Today, each retailer adheres to its own developed pricing strategy. However, in practice it turns out that far not all the stakeholders think over the tactics of changing the price of a product depending on external conditions. Should such a plan be in place, most of the pricing processes could be automated and, as a consequence, the cost of revaluation could be reduced. Meanwhile the “price of price changing”, i.e. the cost of this revaluation, varies in a wide range from 5 to 100 rubles. It depends, first of all, on the capabilities of an employee of the company to swiftly and correctly change the prices of the goods offered on the website, regardless of their quantity.
Currently, most online stores have already deployed their price monitoring systems: via Getrealprice (in Russian and German markets) or using the services of other companies.
However, we came to the conclusion, that they are mainly used without realizing of what, strictly speaking, to do further with the results of the monitoring. And the majority does not understand how far they are from a systematic approach to responding to the prices of competitors at the level of well-understood procedures: “if things go that way, then we will do this”, etc. For example: we have monitored and downloaded the prices of competitors and found out that they have changed the price for the same “A” product that our online store sells, from 9300 to 9150 rubles. While the same product in our online store still costs 9200 rubles. What to do with it? How often should we track such changes and whether should we pay attention to them? In our example we are talking about only one product, and what if our product range includes, for example, 10 thousand items, of which 7 thousand overlap with an range/assortment of three large online stores, and another 2 thousand goods can be found in ten small online stores? All these products are offered daily to online buyers at different prices and are formed into a “common Internet offer” (what ever Russian or European of global market).
So, let's refer to ... school-level math and a set of simple and understandable rules, because we believe that any, even the most sophisticated technology, should be clear to everyone - first of all, to the owner or manager of a business so that they can logically assess the benefits. Let's try together to figure out how, using modern Getrealprice solutions, one can squeeze out 100% of information on competitors' pricing and significantly improve the competitiveness of own company. As well as to reduce operating costs and move to another level of efficiency, by having excluded the human factor and the subjectivity of specific employees that is not appropriate in the matter of pricing.
Market Price: what to do with it and how it works
First, let's agree on what we will mean by “monitoring prices on the Internet.” The fact is that different people perceive this in completely different way. Downloading competitors' prices to a separate table, in our opinion, is not the price monitoring, since it is impossible to process this information. These results are only gasoline for a much more complex engine. Management of Getrealprice practices a more large-scale approach, since we believe that, first, you need to find out what products of yours and those of your competitor are the same or very similar; in other words, we need to figure out what goods overlap in the assortment and “reconcile” these matching goods to yours. This procedure is called “product matching” or “search for duplicates and analogues”. This is regular operation in conventional industrial monitoring, since the market is always evolving and new products often appear, which need to be reconciled with each other. The reconciliation is not an elementary task, since in different online stores one and the same goods may have different names and be accompanied by dissimilar illustrations
So, the range of goods is matched, and we get the following result:
Figure 4: The historical distribution of prices for one and the same product in different online stores of the Russian Federation. The public data for this article could be deliberately distorted without changing the essence of the whole pattern
This information is already suitable for processing, however, let us repeat, far not all stakeholders know how to do this. The reason is simple: individual segments of online stores have never seen the complete picture, that is the entire range of prices for all competitors, and they do not seek to delve into this problem. They are interested in a particular narrow dedicated area of their focus. Since Getrealprice has been monitoring prices for more than six years in many countries and market segments, the full pricing pattern is available to us across all markets. It was the basis for the implementation of a new tool, which is discussed in the following sections.
The tool we developed is named Getrealprice: MarketPrice. The principle of its operation is rather simple and interesting. A little later, we describe the unobvious benefits and advantages that can be derived from the implementation of the tool in your company.
But for now let's come back to the starting point in the form of overlapping goods found.
We know, that four competitors sell the same ten products as we do. However, we have not yet decided what to do if the prices for these goods from competitors change.
MarketPrice tool offers to resolve this issue once and for all by linking the prices of its products to the price of the offer for the same products, but with other players. And not just to equate (this is a special case), but to bind by the formula.
Let’s see in detail:
It follows from the table that today our price for Goods 1 is 3,590 rubles, and the competitors have 2600, 2850, 3445, 3590, 3579, 3640. At what price to sell our SKU? Typical intra-corporate pricing strategies regulate only the segmentation of goods within the product category into 2-3 segments (cheaper goods + more expensive goods or cheaper goods + moderately medium segment goods + more expensive, i.e., upper sergment). But what about the competitors who adhere to approximately the same internally oriented, but a little bit differently adjusted strategies?
Let's look at this situation from a different angle. Suppose we made a decision in respect of a part of our goods: always maintain a price 1 ruble lower than the cheapest offer among the designated pool of competitors. Having this done, we introduce the formula MarketPrice = MP = avg(all) – 1.
