Competition-based pricing: How to Grow your eCommerce Business by Monitoring Competitor Prices

August 16, 2023

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When is it the right time to keep your prices lower than your competitors? When to price higher? When to keep them on par? An easy and explainer of how and when monitoring your competitor pricing might help you boost your sales or capture more profit margin.

In the cutthroat world of eCommerce, understanding the pricing strategies of your competitors is paramount. One of the most vital practices in this regard is competitor price monitoring. This practice is no longer just an option but a necessity for online sellers who wish to succeed. In this post, we will delve into why competitor price monitoring is essential and explore various tools, including the best competitor price tracking software, that make the process seamless.

Why Competitor Price Monitoring Is Important

1.Understanding the Market Dynamics

Monitoring competitor prices helps in recognising market trends and adapting pricing strategies accordingly. In ECommerce competitor price monitoring is crucial to maintaining competitive edge.

2. Avoiding the Price War

By employing competitor price monitoring software, businesses can identify pricing patterns and avoid unnecessary price wars that lead to diminishing profits.

3. Enhancing Profit Margins

Knowing when and how to adjust prices by monitoring competitors' prices can lead to optimised profit margins.


The downfall of BlackBerry: how not monitoring your competitor prices might lead to the fail of a giant


Remember when BlackBerry ruled the smartphone world? Their physical keyboard was a game-changer, and their security features were unparalleled. However, as competitors like Apple and Samsung entered the market with touch-screen devices and aggressive pricing strategies, BlackBerry stuck to its laurels.

The competition lowered their prices, offering high-end features and extensive app ecosystems. BlackBerry, while aware of these innovations, believed in the superiority of its product and didn't consider competitor pricing as a significant threat.

Had BlackBerry employed a form of competitor price monitoring, they would have realised that the market was changing. The price points set by competitors were not just to undercut BlackBerry but were also an indicator of changing consumer preferences.


How to use the results of competitor pricing monitoring

Let’s agree that if you’re an eCommerce business operating in 21 century you do not monitor your competitors manually. No doubts, that you’re using a certain set of price monitoring tools for that. Maybe one tool. Maybe several. Doesn’t really matter. The value of the data not in the data itself but in the insights it provides and in the actions you will be able to take based on this data.

The actions you’re taking based on the market data insights can be accumulated in the pricing strategy called competition-based pricing or competitive pricing. As the name suggests, is a pricing strategy where prices are set based on the market context or competitive landscape. Essentially, you look at what your competitors are charging for similar products, then set your prices accordingly - usually slightly higher, lower, or equal to theirs. Now, the main question is when exactly should you set your products lower, higher, or equal?

Maybe you're using one competitor price monitoring tool. Maybe several. Doesn’t really matter. The value of the data not in the data itself but in the insights it provides and in the actions you will be able to take based on this data.


When to price your product higher

A perfect case for pricing your product higher is when your competitors run out of stock. Indeed, customers are concerned about pricing and actively seeking deals. But when you're the only seller at the moment, they don't have much choice. Why does it make sense to price higher? It creates an excellent opportunity to capture a higher margin and get closer to the elusive breakeven point. It also allows you to decrease the margin for other items that are your main "traffic drivers" and top-sellers, where you ideally want to hold the number 1 position in the market.

Check out this screenshot from one of the eCommerce sellers we recently analysed. They should have known better than to leave money on the table being the only one with an item currently in-stock.

The result of this strategy is higher profit margin. Up to 20%, as Aimondo’s competitor price monitoring solution customers can attest.



When to price a product lower than your competitor?

When would you want to maintain lower prices? This could be when a product is responsible for most of your sales, and customers are actively seeking this item online. However, do not resort to haphazard pricing – like the one shown in this screenshot and currently practiced by one of the large UK-based DIY sellers. Look at their pricing — they have a huge gap of up to 72% between their price and the price of their closest competitor. Do you really want to go that far with your pricing?


When to price your products on a similar level as your competitor?

When should you keep your prices on par with your competitors? For instance, when your product has more positive reviews. Multiple studies show that even in a tough economic environment, shoppers tend to trust reviews and are more likely to choose a product with more positive reviews over an equivalently priced item with fewer reviews or less positive ones.

Look at this screenshot of market data. Do you believe it makes sense for sellers who have lower rating for the same products offer a discount or keep their prices lower? If you hesitate, you can through in review data and sales data in any predictive analytics tool and get your answer.


If you’re still not sure how competition-based pricing is done or why would you want to monitor your competitors prices join our FREE Pricing Excellence Course, learn everything top-level pricing experts know, and get a Pricing Expert Certificate.

a man  pointing at numbers
Ana Bibikova, a Head of Marketing at Aimondo

Ana Bibikova, a Head of Marketing at Aimondo


Ana is a rare breed: T-shaped marketer with a wide experience in eCommerce, B2B, B2C and B2B2B marketing. Writes about unconventional strategies for exceptional growth.

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