Secret 1 — They all do it
According to Business Insider Amazon updates the price of a product every 10 minutes on average. Because they have 17 million orders daily they can alter the price based on shopper behavior in real-time. We're far from the days when Jeff Bezos had a bell ring for every order coming in. If that bell was a simple click today it would ring every 5 milliseconds, essentially creating a 200Hz continuous tone.
But there is another reason for their price updates, competitors. Yes, Amazon has ways to know your price, and if monitoring and repricing is part of Amazon's pricing strategy everyone must do it. In fact, almost every retailer uses some type of price monitoring, whether it is software-driven or old-school with a staff visiting the competitors websites. Not monitoring pricing is blindness and in e-commerce blindness equals broke.
Data analytics reveal that 83% of shoppers will leave their favorite store because another one offers the same product at a lower price. That price is only a click away or less than five seconds.
A few dollars off can mean thousands lost in sales, but how much exactly? I computed this graph based on last year's data history of our customers stores:
NOTES:
• For the percentage of sales increase I averaged 1 month of data before they enable the repricing (because we don't have more, they usually start repricing within a few weeks after signing up) and I compared that with the average of the following 4 months.
• I only included our customers who aligned the price of at least 75% of their products almost perfectly (<1%) to their cheapest competitor.
• Although those who dropped their price below their competitors had a sales increase even greater than those who merely aligned themselves I do not want to share this data because it is an instant gratification approach with guaranteed long term negative consequences (see Mistake #1 below).
• You may ask, why those who were already aligned (were 0% more expensive) still experienced a significant sales increase? Because they were aligned on average, and not necessarily perfectly aligned on individual products. In fact, the main reason why they did not benefit as much from the repricing as those who were 3% more expensive is because they were already relatively serious about aligning their products to the competition.
The key observation here is that although they dropped their price and therefore reduced their margin they still ended up making more in sales on the long run.
An important point to understand is that an increase in sales as a result of better pricing is not just a growth in revenue, it's an increase in the number of buyers. And a rise in popularity has a long term exponential effect I could not measure here, an organic growth resulting from better positioning on search engines, word of mouth, and so on. Sales beget more sales through momentum and acquisition of new customers.
Secret 2 — The magic combo: Repricing and Direct Integration with your store
What tractors brought to farmers is leverage. What software brings to retailers should also be leverage, and not more gadgets or time-consuming distractions.
Monitoring prices doesn't necessarily mean receiving email alerts every time someone beats your price as this can defeat some of the purpose of using a software. You can connect your store directly to our platform so your price is updated automatically based on your own rules. Then you can disable the alerts and sell as you snore.
They are called Repricing Rules and they sound like this: "On that group of products, I want to always be as cheap as my cheapest in-stock competitor, but not below my cost +15%, and not below the average of all my competitors -30%".
But how can the price in your store be updated? Whether you use Shopify, WooCommerce or Magento, all you have to do is copy a key from the admin portal of your store into your LogiPrice account. From there you can import your products without going through spreadsheets and you can set up the repricing rules directly from your account. This will update the price in your store whenever your competitors update theirs. That's the power of Direct Integration combined with Repricing.
Secret 3 — You don't need to copy/paste all your competitors product links
Visiting the page of each product on every competitor's website daily is extremely time consuming, but gathering these links just to set up an automated price monitoring can also take many hours even though you only have to do it once.
Fortunately there are ways around that. We developed a machine learning tool that uses the search bar on your competitors websites to look for your products and match the results. It doesn't just type a product code and grabs the first link, it tries many keywords intelligently and visits the results of each search to match them based on dozens of parameters. When it hesitates between two products it shows you both so you can select them quickly before importing the thousands of links into your account.
It's called SmartSearch and you can even try it here without any account.
Secret 4 — A competitor that is out of stock is not a competitor
Many retailers focus on pricing when monitoring their competitors but those who are out of stock are out of the game, there is no need to compete with them.
For this reason it is important to incorporate the products stock in your repricing strategy. For most people the repricing rules should not track but only . These few hours or days when the competitor is out of stock may seem negligible but they quickly add up. How much extra profit can you make this way?
I computed a graph that shows how much extra revenue our customers made in their store on average as a result of price raises initiated by competitors going out of stock, for those who set up their repricing rules this way.
