{"id":8545,"date":"2021-12-16T14:16:59","date_gmt":"2021-12-16T14:16:59","guid":{"rendered":"https:\/\/www.price2spy.com\/blog\/?p=8545"},"modified":"2021-12-16T14:16:59","modified_gmt":"2021-12-16T14:16:59","slug":"how-can-price-index-help-you-beat-your-competition","status":"publish","type":"post","link":"https:\/\/www.price2spy.com\/blog\/how-can-price-index-help-you-beat-your-competition\/","title":{"rendered":"How can Price Index help you beat your competition?"},"content":{"rendered":"\n<p>If we asked you who your competitors are, would you know the answer? The answer would probably be something along the lines &#8211; companies from the same branch, that are selling similar products at a similar price. That\u2019s correct, but not completely.<br><\/p>\n\n\n\n<p>We can already see you clutching your head thinking that you have again done something wrong. But no need to worry, the only missing part of the pricing puzzle is the <strong>price index<\/strong>.<br><\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/lh4.googleusercontent.com\/6CojmgzrTd6LhsGGTVLAzxZCDwbrZM4DYTDJzwmjL6GdmPfnZc5JV9LWpXWXDU6PDUvQT10OmcJKDh5DSKlSR3V8ZyyHChlVzIaJP6S7l7ZzM7EF4fPxs6tLD_nPaj8cuGuEuFsK\" alt=\"price index\"\/><\/figure>\n\n\n\n<p>What is the <a href=\"https:\/\/www.britannica.com\/topic\/price-index\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\" (opens in a new tab)\">price index<\/a> and why it is exactly the catch 22 of each pricing strategy?\u00a0<\/p>\n\n\n\n<p>This post will give you the answers.<br><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>What is the Price index and how is it used in eCommerce?<\/strong><\/h2>\n\n\n\n<p>When investigating the competition, looking for similar companies can seem like a no-brainer. But, what actually makes the difference is finding companies that are offering the same products, but by using a completely different business model. Not all competitors represent the same threat. What you really want to achieve is to recognize the ones who are <strong>taking all the sales at specific times<\/strong>.<br><\/p>\n\n\n\n<p>The price index serves to identify these competitors and create the <a href=\"https:\/\/www.price2spy.com\/blog\/retail-pricing-strategies-the-ultimate-list\/\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\" (opens in a new tab)\">pricing strategy<\/a> that will pave the way to success. By observing the price index, you\u2019ll be able to improve your sales and get better control of the positioning of your brand on the market.\u00a0<br><\/p>\n\n\n\n<p>As such, the price index is a great way of finding loopholes in your competitors\u2019 strategy and turning them to your advantage.&nbsp;<br><\/p>\n\n\n\n<p>This approach needs to start from 3 basic points:<br><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>Know the competitors\u2019 offer (product catalog)<\/li><li>Know the sales history data<\/li><li>Calculate the price index<\/li><\/ul>\n\n\n\n<p>Once you know all this, it\u2019s time to calculate the <strong>price index (PI)<\/strong>.<br><\/p>\n\n\n\n<p>The formula for calculating the price index is pretty simple. All you have to do is to divide the competitors\u2019 price with yours and multiply it by 100.&nbsp;<\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter\"><img decoding=\"async\" src=\"https:\/\/lh3.googleusercontent.com\/E8cJoz6k0JoWeoT5g4u4MFcvx5tI0LToPU7zej7s2XZF6MZq4Z3TakhvV2BVQnJ34PlyPjI2hxVmyPGPpOMwiyBdx0IHIkaO9aEy0OqnJt9IDJibMNaRSIV2ZFgAfRMBIIa1iAlo\" alt=\"calculate price index\"\/><\/figure><\/div>\n\n\n\n<p>Well, if this is so simple, then why so much fuss around it?&nbsp;<br><\/p>\n\n\n\n<p>The more complex issue is how to understand the results and how to use them in controlling your market position.&nbsp;<br><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>What conclusions can you draw from the price index?<\/strong><\/h2>\n\n\n\n<p>Once you know the price index for all the competitors and products you\u2019re interested in, it would be useful to organize them in some spreadsheets\/tables that will allow you to track the price changes that are mostly related to your online store.&nbsp;<br><\/p>\n\n\n\n<p>We think that you\u2019re starting to realize what\u2019s the real problem here.&nbsp;<br><\/p>\n\n\n\n<p>How to calculate so many products and competitors on a daily basis, and all by yourself?&nbsp;<br><\/p>\n\n\n\n<p>To be honest, it\u2019s almost impossible.&nbsp;<br><\/p>\n\n\n\n<p>The most important thing you\u2019ll need is a competitor <a href=\"https:\/\/www.price2spy.com\/\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\" (opens in a new tab)\">price monitoring tool<\/a> that will gather all this information and present it to you in a comprehensive way.\u00a0<br><\/p>\n\n\n\n<p>Trying to carry out all these calculations manually is not practical for any eCommerce store. Therefore, <strong>price monitoring tools<\/strong> will do all the daunting work for you, and what is more important, you can be sure that the data is timely and accurate. Moreover, some advanced tools such as <strong>Price2Spy<\/strong> offer a great level of <a href=\"https:\/\/www.price2spy.com\/en\/custom.html\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\" (opens in a new tab)\"><strong>customizability<\/strong><\/a> meaning that you can carry out numerous reports, all tailored to your needs.