How to increase traffic in your webshop using Price Monitoring
With the rapid growth of e-commerce, not only has increased the number of people buying online, but also the number of sellers. With a higher number of competitors, shops invest their time and resources to be more competitive and more visible on the online market. They search for new distribution channels, try paid promotions like Google Ads or Facebook Ads, or invest in SEO. Is there another way to increase your traffic?
What is Price Monitoring?
Price Monitoring is a service that gathers prices of chosen products from chosen websites and presents them in one place. Thanks to this, one can easily check the prices of competitors for any product they offer. It replaces manual verification, which with a huge number of products and channels would be impossible.
Having the data one can see where it is possible to increase prices because competitors are more expensive, or where to decrease the price because competitors are slightly cheaper.
Example 1- when you are the cheapest one
Let’s say you offer your product for $100 on a particular platform and you are the cheapest one. The next lowest offer is $120, so almost every person who looks for the cheapest offer comes to your store. However, it is highly possible that if you increase the price by $19.99, the traffic will still go to your website (as buyers filter by the cheapest retailer) but you will increase your margin by almost 20%.
Example 2- when you are slightly more expensive than the cheapest competitor
Let’s imagine another scenario where you are the second cheapest seller, selling for $1000 but the cheapest available offer is for $999. In such a case, it will be wise to slightly decrease the price to $998.99, sacrificing margin only by a bit, but significantly increases the probability of attracting buyers to your store.
Sounds easy, but how to find such opportunities?
Example of lowering the price to get to the top of a listing.
Source: delavo.com
How to find opportunities among your whole offer?
Doing this manually can be quite tricky. Of course one can check each product one by one but doing so even on one platform will be time-consuming. Currently, buyers usually check prices not only on one marketplace (e.g. Amazon), but also check the price on price comparison websites (like Google Shopping). So, to find opportunities to decrease or increase prices one should check competitors’ offers at least at a few websites, which would take hours if not days.
To solve this problem, price monitoring tools introduce specific filters where one can sort by such opportunities. You can either check which products are sold much cheaper than the rest of competitors on chosen websites (you can choose any number of them), or which products have competitors that need for example only 5% of price decrease to get to the top of the listing (this per cent can be adjusted by the user). Thanks to this, in one click, one can see all the products that can bring higher profits than they do at a moment.
Obviously, decreasing a price you should follow your pricing rules, keep the minimum margin and be quick enough to change prices before the market situation changes. Is there a way to adjust the price faster than by hand?
What is Dynamic Pricing?
To adjust prices automatically one can use a tool called Dynamic Pricing (or repricing). In this tool, one can set pricing rules e.g. to adjust prices of chosen products to be always in the top 3 cheapest retailers, or to always have the lowest price. It is also possible to set the minimum margin one wants to keep, so the final prices do not decrease too much. According to set rules and market situation, the tool calculates the most optimum price, suggests it to the user or sets it in the shop.
Thanks to this, you can always have prices generating the highest revenue and be one step ahead of your competitors.
How to use Price Monitoring to increase your traffic?
So far we have covered the basics of how price monitoring and dynamic pricing work. But how to use them in real life? Of course, it depends on your pricing strategy, but let’s cover two cases. The first one, applying the Everyday Low Prices strategy and the second is when one uses the High Low strategy (both strategies are described in detail in this article).
Everyday Low Prices (EDLP)
In one sentence, if you follow this strategy, the prices of all your products have to be competitive. There are no big promotions and your margin on all the products is rather low, but the revenue is high because of the scale.
Using this strategy, when you monitor prices, you should check prices for all your products, track their market position to attract new customers but also to maintain the standard and brand you have created. Customers have to know that you have low prices and that they don’t have to check every time if they can find products cheaper somewhere else.
High Low Strategy (HL)
Shops following the HL strategy offer products with prices higher than the market average. On the other hand, they have in their offer some extraordinary discounts, sometimes even “loss leaders” whose aim is to attract customers to come to their store. According to this strategy, when a consumer comes to buy the traffic generator, he/ she will buy other products as well, generating profit for the company.
With such a strategy, in price monitoring, one should check the prices of these traffic generators to make sure that their prices are attractive during the whole discount period.
With such promotions, dynamic pricing will be especially effective, as you can make sure that your offer will always be the cheapest one automatically.
Summary
To attract new customers to your shop, you do not always have to invest in paid traffic. You can bring new buyers by offering products with prices that will be tempting. These items can convince people to enter your website and make them buy your products. As they probably will buy something except these promoted items, your earnings will rise.
You can automate this process by keeping an eye on competitors with a price monitoring tool, and in case of any changes on the market, automatically adjust the price.
In fact, Price Monitoring doesn’t bring any new strategies but helps you to follow your price strategies in a better, more efficient, way. You can have a better overview of the market, enter new distribution channels and control the market in a better way.
Having pricing rules set in your dynamic pricing, you will be sure that you follow your pricing strategy, even if you don’t adjust prices on your own.
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The article was created in cooperation with Dealavo. Dealavo is a data-driven company specializing in delivering actionable e-commerce insights to brands and e-shops. They help their clients with pricing optimization, strengthening distribution chains and overall DPSM (Distribution, Pricing, Shelving, Merchandising) strategies. They serve their clients in 32 countries all over the world, cooperating with both multinational enterprises and local businesses.
