As Black Friday and Cyber Monday (BFCM) approach, businesses around the world are gearing up for one of the most significant shopping events of the year. While there are many aspects to consider in preparing for BFCM, one of the most critical steps is crafting a successful pricing strategy.
Part 1 of this ten-part series introduced the tooling required to set yourself up for pricing success. Part 2, addressed the importance assessing your current competitor price position, and making sure that reality is lined up with expectation so you have a solid foundation from which to run your pricing strategy during BFCM. Part 3 covered the importance of Google Shopping visibility for ensuring you have strong conversion rates (or conversion of any kind!) to your website. Now it's the turn of Part 4, which takes you through the metrics that should be used to decide what competitor pricing to follow during BFCM and what can be ignored.
Competitor Pricing Metrics
- Identify Competitors: Begin by identifying competitors in your industry who offer products or services similar to yours. This means looking for businesses with overlapping product categories or services. 60% of consumers compare prices, so it's important you are comparing your prices against the biggest sample of products.
- Use Tools: Utilise pricing analysis tools like BlackCurve to rank your competitors based on the percentage of product overlap. These tools can help automate and streamline this process.
- Mean and Mode Positions: Once you have your list, calculate the mean and mode positions of your competitors. Focus on competitors that are above or closest to these positions as they should be your primary benchmarking targets during BFCM.
- Statistically Insignificant Overlap: If you find competitors with a statistically insignificant product overlap, consider excluding them from your BFCM pricing strategy. They might not have significant stock levels or relevance during the event.
- Ideal Customer Demographic: Understand your ideal customer demographic. Consider factors like age, gender, interests, and preferences.
- Competitors with Similar Audiences: Identify competitors targeting the same or very similar customer segments. These competitors are more relevant for benchmarking during BFCM as their customers are more likely to compare your offerings. Two retailers may be selling the same high-performance coat for example. If one eCommerce company focuses on Yachting, and another is a more general outdoor company, how likely is it that these two companies will be attracting the same audience to their website?
- Product Relevance: Ensure that the products or services offered by your competitors align closely with what your target audience is looking for.
- Assess Your Business's Geographic Reach: Understand the geographic areas your business serves, whether it's local, regional, national, or global. 63% of shoppers prefer to shop local, so if your online customer base is local too, make sure you're mainly considering local businesses to benchmark your prices against.
- Geographic Relevance: Prioritize competitors operating in the same regions or markets as your business. They may have similar regional pricing dynamics and can have a more direct impact on your BFCM pricing strategy.
- Local Competitors: If you have a strong local presence or if customers are more likely to compare you with other regional eCommerce businesses, make these companies a priority.
- Market Leader Analysis: Evaluate the market share of competitors within your industry. Larger competitors or market leaders often have more influence. Research by Statista indicated that market leaders account for 45% of total BFCM sales, therefore it makes sense to use these are your benchmark.
- Impact on Customer Expectations: Recognize that market leaders can significantly affect customer expectations and behavior during BFCM. Their promotions and pricing strategies can set the tone for the entire market.
- Competitive Response: Consider offering similar deals, even if not on the same products, to compete effectively with market leaders.
- Analyze Pricing Models: Examine the pricing models and strategies of potential competitors. Determine whether they follow value-based pricing, cost-plus pricing, dynamic pricing, or other models. Pricing tools such as BlackCurve will flag predicted pricing models being undertaken by competitors. It is good to understand before BFCM who for example is using dynamic pricing software. If you don't have the equivalent tooling in place, it will be difficult to keep up during the promotional period, so in this case, you may wish to ignore said competitors, or rather, focus on your key selling lines for benchmarking purposes.
- Alignment: Focus on competitors with pricing strategies that align with yours. If a competitor rarely changes prices, it's likely they won't be dynamic during BFCM and may not be a significant factor to consider in your pricing strategy.
- Historical Data: Analyze historical promotional practices of competitors, particularly during previous BFCM events. Identify those known for offering significant discounts or promotions.
- Trendsetters: These businesses are worth monitoring as they may set pricing trends during BFCM. Consider benchmarking against them for your own promotions.
Customer Reviews and Ratings
- Online Reputation: Consider the online reputation of competitors based on customer feedback, reviews, and ratings. A study by Trustpilot revealed that businesses with an average rating of 4.5 stars or higher experience a 30% higher conversion rate during BFCM compared to those with lower ratings. Again, these are the competitors that you need to benchmark against.
- Trust and Decision-Making: Competitors with a strong online reputation are likely to have a more significant influence on consumer trust and decision-making during BFCM. This can impact how customers perceive your pricing and deals compared to competitors.
In summary, a detailed competitor analysis is vital for crafting a successful BFCM pricing strategy. By meticulously considering these competitor pricing metrics, you can make informed competitor pricing decisions that maximize your competitiveness and appeal to customers during the Black Friday and Cyber Monday shopping frenzy. Pricing decisions to follow a competitor price move can be data led, rather than blindly following everyone's price. Regularly update and refine your competitor list as market conditions change to stay ahead in this highly competitive landscape.