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How To Build a Successful Pricing Strategy Using ECommerce Data

9/20/2019
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The growth of e-commerce across the global retail environment cannot be ignored. Global brick-and-mortar retail sales experienced a decline between 2013 and 2018, while e-commerce more than doubled to reach over $1.7 trillion in 2018 with an expectation to double again to $3.4 trillion by 2023.

As more and more businesses go online to find their consumers, this creates unprecedented opportunities to gain deeper, actionable and real-time insights into their product assortment and pricing mix at a category, brand owner, brand and individual product level. Using e-commerce data to monitor pricing and product assortment also provides significant benefits compared to traditional brick and mortar channel research.

Building and managing an effective pricing strategy is critical to the successful sales and marketing of any product. Companies that price their products appropriately are typically rewarded with healthy profits and revenues.

Conversely, those companies that fail to devise, implement and adjust pricing strategies typically suffer from declining sales, margins and market share. So how exactly do companies create successful pricing strategies? And how does e-commerce data enable the process?

Price benchmarking

Companies often struggle to set pricing for their products due to a lack of visibility over the entire range of prices on offer within a category and, more importantly, where their pricing sits in comparison with competing products.

Failure to benchmark one’s price in this way can lead to products being over- or under-priced relative to comparable competitor brands and Stock-Keeping-Units (SKUs). As a result, shoppers may opt to purchase from a competitor whose pricing is more in line with what they expect to pay for the product.

Build an effective promotional plan

Knowing when, where and how often a competitor runs promotions is valuable insight when it comes to building a promotional plan. Sales promotions can be a great way to make a product stand out from the crowd and acquire new customers. This is especially true when they are tied to major holidays such as Chinese New Year, Ramadan or Labour Day, or events such as Super Bowl, Oktoberfest or the Olympics.

Align pricing to product attributes

Low price guarantees, discounting and promotions such as those mentioned above are used to drive sales volume growth. In order to grow sales value, companies need to differentiate themselves from the competition. One way to achieve this is by offering value-added attributes such as functional ingredients, specialised product claims, and value-added packaging.

Align pricing to market and retail landscape

What do assortment breadth and depth on a SKU-by-SKU and retailer-by-retailer basis tell us about both the overall market and individual retailer landscape? How can this intelligence support pricing optimisation strategy?

To answer these questions, we need to consider additional e-commerce data points like the number of SKUs per brand, brand owner or retailer alongside retail prices. Is the category dominated by only a handful of brands with lots of SKUs or are there a broad range of brands with a more equal number of SKUs on offer? Moreover, do the brands offer the depth of product choice — SKUs of different pack sizes, flavours, fragrances, ingredients and other attributes — or isSKU variety more limited within a given category?

To understand the impact of ecommerce data in the pricing strategy process, download our white paper “How to Optimise Your Pricing Strategy Using Ecommerce Data”.

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