The four most important price indicators you need to know

Nowadays as almost everything is digitalized, basically all merchants are monitoring their competitors. Everyone is watching everyone and this is very important if we look at the pricing processes. Monitoring prices in the industry and even beyond is an essential part of having a successful business. The result is the need for tools that make it possible, thanks to that, there are a lot of solutions for e-merchants that help them to make quick, profit-maximizing pricing decisions.

Although this kind of software is doing most of the work instead of us, it is very important to understand which price indicators should we pay attention to, and set alerts to. Below we have put together the 4 most important ones. 

1. The average price of a product in a timeframe

E-commerce markets around the world are very saturated not to mention the continuous consumer expectation that what is available online should be cheaper than what we can find on the shelves of physical stores.  This leads to a life and death price competition, that results in major price decreases for some products. It is crucial to know the circumstances when these price decreases happen, hence the need for constant pricing monitoring. An increase in the volume of sales should always compensate for the lost profit that results from a lower price when offering discounts. Otherwise, the trader may fall into the trap that despite the increase in turnover, the business will not generate (sufficient) profit as it will no longer produce its own profits. And no one works for free. At this point, it is worth taking into account, from a strategic point of view, how much extra volume the extra burden places on the business.

2. Behavioral patterns of market participants

As a trader, one of the most important information is who the strong players in a given market segment are, who are our main competitors as a trader. We need to observe how these competing firms behave in certain situations, what or who influences their behavior. Do they go into the game if we dare to draw with a discount? Are they monitoring us? Are they monitoring others? Do they change their prices faster or more conservatively? Do they go for quantity or maximize their profits? Are they boarding the Black Friday train? For our business, who are we to follow, who can we ignore? Get to know your friend and know your opponent better - the saying can’t be more true anywhere else than in e-commerce.

3. Tha main characters of the competitors

If the goal is to improve our business position and generate growth, we need to align our desires with our realistic opportunities for success. Therefore, it is important to compare our own prices and sales results with competitors similar to the level of our business. Today, advanced and easy-to-use softwares are available, such as the Hungarian-developed PriceKit. It is not, of course, industrial espionage, but the collection, analysis, and use of publicly available information. However, no matter what pricing strategy a trader adopts in price competition, it is always worthwhile to strive not to over-reduce your profit margins.

4. The dimension of time

When analyzing price fluctuations of the competitors, it is always necessary to check whether they are the same in date as the promotions and discounts or not. Not to mention that we’ll see that not only is the calendar important in this aspect, but it’s also influenced by other time-related factors that affect prices and sales volumes. In large marketplaces such as Amazon, for example, there can be severe price fluctuations during the day, and a sudden increase in demand is also partly predictable.