What is pricing intelligence?
Pricing intelligence is a way to make intelligent pricing choices by measuring, tracking, and analyzing how the market works and how competitors’ prices change. Price information can come from looking at how other companies price their goods, what customers want, and scraping the web.
It is a type of competitive intelligence that aims to help companies figure out how to deal with the complicated price situations in the market to make the most money and keep customers interested.
When companies gather pricing intelligence properly, they can use it to do the following:
- Optimize the current pricing strategy
- Identify new revenue opportunities
- Vertically differentiate their product
- Improve in-store shopping experiences
- Boost pay-per-click conversions
- Adopt competitive pricing strategies
- Implement value-based pricing
Since “intelligence” means “data,” price intelligence depends on getting different kinds of information at any time. Businesses do this with the help of current data mining methods such as web scraping and machine learning.
Synonyms
- Competitive pricing intelligence
- Competitive price monitoring
- E-commerce pricing intelligence
- Online pricing intelligence
Why it’s essential to have pricing intelligence
Price elasticity is very different between products and customer groups in both B2B and B2C. In this way, price optimization is something that every business has to do on its own, and it takes a deep understanding of the data that supports their product (and only that product).
Watching the Prices
Price clarity has always been important in business-to-consumer deals, and it’s quickly becoming important for business-to-business deals. A 2021 McKinsey poll found that 83% of B2B buyers cared more about transparent pricing than brand image. A recent Deloitte poll found that almost 20% of those people have switched to a competitor because of bad pricing.
It’s not always possible to give customers accurate pricing information upfront (for example, when the product is complicated). Still, many businesses have become more open about setting their prices.
Because buyers can find so much information online, it’s getting easier and easier to decide what to buy based on price. They could be looking into a business’s product at any time, which shows how important it is for companies to keep an eye on their market and keep prices competitive, sometimes even up to the minute.
Compare Prices of Competitors
Price intelligence is becoming increasingly critical because rivals are becoming more aggressive. It’s also getting easier to be smart about pricing because any company can access a lot of data with the right tools.
While competitive pricing isn’t the only thing that matters, it is essential to setting prices. Businesses can correctly compare their performance to the market by monitoring their competitors’ prices. They can take action, such as lowering or raising prices if necessary.
How to Understand Perceived Value
It depends on the customer’s needs and situation as to what amount of money they are willing to pay for a business’s goods.
Businesses can get a better idea of their customers’ “perceived value” by looking at the features of their product and how much it costs on the market right now. With this information, they can set prices that meet customer needs and differentiate themselves from competitors.
Automation for Repricing
Any dynamic pricing plan needs to be based on pricing intelligence. It lets businesses set prices instantly based on what their competitors are charging, the state of the market, or several other factors, all while keeping their profit margins the same.
Large online retailers like Walmart and Amazon, whose prices change 50,000 times a month and every ten seconds, respectively, are excellent examples of this. They often use their price intelligence software and machine learning algorithms to ensure they can best follow any market trend in almost real time.
How does software that finds prices work?
A price intelligence tool is needed to collect and examine data spread across many sources and in different formats. There are usually five steps in the process of price intelligence software:
The discovery
The software finds product pages on rival websites during this first step. It crawls and scans these websites to find helpful information about the goods being compared. This information can include names, descriptions, pictures, prices on the market, and other ways to identify the object.
It pulls data from other places, like ERP systems or point-of-sale (POS) systems, from the backend.
Picking out
Once the product pages have been crawled or scanned, the software uses algorithms (or sometimes human intelligence) to check if the goods are an exact match or if they are similar. This process ensures that comparisons between goods on different websites are only helpful and correct.
Companies can correctly match products, pricing information, sentiment, and demand using several methods, such as text analysis, image recognition, and machine learning algorithms.
Getting out
The software gets important data from competitor websites, internal databases, or online sources after finding similar or matched goods. This includes the item’s price, shipping information, stock levels, and any available special deals. To get this data, people often use web scraping or APIs.
Measurable Data Quality
After the data is gathered, it is put into a computer and regularly checked to ensure it is correct. Price intelligence software ensures that the data it collects is correct and up-to-date since outdated or outdated data can cause bad pricing choices. Systems that constantly check, validate, and clean the data maintain the data quality.
Reading reports and data
In the last step, the gathered data is turned into insights that can be used. Price intelligence software usually includes reporting and analytics tools that help users see the data and figure out patterns, trends, and possibilities.
These insights are called price intelligence because they help make strategic pricing decisions, like changing to competitive pricing strategies or making personalized deals for certain groups of customers.
Why using pricing intelligence is a good idea.
Companies that use pricing intelligence have access to more and better data than companies that don’t. This lets them figure out what prices work best in their markets. This has real benefits, such as:
- More profits because prices are more accurate
- More loyal customers because of competitive prices and better deals
- Possible revenue growth in the event of a price increase or better-matched pricing model
- Better market visibility
- Lower price-related risks
- Faster feedback loops for faster business decisions
- Less manual work through pricing automation
Pricing intelligence helps sellers set better prices for their goods to increase sales, whether that means raising, lowering, or matching market prices. Customers like it when prices align with what they want and need.
