“Competitive intelligence” is one of the cooler terms when it comes to ecommerce. If you’re anything like us, you might hear it and think of Jeopardy! or The Price is Right or a bright-eyed troop of spelling bee contestants lined up to dash their parents’ hopes and dreams. In the business world, what it really means is defining, gathering, and analyzing intelligence about products, customers and competitors—especially pricing info.
Over the past few weeks, we’ve helped you develop a pricing strategy for your store. We started by asking and answering the age-old question, “How much are your products worth?” before moving on to weighing the pros and cons of five pricing strategies. Today, we’re wrapping up the series by chatting with Burc Tanir, co-founder of Prisync, a competitive intelligence tool.
Built for ecommerce companies of all sizes, and used in more than 40 countries around the world, Prisync helps merchants track their own prices against those of their competitors. For a monthly fee, the tool automatically monitors competitors’ price changes and sends regular email updates so that merchants can update their prices accordingly.
Curious to hear from a pricing expert, we chatted with Burc about the benefits of competitive intelligence, as well as how to price competitively while staying within your margins.
What are the steps a merchant needs to take to get set up with Prisync?
At the beginning, we have a little onboarding. First, they need to decide on their competitive assortment—that’s the list of products they want to monitor versus their competitors. We need the product name, SKU code, brand and category information for that product, and the specific product link from their website. Then they will need to map their competitors’ links to those same products. And then, when we have a competitive map of the links in the market, the merchant can prepare a CSV file, and they can input that into their Prisync dashboard.
After that’s done, things get fully automated. What our technology does—without any limitations of currencies, product types, verticals, ecommerce content management systems—is we can automatically scrape the pricing information from those links. Then we compare our clients’ prices versus their competitors’ prices. We update prices four times a day.
As an ecommerce merchant, what’s so important about competitive intelligence?
It’s important because optimum pricing is not necessarily the minimum price. Having competitive intelligence really helps you grasp that idea. For example, if you’re not using a competitive pricing tool, it’s easy to panic when you suddenly notice your competitors dropping their prices. You might feel kind of weak. You might want to react out of fear of losing the market.
But having a competitive pricing tool on board, you feel more powerful because you can see more pricing opportunities. On one hand, you may be able to decrease your prices and offer more competitive prices. On the opposite side, you can also lift your margins by increasing your prices when you observe that your prices are really low compared to your competitors.
On average, our merchants are able to lift their profit margins by around 21 percent, not necessarily only by dropping their prices but also by smartly increasing them. This is very hard to do without competitive intelligence. I don’t think anyone would attempt to increase their prices without knowing what their competitors are doing.
Once a merchant has this intelligence, what should they be looking to do next?
We always tell our clients to make sure they have a solid cost understanding. Business is all about profitability. It’s not just making sales, making revenue, keeping clients happy. You should always be aiming for profit. And to aim for profit, you should be really, really aware of costs. In ecommerce, cost doesn’t only mean the unit shipping cost or supply cost that you agree to with the supplier. It also needs to contain the overhead costs of employees, software, etc.
Once overhead costs are gathered and applied to the overall product cost, we encourage our clients to include unit costs as a column in their Excel file so they can compare their costs versus competitors’ prices. That way, they can see whether they can go below a certain number—the cost of the product—or not. We recommend to clients to check both their costs and the competitive prices, and then finding a sweet spot in between that will guarantee the competitive price but also profitability.
Is there a danger of merchants paying too much attention to their competitors’ prices?
That’s a good question. It depends on your definition of “too much.” I always believe in the power of intelligence, because when you have intelligence, you can make sure that you’re never really in panic. That means you’re not suddenly spending hours on a crisis.
With an intelligence tool, you might spend 15 or 30 minutes per day thinking about competitors’ prices, whereas a company that doesn’t use a competitive intelligence tool might think they’re not spending any time at all on their competitive pricing strategies. But because of this constant crisis mode of trying to compete on price, they end up sacrificing much more than that.
Are there industries or verticals where competitive intelligence is especially important?
We’ve seen some interesting traction in pet food recently. We serve pet food retailers in more than 10 countries. One of my friends who’s really into that market told me that since pet food is consumed by animals, and animals don’t really have a way of giving feedback, consumers basically just focus on price. They don’t look at quality or colour or anything like that, since their animals will eat anything. And for that reason the price competition in pet food is really high.
Another interesting one, maybe it’s a coincidence, is we have many sex toy ecommerce companies among our clients. They’re also from all around the world—Singapore, Switzerland, Sweden. And then in addition to these “unexpected” markets, we obviously have mom and baby products, consumer electronics, and all those major ecommerce verticals out there.
Is it safe to say that Prisync wouldn’t work quite as well for one-of-a-kind products?
It makes more sense for branded retailers to use Prisync, because it’s harder to compare yourself or compete at a price level when you’re crafting and supplying a genuinely unique product. We have some clients who are doing that—we have clients selling handmade carpets, for example, and they obviously have competitors, so they use Prisync. But in general we see much more value to our customers who are retailing in conventional retail segments.
As someone who spends a lot of time looking at stores and hearing from merchants, do you have any general advice for ecommerce merchants outside of pricing?
Something I’ve been reading about a lot lately is the power of images. Day by day, I see a lot of ecommerce companies popping up that really focus on beautiful product images, and these convert much higher than your typical dull images. Product descriptions are another major and underrated focus area for ecommerce. In short, I would say content is very important. You should obviously focus on marketing, distribution, customer satisfaction, and so on, but the beauty of the website is the beauty of the store.
Are there any general ecommerce trends you’re watching with special interest?
I’m seeing a lot of these new personalization and customization technologies popping up. These are really proven technologies that can lift sales and revenues for ecommerce companies. Obviously there’s mobile, too. Everyone is talking about that, so it’s hard to ignore.
At the moment, we’re really laser-focused on pricing. Long-term, we don’t want to be limited to competitive pricing. We want to be the smartest pricing engine out there, something that can replace a pricing department or pricing specialist in an ecommerce company. We want to let companies price their products automatically by taking into consideration their competitive landscape, inventory levels, supply costs—all these factors that affect consumer behaviour—which would maximize the revenue and optimize the profit margins of the company. It’s a long journey, but right now we’re focused on building a really beautiful product.
To learn more about Prisync, head to www.prisync.com