John von Neumann and Oskar Morgenstern laid the foundation of game theory in the 1940s and ’50s.
Game theory spans the universe of competitive and collaborative “games” ranging from parlor games to wartime strategy and pricing models. Over the years, game theory has resulted in sophisticated and complicated pricing strategies, but as time goes on and as commerce gets more and more complicated, quality, timely data has become a top priority.
Competitor price tracking helps companies put their pricing theories into practice by providing up-to-date, accurate information regarding their competitors’ pricing strategies and consumers’ buying habits.
- Your best pricing strategy hinges on what your competitors are doing.
- Competitor price tracking gives you an insight into your competitors’ strategies.
- Choosing the right competitor price tracker depends on your industry, budget, and competition.
Game Theory and Pricing Strategy
In 1991, Proctor & Gamble initiated a value price strategy similar to Walmart’s Everyday Low Price (EDLP) strategy. Its strategy was—no pun intended—a gamble for the company as competitors like Unilever were eager to escalate a price war. In the end, their value pricing bid paid off after they were able to weather the market better than their competitors.
Other companies have succeeded with a hi-low pricing strategy, where businesses introduce products at a high margin to maximize profit while demand is high before lowering prices as demand drops.
So, which strategy performs better? Unfortunately, there’s no one best strategy for your company, but that means there’s no one best strategy for your competitors. Your next best move will always depend on what your competitor’s next move will be, and the best way to anticipate a winning strategy is to look back at their historical pricing trends.
Game theory balances your strategy between supply and demand and your competitors’ actions. Good strategies require good data, and competitive intelligence can help bridge the gap between theory and practice.
Competitor Price Tracking Helps Businesses
Your best pricing strategy depends on your competitors’ prices. Unfortunately, collecting quality information about your competitors’ pricing activity is easier said than done, which is where competitive intelligence tools can help.
There are two main ways that price tracking can help your business.
Tracking price history over time can help you maximize your profit by analyzing factors like product mix, price, and margin in the context of your competitor’s pricing history. Competitor price tracking enhances your look back at your historical pricing strategies so that you can make more educated, calculated strategic decisions.
Competitor price tracking isn’t a crystal ball into your competitor’s minds, but it can offer a small window into their strategy. By analyzing what your competitors are doing, you can gain insight into how you should respond. Pricing is a multiplayer game. The best way to play is to know what your competition is doing.
How Does Competitor Price Tracking Work?
There are a variety of ways you can track your competitors’ prices. You can perform some of these techniques yourself, and for others, you need the help of external tools.
1. Web Scraping
According to former Google CEO Eric Schmidt, the internet contains about 5 million terabytes of data. Not only is that an enormous amount of data, but much of it is unindexed or locked behind firewalls. That means finding accurate data about your competitor’s prices isn’t like finding a needle in a haystack. It’s like finding a grain of sand in the Sahara Desert without knowing what that grain of sand even looks like.
Price scraping is mining information from public domain data on the internet. Not only does this price scraping help you access hard-to-find data about your competitors’ prices, but external price scraping tools can notify you when prices change. It saves countless hours and keeps you updated as soon as your competitors change their prices.
Web scraping is one of the best methods of competitor price tracking because it collects raw data from the internet and structures it in a format you can store, sort, and analyze to make meaningful decisions beyond anecdotal clues.
2. Straight to the Source
While web scraping utilizes information from within the public domain, a more direct way to learn about your competitors’ prices is to look at their listed prices from their website or catalog. Reviewing prices on your competitors’ websites has advantages and disadvantages over web scraping.
The obvious advantage is that this information is easily accessible. The disadvantages are that you won’t know when prices change without routine checks, and the advertised prices might not reflect industry pricing or discounts.
3. Industry Reports and Presentations
One effective way to track competitor prices is by viewing price comparisons or competitive analyses from analysts and consultants within your industry. This quality information may be available free of charge (such as consultant presentations), while other pieces of information (like analyst reports) may require subscriptions.
Industry reports and presentations may not be available for every industry, and this resource is more valuable for slow-changing industries where prices are relatively static.
4. Requests for Proposals
Requests for proposals are preliminary documents that companies use to collect bids. These documents aren’t repositories of historical pricing information, but they can give you some insight into your competitors’ general activities and pricing strategies.
These are less timely and reliable than information scraped by a price tracker, but they are helpful tools for companies.
How to Choose a Competitor Price Tracker
While you can do some basic competitor price tracking on your own, the most useful applications of this resource require external tools.
The main considerations in choosing a competitor price tracker are:
- Your industry. Each industry has distinctly different pricing habits and strategies. Bespoke manufacturing tends to have complex but slow-changing pricing, while industries like grocery tend to have more straightforward but quick-changing pricing.
- Your budget. While some of these tools are free, the adage is true: you get what you pay for. While players in niche markets may get by with free research and tools, larger industries call for more robust tools and up-to-date notifications.
- Your competitors. Do you have one or two major competitors? Dozens? Hundreds? Do they update their prices frequently? Your answer to those questions will determine what price tracking strategy best suits your needs.
Profit Optimization with Hypersonix
Every company is in business to provide value, and one of the main ways they provide value is by maximizing revenue for their stakeholders. Your pricing strategy exists to make you money, and Hypersonix can help.
Hypersonix is a profit optimization platform specializing in e-commerce and DTC brand merchants.
To learn how Hypersonix can help you make sense of your data and kick your revenue into overdrive, request a personalized demo today.