NOTES:
• I calculated the percentage of sales increase on the whole store, not just on these products with competitors that were out of stock.
• This is an average on all our customers. Individual cases depend on many factors such as the industry or the country. Some stores saw absolutely zero benefit simply because they are in an industry where competitors are never out of stock.
As you can see, the more competitors they monitored the most effective this approach. Why? Because those who only monitor their main competitors may raise their price while overlooking small players that might still be in stock at a low price. So make sure to only use this technique if you follow most of your competitors or ideally all of them.
This might seem like a small gain but every extra dollar above margin is a dollar of profit, not just a dollar of income. No one should miss on an opportunity to raise their price.
Secret 5 — Spying on your competitors sales
This one usually gets people really excited... It doesn't work with every store but when it does it provides very valuable information. Let's say the page of a product has some information about the inventory of that product in the store, either as "Hurry, only 3 left in stock!" or as a hidden variable in the source code of the page. If I visit this website 4 hours later and the stock is now 2 I know this store sold one and I also know how long it took them to sell one.
This is the basic concept behind our algorithm that calculates the sales of each product of your competitors. They are expressed in sales per week in your account (purple curve) and you can even export them in a spreadsheet.
Why is that important? Because you can target your advertising on these products you know sell the most before you even have your own data about them. You can even monitor products you don't carry just to see which ones are worth carrying.
Mistake #1 — Everyone spirals down to zero profit
“The simple inherit folly: but the prudent are crowned with knowledge.” Proverbs 14:18
Let us not be naive, your competitors are monitoring you too. If they don't do it automatically with some tools like ours, then they do it manually by visiting your website every day.
By far the most common mistake I see customers do is to put some repricing rules in their account like . If they do this with all their products it is only a matter of time before the competitors drop their price too, and pretty soon no one is making any profit. If they also use an automated repricing tool their store will be updated within a couple of hours, but even if they do it manually they will eventually feel the pressure of you trying to squeeze down everyone's margin and will be forced to react to it. This is why some countries like the US and Canada have MAP policies (Minimum Advertised Price, enforced to retailers by some manufacturers). Legislators did not create MAP, fools did.
From my experience, business owners who are overly concerned about dropping their price are insecure. They are not sold on their own products, and if they aren't they should not expect anyone else to be either. A good pricing strategy starts in the psychology of the owner. If they truly believe in the value of their products they see their selling as a moral duty and feel no guilt pricing them right at the market value.
SOLUTION: At the exception of special cases, don't set up the repricing rules in your account to beat your competitors. Set them up to align with them and beat them with more clever benefits such as:
• Free and faster shipping on everything
• Discount coupon for the next purchase. This is brilliant for two reasons, first because it is very similar to being cheaper but without the downside of forcing others to drop their price too, and second because this increases customer loyalty which reduces customer acquisition costs. There is a strong loss aversion effect when a customer with a coupon in hand considers ordering from another store.
• Creative win/win ideas that gives you an edge, like a free book on their topic of purchase which you got for free to promote the author.
Mistake #2 — Overusing alerts
I saw many accounts of customers that have their price alerts set up in a way that makes our software send them 10 emails a day, sometimes even more. I don't know how they still find the time to run the rest of their business affairs but this seems to defeat the purpose of using a software in the first place, which is leverage. There might be a few exceptions but in most cases this is a mistake.
SOLUTION: Either configure the alerts to be sent when it really matters or set up a clever repricing so you can disable the alerts completely.
Mistake #3 — Not investing the initial time to set up the monitoring properly
The whole point of price monitoring on the long run is to both save time and increase cash-flow. Many people however won't invest the initial time setting up their store and their account to take full advantage of this. The excuse our support team hear the most is "I don't have time for that right now!". But when will be the right time to sharpen the saw? Probably before starting to cut any wood. The difference between winners and losers is that losers react when winners anticipate. In other words, winners think big and long term while losers are just busy handling today's sales.
SOLUTION: Give up instant gratification. Be a long-term thinker and spend the initial time to set up your account properly and put your store on the path to success.
Bonus Mistake #4
Not trying our Free Trial :) (no credit card needed)
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Price monitoring software and repricing API