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COMPETITIVE PRICING INTELLIGENCE:

NEW DEMANDS EMERGING FOR AN AGE OLD PRACTICE


The practice of collecting competitive pricing data is as old as retail itself.
While some new tactics have been introduced over time, never in the
history of retail have we experienced such rapid pace of change as we have
witnessed since the onset of online commerce.
Driven by fundamental changes in the dynamics of retail, competitive
pricing intelligence is now

More important: Immediate visibility to pricing information

encourages aggressive price shopping, with showrooming and


webrooming becoming the new normal. With the competition just
a click away, retailers must win the battle for the customers heart
and wallet with each and every purchase.

More complex: At the same time, online commerce has

dramatically increased the magnitude of competitive pricing data,


as the competition is no longer just the store down the road.

More time-sensitive: Pricing volatility has increased to new levels,


as changing prices online is much easier and faster than changing
them at the store.

These three fundamental shifts are calling for a new approach to retail
pricing practices, an approach that can address the growing importance,
complexity, and volatility of competitive pricing.
This eBook reveals how successful retailers stay ahead of the
competition by using competitive intelligence and pricing data to
maximize margins and profits.

Copyright 2015

TURN COMPETITIVE DATA INTO SMART PRICING DECISIONS


The use of competitive pricing data is quickly becoming an industry staple.
According to a 2014 RSR Research study1, over 58% of the retailers surveyed are
either currently using competitive price data, or are in the process of doing so.
With more products, more sales channels, and more dynamic pricing, the amount
of competitive pricing data available to retailers can be staggering. Just 10,000
products with 10 competitors in 5 different channels can create over 5 million data
points in one month.
Big data brings big opportunities, but also big challenges.
The key to success is turning competitive pricing data into smart operational
decisions that best position your prices against the competition in every
category, at every sales channel, throughout the product lifecycle.
Trying to make sense of such vast amounts of data without the right tools is a
recipe for failure. To turn competitive pricing data into actionable insight, you need
a tool that allows you to visualize the data, slice and dice it by competitor, product,
and channel, assess the impact of competitors prices on your sales, and evaluate
multiple what-if scenarios for your competitive response.

Big data brings


big opportunities, but
also big challenges.
RSR Research, The Pricing Paradox, April 2014

Copyright 2015

COMBINE INTERNAL AND EXTERNAL DATA TO GAIN BETTER


INSIGHT
While competitive pricing information is a key ingredient, merely tracking
competitors price movements will not help you make the right decisions. The real
power of competitive pricing data is realized when this information is laid against
your internal data.

Cost data
Product cost information is fundamental, allowing you to understand what your
margins are for each product and where you need to take action to maximize profit
opportunities.

Sales data
Cross referencing competitive pricing information with sales data allows you to
understand the real impact of competitor prices on your business. Armed with this
information, you can better pre-empt and respond to the moves of the competitors
that really matter. It also allows you to identify low converting items that may
require more competitive pricing.

Inventory data
Keeping an eye on inventory levels and velocity allows you to adjust your pricing
decisions accordingly. It allows you to identify items that are performing below
expectations due to non-competitive prices. At the same time, you may be able to
raise prices and capture higher margins on products that are low on inventory and
hard to replenish.

Copyright 2015

SEGMENT YOUR PRODUCTS


With increasing product assortment and shorter product lifecycles in many categories, effective management of product assortment and pricing
is becoming more challenging than ever before.
Different products have different characteristics. They also impact your bottom line in very different ways.
Smart grouping of products is vital to effective assortment
and pricing decisions. It starts with segmentation by category
and brandnot too granular that you cannot see the forest from
the trees, and not too broad that you lose sight of important
opportunities.
Beyond the basics, you can use internal data to apply additional
segmentations that will help you achieve your desired business
outcomes.
For example, using your sales data allows you to focus your
attention on Key Value Items (KVI) that have the greatest impact on
your business.
Other useful ways to formulate data-driven decisions by
segmenting your products include:

Fast moving vs. long tail items. While high volume items

may have a greater impact on your revenues, slow moving


items and tail products may provide excellent opportunities
for margin optimization.