The MarketPrice will recalculate all prices for your products using the formula pre-determined for each product, each time the competitors' prices change, and they change rather often: on different days and at different times and for a random part of the product range.
Immediately after the recalculation Getrealprice API will transfer these prices to your system, where the online store prices are being loaded and stored (1C, SAP, Oracle, different versions of light engines for online stores). The more reasonably the formulas are applied, the more often revaluations are carried out and the more effectively sales in the online store will proceed. After all, a lot more customers will see prices revised according to your rules.
For convenience, we have considered an example with the simplest formula, that is to follow the minimum price of all competitors. However, MarketPrice offers much more interesting features and a variety of strategies. In particular, it allows to set a price with a surcharge or with a discount from the average market price for similar goods. For example, avg + 20% or avg –15% for selected competitors. Your price will always follow this strategy, and each time it will be recalculated when the average price for all found analogous products is changed.
The MarketPrice is capable of taking into account the availability of goods from competitors: as soon as a goods is over, a condition can be added to the formula that when this good is unavailable from one, two or all of the competitors at once, the price shall be calculated using a different formula with a multiplying coefficient.
The tool is a full-fledged stock exchange automated machine that works absolutely on all Internet markets. At the same time, it is not more difficult in use than a calculator, which we made it look like. And any employee is able to intuitively operate the tool.
Basket Management
It would seem that setting the rules for each single product is an unrealistic task when the product range exceeds 100 items. And this actually is true. And that is why the MarketPrice allows to group products in blocks - we call them "baskets". The baskets can be grouped by:
- brands.
If there is the same product of the same brand from a competitor, then MarketPrice will fulfill your revaluation rules, for example, maintain the same price as Amazon or eBay, Wildberries or Aliexpress;
- categories.
For example, to set and maintain for all men's T-shirts a price by 5% lower than that of competitors;
- individual items.
Set your own rules for setting prices for individual products, for example, for the top 10 bestsellers of your company. The MarketPrice will daily maintain the right prices after pressing a single button;
- lines of category managers.
Practice has shown, that in companies, individual category managers are engaged in selected categories. Belonging of a good to the line of a particular category manager operates as a basket, for which they select to set their own rules, if the company admits this;
- rules based on the availability of goods.
If a competitor does not offer a product anymore, and you still have this product in stock, the MarketPrice is capable of automatically fulfilling a pre-determined rule. For example, the tool can increase the price by 15% and then return to the previous level when the product once again becomes available from the competitor's store.
While everything is clear in the case of one and the same goods (we call them duplicate goods), then pricing strategies based on the overlapping similar goods require additional explanation. Analogs will be useful where private labels or no-name goods are used. For example, your product is Bau Putz Zement plaster, 25 kg.
This product has competing products, that is the products that are similar in terms of properties but produced by other manufacturers and have different positioning and pricing.
Here are two competing products:
KREPS Master plaster, 25 kg
KNAUF Unterputz plaster, 25 kg
The MarketPrice allows setting up a price corridor that will be maintained on a daily basis, for example: 10% cheaper than Knauf, but 20% more expensive than KREPS.
Think about this opportunity. Now long disciplinary meetings dedicated to the pricing matters, are not required anymore, no additional control is needed, as the pre-determined pricing rules will be adhered automatically by using the MarketPrice. Worth noting, that the time required to change all prices, is just the time required to press a button, while the old procedures took from 3 to 10 minutes. Any minute spent is money lost. As frequent participants in such practical corporate meetings, we do not believe those who claim that flexible pricing management does not affect business. Instead, we offer a constructive, non-centric view, an outside perspective that does not deny the equality and similarity of your competitors' product offerings in part of the overlapping assortment, whatever are the "price-adding" marketing activities. If you change prices once a week, just imagine how many products during this time will be sold by your more deft competitors working with Getrealprice technologies!
Here is an example of how prices for your product will look like in the context of time, when managed through the MarketPrice:
Play the Game
Getrealprice offers efficient, high-tech MarketPrice tool for pricing automation, while user retains full control of what is going on, since it's the user who sets the formulas for this “stock exchange” automated machine. The management of our customers always knows for sure the rules by which their online stores operate, and is able to instantly change, cancel, or check these rules.
Middle-management management easily translates the applicable pricing strategies and takes into account all agreements to comply with recommended retail prices and other rules.
Immediate specialists also benefit, because with the advent of the MarketPrice, they begin to work according to understandable standards, as they become able to accurately, promptly and reliably observe the applied pricing requirements. And all employees get more satisfaction from their work, simply because now everyone can play together according to common and intelligible rules.
Please feel free to communicate with us – we are able to give clear and solid benefits to your business because of our price monitoring and data crawling experience and powerful network possibilities over the World. We are interested in business cooperation
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