% after the pricing change, the eCommerce company can infer that the price reduction had a negative impact on customer behavior and may decide to revert to the original price or adjust the pricing strategy in a different way.
Invisible helps companies leverage Competitive Pricing Intelligence by standing up custom automation tools and leaning on expertise in training AI tools.
But where we provide even greater value is in preparing data for these tools: we lean on DNA in data scraping to glean competitor insights in near real-time. Then, we feed these insights into a custom pricing intelligence tool.
Finally, we manage your product feed, optimizing product listings to boost products’ search engine visibility. It’s a true end-to-end pricing solution.
Interested in learning more? Check out our pricing intelligence solution today.
