The effects of the pandemic, which for businesses meant they had to embrace digital transformation, came at a time when the number of e-commerce platforms was mushrooming, and more and more people were preferring to shop online than visiting a physical store. A 2019 study detailing the consumer shopping trends for the year concurred with our assertion. 57% of the consumers preferred to shop online compared to 31% who opted to visit physical stores.
With the figures have risen due to the pandemic – to 59% in 2020, according to a Forbes study – the emphasis on pricing as a factor influencing purchasing decisions has never been more critical. This, coupled with the fact that customers usually visit multiple marketplaces to compare the prices of goods, means that the pricing aspect of running an operation should not be taken lightly.
Notably, pricing is the first step towards differentiating your products from competitors. Other factors take a backseat in the initial stages of a business’s lifecycle but are still crucial once it starts growing. This analogy, therefore, shows the importance of having a competitive pricing strategy, which can only be arrived at after carrying out price monitoring. Due to its function as a crucial process in compiling a pricing strategy, it can boost your business’s revenue in many ways, as we’ll detail later.
What is price monitoring?
Price monitoring is the process of understanding the market by analyzing the factors affecting the pricing of goods and services. It entails going through e-commerce websites to identify the prices at which your competitors have priced their products and services. As such, it is usually carried out through the use of web scraping tools. For instance, here’s how proxies help ensure smooth data gathering for price monitoring.
Web scraping refers to the automated extraction of data from websites and is usually carried out by applications and software. In price monitoring applications, web scraping applications usually harvest pricing-related data. They do this by working in conjunction with web crawlers that scour the web taking stock of all websites selling the products or services whose prices are to be collected.
Once the websites have been identified, the web scraping tools send web requests requiring the websites’ respective web servers to send HTML documents. Upon receiving these documents, the scrapers isolate the data on prices and subsequently convert it into a structured format.
The next stage of price monitoring involves data analysis to identify patterns affecting computer behavior. Notably, the ultimate goal of any price monitoring undertaking is to come up with a robust and competitive pricing strategy and is mainly done by companies selling goods or services. For instance, you could opt to set a low, matched or high price for your goods or services relative to your competitors’. The benefits of price monitoring arise from these three possible price points.
Benefits of price monitoring
Price monitoring offers the following benefits:
- It enables you to set a high price when there is little or no competition.
- It helps you source for cheap suppliers, thereby increasing your profit margins once you set your preferred retail price.
- It enables you to identify new entrants, some of whom may be undercutting you to gain a competitive advantage.
- If you opt to set a low price thanks to price monitoring, you build a reputation as the lowest cost vendor, and you could dictate the prices of the products if you pull all the customers.
- It provides insight into changes in consumer preferences and ensures you are the first to know this as well. For instance, if you establish that all suppliers have slashed their products’ prices, it could be an indication that you need to come up with a new pricing strategy. This is because it could mean that a new supplier offering a product that customers deem as being of higher quality has entered the market.
- It helps you determine the right time to run a sales promotion. Price monitoring helps you identify competitors that are already selling their products at low prices. As such, it informs you about how lower you should go to attract more buyers.
- It enables you to determine the time to do away with oversupplied products, which, of course, have low margins because setting very low prices is the only way to get customers to buy such products. Upon deciding to do away with such products, you could start selling new products altogether or opt for product differentiation.
These benefits point to the importance of price monitoring as a revenue booster. For instance, by helping you source cheap suppliers, you get to increase a product’s profit margin once you set a high price, especially when there is little competition. Similarly, establishing competitors’ prices before running a sales promotion helps you avoid selling a product at a higher price than another seller’s selling price for the same item. Therefore, price monitoring indirectly enhances sales and boosts revenue.