Why analyze by category?

Your strategy for different categories across your business won’t necessarily be the same. For example, perhaps you are well known for having the best deals on computers and want to implement lower prices to be more competitive on your most popular category. 

At the same time, you can make back margins on other categories. Because of this, it’s important to track where you stand not just at the SKU level and ensure that you’re positioned strategically in the market. This also helps ensure that consumers are perceiving your brand the way you want them to.

Making price position data actionable

1. Understand and respond to market changes

Competitors can change their pricing at any time, altering where you stand relative to them. Tracking competitor pricing allows you to respond quickly to maintain your price position. 

You can also track how the market responds to your own price changes to help optimize your own strategy. You’ll likely notice that certain competitors consistently change their prices around your own and are actively trying to undercut you. 

Those are the ones you’ll want to keep a closer eye on, although you should take into account whether that competitor’s price changes are actually affecting your sales.

For example, you may have a relatively unknown retailer with more competitive pricing than yours, but consumers may not trust them and prefer to buy from you. In that case, you have pricing power over them and no immediate action is necessarily required.

2. Validate your pricing strategy

Let’s say that on average, you’re priced higher than your top competitor in a category you want to be more competitive on. You can adjust your strategy to close the gap, but it’s critical to track where you stand over time to ensure you are maintaining your optimal position in the market.

Take it one step further by correlating your price position to changes in demand or sales in order to verify that the performance aligns with your growth strategy.

3. Identify new assortment and cross-sell opportunities

Analyze trends over time to determine what areas you’ve been able to maintain a strong position in consistently. Are there adjacent categories that you might be able to grow? 

For example, if you maintain a strong position in cell phones, you may be able to generate string cross-sell traffic for smartwatches too. You may also want to stock heavier in categories where you have a strong price position, as well as complementary categories.

4. Determine where you have pricing power

Couple price position data with sales data. If your most expensive products are earning you the most money, chances are you may have the ability to increase prices and maximize margins, without sacrificing sales. 

Consider running some price tests to determine how incremental price increases will affect demand (essentially measuring your price elasticity). Proceed with caution, however; even though you may command a premium, you’ll want to make sure there aren’t any drastic increases in prices that may upset consumers.

5. Increase return on advertising spend (RoAS)

Once you’ve identified the areas where you hold the strongest price positions, share your findings with your marketing team. As you align with them on where your business is strongest, they can allocate more time and budget to drive even more traffic to those areas and gain better return on marketing spend. This will create a positive feedback loop where your market position will be strengthened further by the demand they generate.

Closing thoughts

The ecommerce landscape is more competitive than ever. Pricing is changing constantly and understanding where you stand in the market at all times is critical to shaping your strategy and tactics. 

There are many ways to slice and dice competitive pricing data, but evaluating where you are positioned at the aggregate category level to identify trends is a great place to start. 

From there, it’s easy to drill down and look at sub-categories or SKUs to optimize your strategy at a more granular level. By taking this approach, you can ensure profitable growth by capitalizing on where you have pricing power, while staying price competitive in other areas.

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