Mining for data is a great way to get ahead of the competition. The task of mining can be a lot of work, but the effort is worthwhile. But what do you do with the information once it’s in your hands? You don’t want to be like a dog chasing its own tail, so determine a specific end goal to make the most of your data mining endeavors. Unlocking a goldmine of data can do wonders for your business, but it’s the way you use it that can help you differentiate your business from the competition.
There’s plenty you can do with the power of data, especially within the realm of competitive intelligence.
Competitive intelligence can give you a unique view of your product assortment in relation to your competitors’. It provides you with a venn diagram of sorts, representing where you and your competitors’ assortments overlap. It also shows where you stand out from the competition, and where the competition has unique products.
You can use this information to optimize your assortment and improve the selection of products you offer your shoppers. Gathering competitive intelligence in real-time can help you make informed decisions about the potential items you’re considering adding to your own assortment. If an item is very volatile within a best seller list, then you should be aware that an investment in that product may not be entirely worthwhile. Its volatility suggests its popularity is a mere trend that shouldn’t be taken too seriously long term.
Competitive Pricing Trends
It’s one thing to mine competitive prices, but it’s an entirely different ballgame to infer competitor pricing strategy based on it. Viewing competitor prices over time can give you an idea of how they price their products, and these trends help you improve your own pricing strategy in the future. If you know a competitor is constantly undercutting you, then you know they are competing on price. This means you have to step up your pricing game and might have to be more aggressive.
But if your sales trends remain the same after undercutting competitors, then you know you can charge a premium. This pricing power can help you stay competitive without sacrificing your profit margins. Without identifying these trends, you might simply undercut in an attempt to stay competitive. For the sake of your margins and overall profitability, don’t do that. You have the competitive data and coupled with your sales data, and you can use it to make educated and well-calculated price changes to stay competitive and profitable.
Conduct a SWOT Analysis
With the competitive data you’ve gathered, you can conduct a robust analysis of your business’ strengths, weaknesses, opportunities, and threats. You can then use that analysis to structure your ongoing strategy. In the example above, testing the impact of your price changes against your competitors shows you where you have pricing power and where you have to be more competitive. This helps you identify your strengths and weaknesses. If you have pricing power, you know that consumers view your brand in a more favorable light than your competitors.
At the same time, it helps you understand which competitors are becoming more viable threats to your business, and which strengths you can capitalize on (for example, identifying areas where you could actually raise prices). There will be competitors who will cut their prices when you do and hurt your sales numbers, and there will be competitors who will attempt to shrink your assortment gap. If they’re attempting to close the gap, you know they are trying to go toe-to-toe with you. Be aware of these “Heatseekers,” as they are looking to dethrone you.
An immediate result of data mining is automated repricing. Retailers can stay competitive by changing the prices of their products in real-time to combat heat seeking competitors. There are a couple of ways to reprice your products, both of which revolve around data. You can use competitor-based repricing (a type of rule-based repricing), or you can use dynamic pricing.
Competitor-based repricing uses competitor prices as benchmarks to base your own price changes on. It’s useful if you want to beat your competitors’ prices, but it’s relatively one-dimensional compared to a dynamic pricing solution.
Dynamic pricing takes a handful of metrics into account to determine the optimal price for driving revenue or profit growth. One of the main factors is competitor price. To build a successful dynamic pricing strategy, you need to build an intelligent demand estimation engine, fueled by competitor data. Adding in historical sales, elasticity, and factors for seasonality gives you the most comprehensible formula to find the right price at any given time.
Analysis and Testing
Comparing your sales data to competitor price changes is a great way to analyze the impact of each price change’s effect on your demand levels, map product price elasticity, and determine your pricing power. If your price goes up and shoppers choose you even though there are cheaper options available from other competitors, you know you can test higher prices in the future to maximize your margins while perfecting your pricing strategy. Why sacrifice profits if you know you can make more without impacting demand? It’s only possible with the insights gained from competitive data.
Competitor data is the most valuable asset a retailer can have in eCommerce. Using it to further optimize assortment and pricing strategies is one of the best ways to get ahead. Wiser can help you collect competitor data and utilize it in a way that will make your business the strongest it can be. To learn more about Wiser’s data mining process and services, sign up for a free demo below.
Contributing writer, Brian Smyth