Price intelligence is the ability to track, monitor, and analyze competitor and market pricing data to make educated pricing decisions for your business. With that pricing intelligence comes plenty of ways to slice and dice it, making it a flexible and customizable data set for brands and retailers.
So, we wanted to learn more about how to use price intelligence. We asked several brands and retailers their thoughts on the subject: Keep reading to learn their seven simple ways to use price intelligence, intelligently.
1. Reprice with Confidence
Let’s get the obvious one out of the way first. Price intelligence is a must-have if you ever want to reprice across your assortment. Pricing data shows your position in the market relative to your competitors and it can highlight your prices throughout your reseller network.
This data presents opportunities for price changes to increase sales. Moreover, pairing intelligence with repricing gives you the confidence to make those important decisions. This data can quickly identify which repricing decisions have been successful or not, too.
“We’re cognizant of pricing. Sometimes those decisions can end up hurting the business.”
2. Provide Context to Market Share
Market share—the percentage of a market controlled by a specific brand or retailer—is an important metric in retail. However, market share alone doesn’t tell the full story. This is where price intelligence helps, as it provides context to market share.
For example, you lose market share and need to know why. Price intelligence can highlight a price change from your top competitor or pinpoint a promotion they recently ran. They could then beat you on price, and that’s why shoppers have shifted to them over you.
“If we lost share to our competitor, we need to understand why and what they did that month,” a leading toy manufacturer explained to Wiser. “Did they run a media campaign? Did they run price promotions? Did they launch a new product? What was the driver of them winning share and how do we essentially correct for that going forward?”
3. Define Average Unit Retail (AUR)
Average unit retail, or AUR, is the average dollar amount spent on a specific item. It is also a metric that works nicely when paired with price intelligence.
AUR itself is calculated by dividing total sales in dollars by the number of items sold. Therefore, brands and retailers use pricing data along with transaction data to define AUR for their businesses. The issue at hand is how much a customer is willing to spend. In many cases, they have fixed budgets—and how expensive your products are will dictate how many units they buy. Increasing prices doesn’t mean they buy more units. Typically, the opposite.
“If your AUR goes up and the customer is still only willing to spend $100 with you, they’re either buying two units or three, and that’s a function of your AUR,” a women’s apparel retailer explained. “We’re cognizant of pricing. Sometimes those decisions can end up hurting the business.”
4. Better Understand Market Positioning
How are you priced compared to your competitors? This is market positioning. You could be priced higher, lower, or equal to, and all options could be beneficial depending on your assortment, brand reputation, and other factors.
Therefore, it’s important to use price intelligence to better understand market positioning. This data will quickly show you where you stand in the market. Best of all, it will demonstrate whether you’re priced accurately given all those contextual factors. You don’t want to be priced like a premium brand if you’re really a discount brand or vice versa.
“The goal was to understand whether we were priced fairly relative to our competitors,” the toy manufacturer added. “We would also look at competitor pricing in-store vs. their average retail price to understand what level of discount they offered compared to us.”
5. Measure Price Elasticity
Price elasticity is how a price change will impact the demand for a specific product. Naturally, it’s also a great metric to track alongside price intelligence.
For starters, intelligence will provide a key data point to calculate price elasticity. You can see prices across your assortment at specific times and compare those to consumer demand. In addition, you can also use price intelligence to watch for prices that could negatively impact elastic products.
“Our customers won’t always tell us when they’re going to discount an item or have some sort of pricing approach,” an apparel manufacturer told Wiser. “Usually we have to see the numbers where your margin drops or your AUR drops off a bit.”
“We do measure performance based on overall productivity of our individual SKUs.”
6. Determine SKU Profitability
How profitable are specific SKUs? A category? Your entire assortment? Many brands and retailers use price intelligence to determine SKU profitability, and then take that data to complete more in-depth calculations.
For instance, price intelligence is needed to determine overall profitability. Plus, it can be segmented by region, retailer, category, or something more to better customize the data. This will help quickly identify profitability for specific SKUs.
“We look at the dollars per store per week,” according to a global consumer products brand. “We look at units per store per week to see how we’re trending. This is the best comparison when we look at various assortments across the board, as we start to do assortment optimization or SKU rationalization. We do measure performance based on overall productivity of our individual SKUs.”
7. Develop New Products
Lastly, price intelligence is a core component of the product development lifecycle. Pricing teams must work closely with product development and marketing teams to ensure that any new product is positioned correctly in the current market. This is where competitive price intelligence comes in.
Pricing intel also helps set manufacturing budgets so that margins can be maintained once the product hits the market. There’s little profit to be had if the costs of development will far outweigh the potential revenue.
“The upstream marketing team that developed our products would use the competitive pricing information as they were building out their product lines to ensure that they were building a line that was competitive from a price value standpoint in the marketplace,” the toy manufacturer concluded. “Or, if we’re entering a new category, we would use this to understand the category norms and what acceptable price points were for a particular category.”
These are just seven ways that brands and retailers can use price intelligence. There are plenty more out there, but, as we repeatedly heard, data informs overall strategy. Whether you have a revenue plan, a new product launch, a promotion to measure, or more: good data is hard to beat.