Competitive Price Strategy in eCommerce: The Ultimate Guide

Competitive Price Strategy in eCommerce: The Ultimate Guide - Data Noodle

Coupons, discounts, promo codes—who would ever pass up the chance to grab these deals? It’s even harder to abandon carts when the store offers to slash the original price almost in half. You find yourself clicking the checkout button and finding more coupons, something you didn’t initially plan. 

This is not shocking at all. Did you know that 86% of shoppers use coupons to influence their purchase decisions? And when you’re in the ever-changing e-commerce space, staying on top of your competitors’ price changes and deals is a must.

It’s one of the ways you can stay competitive and maintain a loyal customer base. This helps companies peek into market trends, find pricing opportunities and threats, and restructure their pricing strategies in a highly competitive landscape.

This is where a competitive price strategy comes into play. If you want to stay ahead of the curve, strategically selecting price points for your products based on competitor pricing can make a huge difference in maximising your revenue and understanding consumer behaviour.

Continue reading below for more information!

Getting Started: Defining a Competitive Price Strategy

Also referred to as price intelligence, a competitive price strategy involves keeping track of your competitors’ prices to examine historical and present price changes. It allows you to optimise your own pricing strategy by studying how often competitors update their prices and identify patterns over time. 

Using a price monitoring tool is also required for medium to large e-commerce businesses. That way, you can effortlessly collect and analyse data while receiving alerts about changes like discounts and big price drops in the market.

A competitive price strategy may leverage data mining and AI to analyse how customers typically react to price changes. It also lets you gain insights into your competitors’ actions, determining an optimal pricing strategy for your products. 

For example, it can tell when certain competitors are engaged in a price war. You can make an informed decision whether or not to join the price competition for a price product. With this, you have the power to know their strengths and weaknesses, empowering you to strategically launch counter-campaigns. 

Manual competitive pricing analysis can also be an option. This is where you regularly visit competitors’ websites, marketplaces or physical stores to collect pricing data. 

However, it tends to be repetitive and prone to errors, especially for large-scale businesses with a long list of competitors. And before you can even finish reports, new price changes have already occurred without your knowledge.

Competitive Pricing Strategy: Debunking Myths

According to Shopify’s Future of Commerce Report 2022, 74% of consumers are influenced by price. This is why a competitive price strategy is almost a requirement, helping businesses strike the right balance with pricing in an ever-changing industry.

However, while it’s considered a valuable practice, there are common myths associated with it. Let’s explore and debunk them below:

Myth # 1: Competitive Pricing Strategy Is Illegal

Whether you’re a startup or an established business for years now, you can’t deny that you’ve spied on your competitors. You check their websites, look at their product catalogue and study how they price their products. You do this for the next competitor on your list, and so on.

Did you ever think this was an illegal act? Did the cops come knocking on your door because your competitors happened to track you down? Of course not, because it’s totally legal to compare prices. 

Some companies will even send one of their employees to visit the stores of their competitors to see their prices before price monitoring software is invented. It’s called mystery shopping; it’s an old trick in the book.

Myth # 2: Matching Competitors’ Prices Is The Best Strategy 

Another common myth about competitive pricing strategy is that its end goal is for you to match competitors’ prices. However, this isn’t entirely true. It can be a quick race to the bottom, significantly decreasing your profit margins.

If a business lacks the operational efficiency and cost structure to support low prices, it can cause troubles down the line. 

You also have to keep in mind that customers don’t only consider prices. They look at brand reputation, quality, customer service and features that other businesses might not offer. 

By solely focusing on price, you run the risk of lowering the perceived value of your products. This will make customers seek alternatives offering a more comprehensive value proposition.

Myth # 3: Competitive Price Strategy is a One-Time Task

Some e-commerce companies think that a competitive price strategy is a one-time project. You can do it once, then move on to the next pricing strategy that mainly favours what you’re aiming for.

The reality suggests otherwise. Think about it: market dynamics are constantly changing, and up-and-coming players can dip their toes in the market any time they want. The economic climate, customer needs and trends also change over time.

How can a one-time competitive price analysis help you maintain a competitive edge?

