With the market becoming increasingly competitive, competitive price benchmarking should be a practice implemented by most businesses. Competitive pricing benchmarking involves assessing, adjusting and comparing key commerce activities, trends, promotions, competitors and suppliers pricing. This practice allows a business to determine prices in order to achieve greater value.
With the introduction of the internet, the number of e-commerce sites has increased substantially, and nowadays, most customers shop online. Pricing is one of the most critical factors behind consumer purchasing decisions in this lucrative environment. According to studies, online shoppers visit at least three websites before making a final decision. This shows clearly that price comparisons are significant factors that influence online customers buying journeys.
Read on to find out further why competitive price benchmarking is important for businesses.
Faster response time
Adopting a competitive price benchmarking strategy can help a business grow – in the short and long term. Typically, the success of this practice becomes more apparent in the short term. For example, after running a benchmarking analysis, you may find that a competitor has launched a new promotion; your business can react and respond to this by launching your own promotion to compete.
This quick turn-around response time allows your business to stay competitive and not lose any market share. On the other hand, evaluating the long-term effects helps the company’s owner to consider the overall trend of pricing and their place in the industry.
Competitive price benchmarking can make the decision making for price changes more efficient. As your decisions will be backed up by results generated from the benchmarking, it should be easier to justify any price drops or increases.
Investing in a price comparison tool or outsourcing the benchmarking to a specialist is recommended to make the process more efficient. They will be able to give you access to data and information that your competitors would typically find difficult and have to gather manually.
The tool provides you with invaluable insight into your competitors, as well as monitoring the range of products/services and prices of your competitor over time. You can track, manage and make price changes accordingly with this tool. Also, using a tool or a specialist leaves less room for error when conducting the benchmarking, which can show you incorrect data that might lead you to make a wrong decision.
Prevent market loss
Competitive pricing benchmarking enables the firm to monitor competition and put preventions in place to avoid customer and market share loss. Decisions are essentially justified using existing data, and this can be an effective way to minimise risks.
By having costs the same as your competitors or offering it even cheaper, customers will be less likely to switch from your brand or choose products/services from your competitors over yours – helping you to retain your market share.
Improve profit margin
Through competitive price benchmarking, you may find that the best course of action will not always be lowering sale prices. Pricing in the middle of the range often drives sales just as well, compared to competitors, and does not have a significant impact on your bottom line.
Some instances might call for an assessment of the whole supply chain, and evaluating whether costs can be cut on the supplier side to balance out the decrease in price for consumers. Benchmarking allows you to outline both ends of the spectrum. Not only can your business improve their profit margin, at the same time, you can see how your business can be more price competitive, and also which suppliers are offering a better price.