High vs. low inventory levels. Adjust prices to reduce

excess inventory, or capture higher margins when inventory


is low.

Seasonal vs. year-round items. Manage assortment and

pricing decisions according to the cyclical nature of seasonal


items.

Smart product segmentation and grouping helps you focus


on the key products that can drive the desired business
outcomes

Copyright 2015

MANAGE THE PRICE LIFECYCLE


Understanding the product lifecycle and applying the right pricing strategies at each stage is one of the qualities separating winners from
laggards. According to RSR Research2, retail winners are twice as likely to address end-to-end price lifecycle management compared to the
industrys laggards.
Each stage of the product lifecyclefrom introduction to growth, maturity, and declinebrings its unique pricing challenges and opportunities.
Each stage calls for different actions, requiring a different set of tools.

INTRODUCTION
Challenges and
opportunities

Selecting the right


assortment

GROWTH
Increasing sales and
market share

Initial pricing for your

MATURITY
Maximizing margins and
profits while retaining
market share

penetration strategy

DECLINE
Identifying end-of-life
products

Markdown

management

Questions you need


to answer

What new products are


the competitors selling?
At what price?

Where do you have noncompetitive prices that


provide opportunities to
grow revenues?

Which products are


priced too low? Do you
have opportunities to
raise margins?

Which products are


showing signs of
declining sales? How is
the competition pricing
these products?

Smarter decisions
you can make with
competitive insight

Set the right price to


match your strategy for
each product / category

Identify the products and


channels where you can
lower prices to capture
market share

Adjust prices on each


product at each channel
to maximize profits

Pinpoint the right timing


and pace for product
markdowns

2 RSR Research, The Pricing Paradox, April 2014

Copyright 2015

MASTER YOUR SALES CHANNELS


Further complicating matters is the proliferation of sales channels
and online marketplaces. A retailer may have one set of competitors
offline, a different set of competitors online, and yet another on
Amazon or Walmart.com.
Prices in these marketplaces can vary from those in the retailers
own channels, adding yet another level of complexity that can
challenge even the most sophisticated retailer: Who is the
competition in each of the channels? Which products should we sell
through each channel? What is the right pricing strategy for each?

Your eCommerce
Website

According to RSR Research3, 65% of retail winners are applying


multiple pricing strategies in response to channel proliferations, vs.
only 28% of retail laggards.
To effectively compete in todays multi-channel reality,
retailers must step up their game with new capabilities that
allow them to simultaneously track, analyze, and respond to
competitor prices across multiple channels, each requiring
its own competitive strategy.

One-stop tracking for all of your sales channels

Amazon is often the first place people go


to shop, so its important to know what
competitors are selling at there. With
Marketyze, we can now track prices on 65-to-70
percent of the products we carry. This includes
data from Amazon Marketplace competitors we
were not able to previously monitor.
Susan Palazzese, Former Executive Vice President of
eCommerce Marketing & Operations, ReStockIt.com

3 RSR Research, The Pricing Paradox, April 2014

Copyright 2015

KNOW WHO YOU REALLY COMPETE WITH


Knowing which competitors actually impact your sales for each product and category is paramount to a successful competitive pricing strategy.
Retailers tend to have a different set of competitors in each category, and sometimes even within the same category. For example, an office
supply retailer can have one set of competitors impacting sales for printers and another for printer ink.
Thats where competitive elasticity comes into play:
Price elasticity helps you understand how customers react to your price changes. Competitive elasticity gives you the ability to understand
at a product / category level how your sales are impacted by changes in each competitors price.
Correlating competitive pricing data with your own sales data (both online and offline data) gives you the insight you need to effectively adjust
your prices to meet volume and margin goals.

