Welcome back to the second part of our comprehensive ten-part series on Black Friday and Cyber Monday (BFCM) pricing strategies. As a quick reminder, in part one, we emphasised the critical role that pricing plays during BFCM and recommended setting up a BlackCurve account to significantly enhance your ability to optimise your pricing strategy for these pivotal shopping events. Setting up an account will allow you to follow along with our recommendations at ease, and take the stress away from knowing if your pricing is in the right shape for BFCM.
In this article, we'll dive deep into the crucial step of assessing your market position before BFCM. Achieving a robust understanding of your market position is essential for fine-tuning your pricing strategy and maximising your success during this high-stakes shopping period.
A famous parable from the Bible teaches us to build our houses on rock and not sand, and this solid foundation from a pricing perspective is getting your market position in order across all your products before you make any more pricing plans for BFCM.
Why Assess Your Market Position?
Pricing is more than just setting a number; it's about positioning your products or services strategically within the market to achieve your business objectives. Before determining your pricing strategy for BFCM, you must thoroughly evaluate where your business stands in the competitive landscape. Here's why:
Did you know that products priced significantly higher than the market average can experience a sharp drop in click-through rates? In fact, BlackCurve Insights 2023 identified that products priced 50% or more above the market average are 71% less likely to be clicked on by potential customers.
Consumers are increasingly price-conscious during BFCM, with 67% of shoppers actively seeking discounts and deals. Being out of sync with the market can mean missing out on this substantial portion of the customer base.
Effective pricing aims to strike a balance between maximising profits and attracting customers. Data reveals that businesses that align their prices with the market average experience an average increase in sales volume of 26% during BFCM (BlackCurve Pricing Insights 2023).
On the flip side, pricing too low, especially in niche markets, can lead to a scenario where customers question the quality or authenticity of the product. This can lead to a reduced conversion rate, ultimately impacting profitability.
Pricing is a powerful signal to consumers. Assessing your market position allows you to align your pricing with the perception you want to convey. Research indicates that 75% of consumers consider price as an indicator of product quality (Retail Dive).
Striking the right balance in pricing can not only attract more customers but also reinforce your brand's image as a reliable and value-driven option.
Enhancing Your CPA with Improved Pricing
Studies in e-commerce have shown that optimising pricing across your entire product inventory, especially where you're too expensive, can result in an average 15% decrease in CPA during BFCM (BlackCurve Pricing Insights 2022).
By ensuring that your products are competitively priced, you can improve the efficiency of your advertising spend. When potential customers are more likely to click on your products due to favorable pricing, your cost of acquiring each customer decreases.
Understanding Market Segmentation with BlackCurve
BlackCurve simplifies this process by collecting competitor prices multiple times per day from Google Shopping and presenting the data in a Market Segmentation chart. This chart provides a count of the total number of products at 5% increments above or below the market average price. It can also be overlaid with additional filters to customise your analysis.
Identifying Market Position Groups
We recommend starting with Group 'A,' which highlights products that are priced 50% or more above the market average. In the chart, you'll notice products that are, for example, 95% more expensive than the market average. Even if your business is a market leader in terms of market share, being this far out on price can significantly impact your click-through rates. Consumers are less likely to click on products that are significantly more expensive, as highlighted earlier in this article, especially if they are readily available from multiple eCommerce sites, so it's crucial to address this pricing gap. You don't necessarily need to slash prices wholesale, but bringing these products closer to or slightly above the market average is essential to improve sales.
Addressing Group 'B' - The Cheapest Pricing Dilemma
Moving on to Group 'B,' you'll want to identify products where you are the cheapest in the market. While this might seem like a positive position, it can lead to customer skepticism. Imagine selling a niche or infrequently bought product, and you're 50% cheaper than your competitors. This might trigger doubt in the minds of potential customers: "Is it too good to be true?"
Additionally, selling at significantly lower prices than your competitors can erode your profit margins unnecessarily. While visibility might increase, it's essential to strike a balance between competitive pricing and maintaining the perception of quality and trustworthiness. At the very least, tighten your price position as close as possible to the next lowest competitor price. You win no benefit in terms of search visibility by being significantly cheaper.
Groups 'C' and 'D' - Fine-Tuning Your Prices
Once you have adjusted group A and B, effectively removing them, you should be left with Groups 'C' and 'D'. This is now your playground for BFCM.
Stay tuned for the next installment in our series, where we'll explore more strategies to fine-tune your pricing for Black Friday and Cyber Monday. Remember, a solid market position is the foundation for a successful BFCM campaign.