Use Cases for Pricing Intelligence
Pricing information can help almost every industry in some way. Large businesses use AI-driven pricing analytics engines and data science tools to get the most out of their pricing plans. Small and medium-sized businesses, on the other hand, can start with simple scraping and reporting tools.
Pricing intelligence is often used for things like:
- Regularly checking out rivals’ prices and deals
- Finding new market opportunities or threats
- Doing price audits to make sure prices are correct and consistent across all channels
- Figuring out how customers act by keeping track of things like sales conversions, average order value, and so on.
- Making sure that local rules about prices are followed
- Knowing price volatility to figure out when, where, and how much to change prices;
- Making pricing models that change based on competitor prices or user groups;
- Using automated repricing based on market conditions;
Now, let’s look at how that might happen:
1: B2B SaaS
Let’s say a B2B SaaS company is expanding its unique product line to meet the needs of more than one market. They want to start charging different amounts for different services, but they’re unsure if they should add extra features and charge more for them or make separate services for each group.
They look at their competitors’ prices and compare their goods to those of their competitors using software for pricing intelligence. They also look at how customers act and feel about their goods, which helps them determine how much people are willing to pay.
Ultimately, they figured out that the price difference between them and their competitors was at the premium level, so they added a premium tier. Because they know what their customers want, they offer deals for yearly subscriptions to get more sales and a higher annual revenue rate (ARR).
2: Direct-to-consumer (DTC) Online Shopping
An online store sells a product that people want in a market that is already full. The price should be based on people’s willingness to pay since the market is transparent.
They use price intelligence software to look through competitor websites and high-volume customers like Amazon to find the best-selling items and pair them with their own. They look at shipping costs, stock levels, discounts, and prices to find the best price for their products.
To get a better idea of the small amounts, they then use analytics tools to make reports that show how customers react to slightly different price points.
3: Being friendly
A hotel company in a big city relies on up-to-the-minute pricing to ensure that its rates reflect how the market is changing. However, the owner doesn’t have time to watch all the significant events coming up or predict the weather to figure out what people want.
With pricing intelligence software, they can check the prices of nearby hotels and online travel agencies (OTAs) daily. Then, they use real-time pricing (RTP) tools to change their prices based on demand, occupancy rate, time of year, and events in the area.
How to Get the Most Out of Price Intelligence to Make More Money
Pricing information benefits businesses that want to compete, but it only works if done correctly.
Find Out Who Your Rivals Are
Find the companies in your market group that are competing for your buyers’ attention (and money). These do not have to be straight rivals; they could be suppliers, vendors, stores, or other options. For example, Airbnb is a rival to hotel chains because it lets people stay who might have used the services of a hotel chain otherwise.
To find the companies that compete with yours, ask yourself these questions:
- What do people buy instead of our service or product?
- When they decide what to buy, what do they compare us to?
- Where do they look for better offers, deals, and sales?
- What other goods or services fall into the same group as ours?
Site and search engine details are also helpful to look at. Some businesses that are taking your buyers’ search interest may surprise you.
Check the prices and deals of your competitors.
Find out more about the market by looking at your top rivals’ products’ prices, deals, and offers. This will help you understand how they set their prices and any changes they make to their products.
To determine how your rivals are trying to get people to buy, look at their loss leaders, top sellers, and bulk discounts.
Adding human intelligence to this step can help you find secret trends, especially if your customers aren’t telling you how much their products cost. You can learn valuable things from interviews, polls, and “mystery shopping” that you might not even be able to see on the back end of a competitor’s website.
Look at the pricing strategy.
Now that you have more information, look closely at how your rivals price their goods and services to find patterns.
Are they setting different prices for different groups of people based on where they live? Do they give bonuses or discounts for buying in bulk?
Why wouldn’t I charge the same amount for my goods or services?
It’s also important to look at how customers act. Competitor price matching isn’t always the best thing to do, especially if people are ready to pay more for a product or service that meets their specific needs.
Use software for pricing intelligence.
Once you know how you want to work, get software or an app to help you mine data without doing as much by hand.
With artificial intelligence (AI) and machine learning (ML) algorithms, these tools are meant to make price decisions faster and easier. That way, you can quickly and correctly set prices for your products while considering the market, customers’ feelings, and what your competitors are doing.
Add CPQ to the mix.
There is no such thing as “pricing intelligence” with CPQ software, but it is still a valuable tool for two reasons:
- It’s an essential source of information. CPQ’s product, sales, and customer data lets you see what customers want and how they feel as they appear on the sales floor. It also helps you stay organized. CPQ software organizes and keeps track of your pricing, discounts, product configuration, and availability information quickly and easily. It also ensures that these details are included in your contracts, quotes, and bills.
- Advanced CPQ platforms also have pricing engines that AI runs. These engines offer the best prices for each product or service without going through the whole pricing intelligence process.