\u00a0<br><\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter\"><img decoding=\"async\" src=\"https:\/\/lh3.googleusercontent.com\/opuQJ30FMSEP99D5Bz4cUbu8wnXSK8qfP5w36tXYttgkbBfZjhxnTlGvQRutRkHQbjZ7hQw_rWy6hKHFHHpTNfUYfzpDP6CToAIwzZW_qe8fGFjPb5_X8aCYTrTu-DF58meG1LoJ\" alt=\"price2spy dashboard\"\/><\/figure><\/div>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter\"><img decoding=\"async\" src=\"https:\/\/lh5.googleusercontent.com\/INLNDtM15WFtfhseqO3KCsjK5o42lgOl9dMEy5WLpfTkEXfj6UkyrK0T9lsPAPsiYxIWUFup_sNIsRW7PdbZY8ziPdqdL5oErKKEL5NK2dWwGZUxLXTKDHJx21sSz-d_LSN_z_Jo\" alt=\"price2spy dashboard\"\/><\/figure><\/div>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Does this mean that you can control your market position?<\/strong><\/h2>\n\n\n\n<p>Yes. The aim is to offer a lower price in comparison to your competitors. But, that is easier said than done. Why?<br><\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter\"><img decoding=\"async\" src=\"https:\/\/lh6.googleusercontent.com\/OlCIAPC5Bl0DFx50iPltx16TQ8z2G2ueqJ6dlF4cYoV65tXvbDZfqYrF8IjTaU4XWGlq9MV6vOhc6GAgNlLGqP9FbZdUdvCNrnP8ZGnbT43bBOehZcfGvxjOetjc09Xtb6nsY_g4\" alt=\"control your market position\"\/><\/figure><\/div>\n\n\n\n<p>Well, it makes no sense to just drop your price randomly. A lower price will attract demand, but will it also bring profit? That\u2019s the catch &#8211; <strong>find the <\/strong><a href=\"https:\/\/hbr.org\/1992\/09\/managing-price-gaining-profit\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\" (opens in a new tab)\"><strong>balance between the set price and the profit that it brings<\/strong><\/a>.\u00a0<br><\/p>\n\n\n\n<p>For example, if a retailer tries to sell a MacBook Pro for $600 it would certainly attract a huge number of customers, alongside the lawsuit from Apple.&nbsp;<br><\/p>\n\n\n\n<p>So, offering the lowest price is not necessarily the smarties option. Instead, you can use the price index to identify what the right price should be. By using it, you can tell that there\u2019s probably room to set a price that\u2019s lower than PI for 5%, or 10%, and still make good sales.&nbsp;<br><\/p>\n\n\n\n<p>Another fact that you\u2019re already familiar with is that the prices can be pretty unstable. Price changes require more often price tests, and price index can help you with that as well. Instead of randomly lowering or increasing the prices, you can take the price index as your point of reference. Start by increasing or decreasing the prices for, let\u2019s say 5%, and see how the market will respond. In that way, you can test the waters without jeopardizing your market position.&nbsp;<br><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Adjusting your pricing strategy according to the price index<\/strong><\/h2>\n\n\n\n<p>As you can already tell, the main benefit of using the price index is knowing how and when to make changes to your pricing strategy.&nbsp;<br><\/p>\n\n\n\n<p>Let\u2019s say your competitor\u2019s price index for one brand is much lower than yours. That means that they\u2019ve managed to get a better deal with a supplier. Now that you know this, you\u2019re in a better position to negotiate a better deal as well.&nbsp;<br><\/p>\n\n\n\n<p>Another way of using price indexes is to <strong>calculate them for <\/strong><a href=\"https:\/\/www.ilo.org\/public\/english\/bureau\/stat\/download\/cpi\/ch9_rev_1c.pdf\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\" (opens in a new tab)\"><strong>different product categories<\/strong><\/a>. For instance, your business can compete well in the sports&amp;outdoors equipment, but not be so successful in the customer electronic department. You can either decide to focus only on the sports&amp;outdoors category and improve it further, or you can see what changes need to be made to the customer electronics category.\u00a0<br><\/p>\n\n\n\n<p>When it comes to your pricing strategy, one more valuable insight lies in analyzing the <strong>historical data<\/strong>. Understanding what changes have happened and when will help you enormously to understand the pattern and predict possible future price changes. A price monitoring tool can do a retrospective analysis of the price index changes, and tell you when and where you\u2019ve faced some price changes.&nbsp;<br><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Conclusion<\/strong><\/h2>\n\n\n\n<p>Price index is a metric that will complete your pricing puzzle. Finding the right price doesn\u2019t need to be a guessing game if you have the right knowledge and tools. By understanding the pricing process and following your results in different categories setting the price will be much easier.&nbsp;<br><\/p>\n\n\n\n<p>What is your experience with the price index? Did you have trouble with calculating it?<br><\/p>\n\n\n\n<p>Our readers would find your experience very insightful! Feel free to share it.<br><\/p>\n\n\n\n<p><\/p>\n","protected":false},"excerpt":{"rendered":"<p>If we asked you who your competitors are, would you know the answer? The answer would probably be something along the lines &#8211; companies from the same branch, that are selling similar products at a similar price. That\u2019s correct, but not completely. We can already&#8230;<\/p>\n","protected":false},"author":13,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[108],"tags":[190,636,161,128],"class_list":["post-8545","post","type-post","status-publish","format-standard","hentry","category-best-practices","tag-ecommerce","tag-price-index","tag-price-monitoring","tag-pricing-strategy"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.4 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>How can Price Index help you beat your competition?<\/title>\n<meta name=\"description\" content=\"What is the price index and why it is exactly the catch 22 of each pricing strategy? 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