Additionally, building a competitive price strategy helps businesses test the effectiveness of their pricing strategies. When you compare your prices to your competitors’ prices, you can determine price gaps, evaluate value propositions and decide if adjustments are necessary.

Setting Up An Effective Competitive Price Strategy: A Step-By-Step Guide

It’s common knowledge that buyers tend to shop for the best deals online. The problem is, only a few e-commerce websites know how to make the most of this behavioural tendency. They often make the mistake of building a pricing strategy without knowing what their competitors are charging for the same product or service.

Remember that a great competitor price strategy can act as your GPS. It lets you know if you’re still on the right track, where others are heading and how you can get from one point to another.

To get started, let’s cover the steps you should take in setting up an effective competitive price strategy:

Step 1: Set Your Market Position

When customers think about your brand, what image comes to mind? What do they truly think of your products? Once you know the answers to these questions, then you know—more or less—where you stand in the market. 

Market positioning establishes your brand’s uniqueness, which is closely related to brand awareness. It’s the impression that comes to mind when a target customer thinks about a certain company. 

For example, when someone mentions Chanel, you instantly think of luxury. And when you see iPhones or any Apple product, you associate them with cutting-edge technology.

This is why market positioning is a crucial element in your competitive pricing analysis. It helps you make sense of the price data you collect. Because when you fail to define a market position for your brand, you might offer your products at a much lower price and damage your profits in the long run.

However, market positioning doesn’t always revolve around value propositions; it also involves brand DNA.

Keep in mind that successful brands have distinct brand DNAs, implying that they won’t succeed by charging the same price.

For example, think about iPhones made by Apple. One of its recent models, which is the iPhone 14 Pro Max, costs up to S$2,653 with the biggest storage and screen size. It only means that Apple has a premium positioning and a powerful technology brand DNA. 

So, what happens if Apple tries to charge the same price as their competitors? Say its products have similar price tags with an unknown smartphone brand. With the market position that Apple has, it would go out of business faster than you might think.

Make sure that you get a clear understanding of your brand positioning to prevent misinterpreting or misusing data. 

Step 2: Know Your Competition

It’s not surprising to meet a retailer who doesn’t know which competitors directly influence their revenues and performance. It’s pretty easy to be one of them, given that identifying who you need to spy on and compete with isn’t a piece of cake.

And sometimes, the real competition isn’t even on your radar. Things can take you by surprise. 

To make things easier for you, you can divide competitors into three categories:

  • Most important competitors should include the players in the market you truly need to compete with, head to head. Make sure that you only list five to ten competitors to narrow things down.
  • Similarly positioned competitors are the ones with the same market positioning as you do.
  • ‘Foils’ of your brand are the competitors that you can use as inspiration to help you reach your goals and where you want to be.

Instead of just collecting competitors and lumping them all in one list, writing granular lists will help you produce more actionable data. When you study these categories, you identify patterns within every subset. It provides valuable insights into competitor pricing strategies in the marketplace.

For instance, you observe that retailers with the same market positioning as yours have higher prices for the same products you sell.

Alternatively, you might discover that high-end brands that are not direct competitors are selling your products with deep discounts to attract affluent customers.

Studying the competition in detail, ideally at a granular level, is the ideal approach. It allows you to understand competitive behaviour, pricing trends and market dynamics, among other things. 

Step 3: Pick Which Products To Price Compare

In competitive pricing, you don’t have to benchmark each product that you sell. We suggest that you follow the 80/20 rule: Focus on the 20% of the products that generate the lion’s share of your profit, which is approximately 80%

However, this approach may not give you a complete picture. In some cases, it’s also important to consider other factors beyond sales volume. 

For example, it’s possible that your worst-selling products are underperforming because they’re priced too high—way above their market value. Did you know that many e-commerce stores have increased their revenue by aligning the prices of their less popular products with market rates after conducting a competitive pricing analysis?

Generally speaking, it’s a good idea to monitor a broad range of products, taking into account both top-selling and low-selling items. You can use price monitoring software to automate price data collection and other factors you might want to review, like:

  • Reviews
  • Product images
  • Shipping fees
  • Product descriptions 

Step 4: Test The Pricing Data

To ensure that the pricing data collected through a competitive price strategy is accurate and relevant, conduct initial tests. Start by monitoring a subset of relevant products for a certain period, such as two to three days or up to a week. 