HIGH RELEVANCY/LOW IMPACT

HIGH RELEVANCY/HIGH IMPACT

React to events that impact your performance

LOW RELEVANCY/LOW IMPACT

LOW RELEVANCY/HIGH IMPACT

Copyright 2015

UNDERSTAND YOUR COMPETITORS PRICING TACTICS


Reacting to the competition is just the first step. To stay ahead of
the competition, you want to understand each competitors pricing
strategies and tactics.
What promotions do they run and when? How often do they update
their prices? Across how many products? Who is a leader and who is a
follower?
By gaining visibility into your competitors moves for each product,
category, and brand you can understand the level of volatility across
the competitive landscape and focus on the areas requiring the most
attention.
Armed with this knowledge, you can define your strategy for each
competitor. Who do you want to follow? Who should you preempt?
Ignore? When do you need to update your prices?
This information can get as granular as you need it to be, allowing you to
define specific strategies for each product category, each sales channel,
just for your KVIs, or any other combination.

Who do you want


to follow?

When do you need


to update
your prices?

Who should you


preempt? Ignore?

Copyright 2015

MARKET ANALYSIS:
Price volatility in office supplies
To understand how the top office supply retailers manage their prices, we looked at 1,462 office supplies products sold at Amazon, OfficeDepot,
Staples, and Walmart over the period of Jan 21st Feb 21st 2015.

Download the complete market report


with additional charts, analysis, and
insight

What have we learned?


Walmart has updated almost 85% of the
1,462 items and Amazon has updated
nearly 60%, while Staples and Office
Depot have updated prices for only a
little more than 10% of the assortment.

Increased
Prices

Decreased
Prices

Total Updates

Items Updated

%
Changed

Avg. Changes
per Item

officedepot.com

153

97

250

195

13.3%

1.3

Staples.com

221

192

413

173

11.7%

2.4

Walmart.com

1726

2565

4291

1237

84.6%

3.5

Amazon.com

1571

2086

3657

863

59.0%

4.2

Walmart has updated the prices of over

25% of the items on multiple occasions,


while Amazon has done the same for
10%-12% of the itemsboth significantly
more than Staples and Office Depot.

Although Walmart has updated prices on


the most items, Amazon has made the
most price changes per item.

Copyright 2015

MAKE THE MOST OUT OF YOUR PROMOTIONS


For better or worse, promotions play a big role in todays retail battleground.
Some categories are practically dominated by promotions, forcing all retailers to
play along.
Promotions are very costlyboth in terms of lost margins as well as advertising
dollars. Promotions are also short-lived. To capitalize on the opportunity, you
need to react quickly.
To make the most out of your promotions, you need pricing intelligence tools
that automatically map out the competitive landscape for your promotions,
allowing you to:

Focus on the right set of competitors for each promotional item.


Get a real-time snapshot of your position against each one of them.
Quickly correct any non-competitive or over-competitive prices to
improve volume while protecting your margins

Dramatically improve ROI for your campaigns.

Copyright 2015

IDENTIFY IMMEDIATE MARGIN AND REVENUE


OPPORTUNITIES
Rather than trying to get everything done at once, focus on the quick wins.
Based on the data that Marketyze has been analyzing over time, we can
say that, in most companies, 10-20% of base prices are significantly out
of line. Correcting the prices of these products can make a substantial
difference in bottom line results in a matter of weeks.
Your pricing analytics solution should clearly highlight areas where your
prices are too low resulting in lost margins, as well as items that may be
overpriced resulting in lower than expected revenues.

