Price analysis is a key task to undertake before defining a marketing strategy and positioning your business. Above all, it ensures the profitability of your products. For instance, having a clear idea of the minimum viable price of your products and services is vital to sell them above your costs.
In this post, we will help you answer various questions about your products, such as: does the price fit the market? Does it allow you to reach required profitability? And, should you increase the product´s price to reach the profit margin you seek?
Only by knowing the answers to these questions, and some others, will you be able to price your products correctly.
What is a price analysis?
Pricing analysis is one of the most important tools for designing a powerful pricing strategy that will allow you to increase your profits.
As the name suggests, it consists of a detailed analysis of the different types of prices available in a market. Sometimes, setting the right price both efficiently and competitively can be a very complicated duty. This is why having a price monitoring and cost calculation tool, such as Boardfy, is highly useful for this key task.
What is the use of price analysis?
Conducting a deep analysis of market research and pricing will allow you to:
– Boost your business’s evolution by defining competitive prices, taking into account the minimum price of a product, your competition’s prices, and what your customers will be willing to pay. Choosing an optimal price has a decisive influence on the sales volume of your business.
– Know our competitors and market behaviors in order to launch your product with the highest possible profit margin.
– Maintain updated pricing strategies for new and old products. Prices change every day, so it is essential to know your position in real-time to avoid losing advantage over the increasingly aggressive competition in marketplaces.
– Evaluate new ideas and help decision making in your pricing, marketing strategy and positioning.
– Carry out proper research in order to test a new product and have an approximate idea of the reception it will have among your target audience.
In addition, a thorough analysis of your brand and competitors is paramount if you want to position your product in newly conceived markets, which are increasingly digitized, constantly growing, and increasing in price competition.
Techniques to carry out a price analysis
Some of the most common techniques to perform this market analysis are:
BPTO (Brain-Price Trade-Off):
Through this technique, based on statistics, we evaluate brand value. Thanks to market research, which analyzes the prices of the same products, we can find out brand value.
The difference between the price of the product in a market and the price your customers are willing to overpay to purchase your products is one of the factors that helps us quantify brand equity.
This is another very common technique for conducting market research analysis. Thanks to it, you can find out how your audience behaves by setting out different variables that indicate their true references.
This data is of great help to simulate and validate current and future commercial scenarios. When setting a price strategy with this technique, multiple variants are considered, which makes the process more subtle and less biased.
To implement this strategy, you must know the difference between the price of the product and the cost of selling it based on the expenses of keeping it in stock, transportation and logistics and staffing costs, etc.
How to know your minimum profit margin and set your prices
Accordingly There are many ways to do this. Here, we suggest three methods:
Increase your price progressively and study the behavior of your target audience. This will help you enter and position yourself in the market. Once you have reached this point, you can continue to raise prices until you achieve a desired profit margin, including increasing it and balancing it to market demands.
In this case, we do just the opposite. Start with high prices until you determine the amount your audience is willing to pay. This kind of method is usually applied when you are going to test a new product.
This is the most common method – compare your competitors’ prices with your own. Find out where you are in the price range to choose the most effective communication, marketing and positioning strategy for your business.
For instance, if your prices match those of your competitors, you will have to enhance your differentiating features in order to be the option of choice among all of them.
Step-by-step to do a price analysis
In order to carry out a truly effective price analysis, we must delve into the following aspects:
Establish your objectives
You must determine your objectives according to your positioning strategy. To do this, you need to have data on prices and demand for your product, as well as your value proposition – benefits that you, and only you, can offer, which makes you stand out from the rest of your competitors.
Run a detailed market price analysis
This step incorporates market research of a company and its competition. A good monetization strategy can only be done if you have a good understanding of your competitors’ prices, your competitors’ strategies, and market behavior.
Analyze your target audience
Knowing your target or audience in-depth will allow you to answer important questions such as what, why and how they will use your product or service, what their needs are and the value that your products/services brings to them.
Based on this, you will be able to develop a pricing strategy for new products and modify your existing pricing strategies.
In addition, thanks to your customers’ feedback, you will know which of your company’s areas needs improvement.
Analyze your competitors
This factor is crucial.
You need to conduct a detailed review of their products and services and determine their market share.
One way to get valuable information is to monitor your competitors’ prices and, of course, to access their pricing history to anticipate their movements and/or achieve higher profitability.
Create a pricing strategy
With all this information, you can begin to design a strategy and use the pricing method that best suits your business.
Want some extra tips for your e-commerce business?
In addition to all of the above, don’t forget to:
– Calculate unit prices including the proportionally of all the expenses derived from production and add to it a proportional part of the investments made in your business.
– Make a pricing curve and determine the segment where you can get a higher profitability.
– Make the most of your product sheets! Very few online stores are giving importance to this feature, so it will be easy for you to make a difference. Your product descriptions should highlight all their benefits. By doing so, you will increase your customers’ perception of quality and they will be willing to pay more. In other words, you will be able to improve your conversion rate and performance of your e-commerce business.
Remember the factors most taken into account when making a purchase:
The quality-price ratio.
The quality and honesty of the business.
Don’t focus just on the last one!
Why is it important to conduct a price analysis, especially if you sell in a marketplace?
Every day more and more purchases are made through the Internet. Therefore, knowing the online market (your target audience, your competition, prices and their continuous fluctuation) is essential if you don’t want your business to be left behind.
The price of a product can change depending on whether it is on one platform or another, and this permanent oscillation is also a factor that you must be aware of and take into account in your pricing strategy.
In case you still have any doubts, here we summarize the most important benefits of doing a price analysis and applying it to your business strategy:
Greater profitability in your e-commerce business.
Getting to know your customers better, and knowing how they value your products.
Identifying new business opportunities and new ways to attract customers with a highly competitive pricing strategy, thanks to a deep knowledge of your market.
Discovering which sales channels require less investment and are more profitable.
In short, with price analysis you will be able to know and quantify the value of your products in the marketplace and design the best pricing strategy for each one, according to your positioning goals.
In a highly competitive market like the current one, you must use all resources at hand to establish the highest possible price that will allow you to maintain your dominance over your competitors.
Price fluctuations reflect changes in the market and the economy. Know it and you will be able to identify, anticipate and apply the necessary measures in your pricing strategy.
How does Boardfy help you increase the profitability of your
E-commerce? Boardfy, the world’s fastest Dynamic pricing and monitoring tool, allows you to:
Identify your competition: knowing who you are up against gives you the option to win the battle.
Get ahead of their movements: knowing their price history allows you to discover if there is a pattern in their changes and get ahead of them. Always stay ahead of your competition.
Monitor your competitors’ prices: monitoring their prices will help you verify that you are still competitive.
Find out with which products you are competitive, with what margin and what products your competitors are offering that you are not. Don’t fall behind and take advantage of all your opportunities!
Calculate your costs and know your commercial margin in real-time. Boardfy calculates cost price and shows you your current margin and the margin you would have if you matched the price of your cheapest competitor.
Automate price increases and decreases according to your strategy (Dynamic Pricing).
Optimize your campaigns: know your position against your competitors, the classification of your products, and make the necessary adjustments automatically according to an intelligent pricing strategy.
All this, and much more, is what Boardfy can do to increase your sales and profits. And only from 39 €/month without permanence!
Are you going to let it slip away?