Once done, review the collected data to confirm its quality and relevance. You can also add missing products and adjust the settings in your pricing tool if the prices seem unsatisfactory. If you’re satisfied with the pricing data quality, feel free to apply the price monitoring tool to your strategy.

In this way, you can establish a full-scale competitor pricing strategy that delivers accurate data and timely insights. 

Step 5: Adjust The Strategy As Needed

You’re bound to encounter several problems once you let your competitive price strategy run for a while. There’s nothing to be alarmed about, but you have to make the necessary adjustments to keep the strategy optimal.

Let’s say a competitor suddenly changed their website layout or some of their products went out of stock. If you ever encounter these issues, it’s best to evaluate the reasons behind data discrepancies and make decisions accordingly. 

For example, you might drop a competitor from your pricing strategy set if their data is consistently unreliable.

When you make it a habit to evaluate and adjust your competitive pricing approach, you maintain the accuracy of data. It’s advisable to review the fresh data at regular intervals—like every two weeks—to price goods that will maximise your profit and advantage. 

Competitive Price Strategy: Best Price Monitoring Tool Features To Look 

Now that you know the most fundamental steps in setting up a competitive price strategy, it’s time to look for the best price monitoring tool in the market. 

It is extremely difficult, if not nearly impossible, for even a medium-sized online store to constantly monitor competitor prices across multiple products. Let’s take a look at the best feature you should look for in a competitive price monitoring software:

Competitor Tracking

The most basic feature any decent competitor price monitoring software should offer is competitor tracking. The tool should automatically monitor the price movements of products, including pricing changes and promotional offers.

It should provide alerts or notifications when competitor prices drop or change over time. A great competitor pricing tool must also be able to collect and present data in a simple, intuitive dashboard.

Timely Data Collection

A good competitive pricing solution has the ability to collect pricing data in a timely manner. With this feature, you are guaranteed to have access to the latest and precise pricing information from different sources. 

It’s especially important in competitive markets where prices can change in the blink of an eye. 

By collecting data at the right moment, the software can provide you with immediate insights into competitor pricing strategies, price fluctuations and market trends. As a result, you can make timely and informed decisions on your own pricing strategy, helping you stay ahead of the curve.

Stock Movement Visibility

Aside from competitor prices, price monitoring software should also track competitor stock movements. This includes in-stock and out-of-stock products as well as product demand. 

This information can help you plan your pricing and promotions strategy accordingly. For example, if a specific product goes out of stock on your competitor’s website, you can increase your prices for the same product. 

In-Depth Competitor Tracking

In addition to monitoring prices, one of the best features of reliable pricing software is the power to assess competitor products based on various parameters like:

  • Top-selling items
  • Product descriptions
  • Customer reviews
  • Product visibility

Final Thoughts

We are finally in the era of informed shoppers. In just a few clicks, they’ll find the greatest deals and the cheapest prices online at the tip of their fingers. They can easily abandon their carts and jump to the next brand the moment they see discounts or low prices. 

That’s why establishing a carefully planned competitive price strategy is essential to thrive in an overcrowded market. Sure, other retailers might even call it spying, monitoring and gathering information, but they all have the same goal: making informed pricing decisions. 

Moreover, with your competitors selling identical products across different platforms and marketplaces, leveraging competitive pricing software is a need. This helps you automate competitive insights, improve conversion rates, reduce man hours and optimise pricing strategies.

Don’t be afraid to take the next step. If you’re ready to win the hearts of today’s shoppers, get in touch with us. We’ll help you stay ahead of the game with our product dashboard, ecosystems and many more.


What is a competitive pricing strategy?

Also called price intelligence, competitive pricing strategy is the process of setting your price points for your products based on your competitors’ prices. It can take advantage of AI and data analytics to study consumer behaviour, identify patterns and help you make informed decisions.

How do you build a good competitive price strategy?

To build a good competitive price monitoring strategy, here are the steps you need to follow:

  1. Set your market position. 
  2. Study your competitors.
  3. Choose products to price compare.
  4. Test the pricing data of your relevant products.
  5. Identify problems and adjust your strategy as needed.