MARGIN OPPORTUNITIES

In most
companies,
10-20% of
base prices
are significantly
out of line

VOLUME OPPORTUNITIES

Easily idenify quick win margin and revenue opportunities

Copyright 2015

10

USE THE POWER OF AUTOMATION TO


OUTPACE THE COMPETITION
Once youve exhausted the low hanging fruit, the challenge is to maintain your competitive edge
with limited time and resources.
You cant expect your competition to stay still.
Trying to manage pricing effectively with spreadsheets is not going to cut it anymore. You just
cannot keep up with the pace of change for each product in any channel in any given time
period without the right tools.
Automating the collection of price intelligence and using advanced analytics to formulate the
best pricing strategies is a must-have for any retailer today.
Using innovative pricing analytics tools to automate pricing decisions is how winning retailers
improve their agility to take advantage of market opportunities.
Beyond the obvious benefits of saving time and reducing price miscalculations, automated
pricing rules enable retailers to accelerate the path from data to decision, capture additional
profits, and prevent margin and market share losses.
Here are just a few examples of how automated rules can help you ensure compliance with
your pricing policies and strategies:

Maintain your prices in sync with your competitors in each category (e.g., no more than
2% above or below the top 5 competitors).

Alert when a competitor launches a promotion for one of your KVIs.


Suspend promotion pricing when inventory levels dip below a certain threshold.
Easily define and manage your
pricing rules

Copyright 2015

Case in Point:

BEST BUY RAMPS UP SECONDARY MARKETS DIVISION


BACKGROUND:
The Best Buy Secondary Markets Division refurbishes and resells products that
were traded in, returned, or overstocked in stores. A key goal for the division is to
keep these products out of landfills and give them a second chance for use, said
Robert Biles, General Manager - Online Consumer Sales, Secondary Markets, Best
Buy.

CHALLENGES:
Pricing used electronics can be challenging because there are not always clear
benchmarks. Certain item may be older or have a unique condition, Biles noted.
Because the electronics business can be highly commoditized, a pennys difference
in pricing can have a significant impact on sales, according to Biles. However,
retailers always need to walk a fine line between providing compelling and
competitive pricing while also protecting profit margins.

Marketyze allows us to be
more automated and
up-to-the-minute, but also
dig in more and make sure
were protecting margins.
It has helped us build a
more profitable business
that also delivers more
value to the customer.

SOLUTION:
The Secondary Markets Division of Best Buy has experienced a surge in sales
and satisfaction since partnering with Marketyze, a pricing intelligence software
company, to keep a constant pulse on the electronics landscape.

Read the complete interview on


Retail Touchpoints:

Were leveraging a view of the entire competitive landscape, Biles explained.


One of the things that Marketyze can do for us is take that data, which is very far
reaching and can be a bit inconsistent, boil it down to make it easy to base our
pricing algorithm off of.

Copyright 2015

10 WAYS TO STAY AHEAD:


Quick reference

Turn competitive data into smart pricing decisions

Combine internal and external data to gain better insight

Segment your products to zero in on opportunities

Manage the price lifecycle

Master your sales channels

Know who you really compete with

Understand your competitors pricing tactics

Make the most out of your promotions

Identify immediate margin and revenue opportunities

10

Use the power of automation to outpace the competition

Copyright 2015

HOW CAN COMPETITIVE INTELLIGENCE HELP YOU WIN?


New retail realities call for new competitive pricing strategies and capabilities better data, crisper insight, faster action.
Marketyze helps leading retailers turn these challenges into opportunities, using competitive pricing intelligence to outsmart the competition.

Gain immediate visibility into your competitors


moves
Marketyzes patent-pending technology collects, extracts, cleans, and
accurately matches your products with those of your competitors, in a
fully-automated and self-learning process.

Turn competitive data into actionable pricing


insights
Correlate competitive pricing and availability data with your internal sales
data to determine how market pricing affects your actual performance.

Get unfair advantage with the science of pricing


Combine robust rule-based decision support with price performance
insights and analytics to generate automated recommendations that
result in smarter pricing decisions.

Contact us for a
complementary
analysis

Tel: 650.209.6610
info@marketyze.com
www.marketyze.com

Selected Marketyze clients

Copyright 2015

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