HELP! I have thousands of products, where should I focus my price decision making? | eCommerce Matters Ep. 032
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Episode 32 is here! We're focusing on how to make the right pricing decisions, quickly, and at scale.
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Podcast Summary
Introduction
If you have thousands of products. Where should I prioritize my pricing decisions? I'm talking to the ecommerce companies out there that are selling branded goods, products available to consumers from multiple online stores. Everything from appliances like dishwashers, washing machines, TVs, all the way through to power tools and everything in between.
Any product that a consumer can put that search term into Google and get that exact same product from multiple retailers. The challenge for anybody involved in pricing and making pricing decisions inside retailers, is that you've got thousands and thousands of products. You've got so much data, you're often not just doing pricing, maybe as part of your day to day job, you may have other functions to do. And therefore, where on earth do you start each day to focus your efforts and energies that is going to make the greatest impact?
I'm talking when you've got 1,000 SKUs, 5,000 SKUs, 10,000 SKUs, and more. How do you focus that data and make sure each day actually, you only need to think about maybe those ten products, those 50 products, those 100 products whereby your decision making is going to make the greatest benefit to your business.
So, in today's podcast, I'm going to go through five options to support your focus. And all of these Black Curve can help you with, to help you cut through the noise, cut through all the information that's irrelevant almost, you're playing around that is not going to help your business and really help you focus your decision-making.
1. Top and Tail
So, the first one we generally recommend that retailers do on their day-to-day is top and tail or look at the outliers, any anomalies whereby your price position stands out versus whether it be the market average or the lowest or the highest market priced position. And inside Black Curve, we call this a market segmentation. And basically, what we're trying to do is we're trying to count the number of products that sit within specific percentage intervals away from, for example, the market average.
So, can we show you where you've got ten products? 20 products that are. For example. More than 30%. More than 40%. More than 50% more expensive than the market average. Where you've maybe got five products. Ten products. 15 products. Or just one product where you're more than 50% cheaper than the market average or the lowest market price. And over time you can see these buckets and BlackCurve presents these buckets in five percent increments. And really what we're trying to do is we're trying to support your decision-making so you can say, hang on a minute, is that right? Should I have one product at that position? Should I have two products at that position? And therefore, should I then look to make a counter, counter move?
So, it may just be simply if you're doing manual pricing decisions, you can go in and rectify that. As I've said on many podcasts in the past, you win no prizes by being the cheapest and you win no prizes by often being the most expensive, especially when those products are available from multiple different locations. So, if you are the cheapest and nobody else is with you, bridge that gap. You might be actually running where you want to be the lowest, but you don't need to be massively cheaper than the lowest if that's your particular strategy.
And conversely, if you've got products which you're vastly more expensive than the competition and that product is available in multiple locations, and your competitors are actually still stocking that product, again, you're going to win no prizes and you're going to convert a lot fewer sales in that particular instance.
So, as I said, if you're doing a manual pricing strategy, go and correct those. If you've got an automated pricing strategy, such as BlackCurve supports you with that, whereby you've got rules which are running, and then the prices are automatically being communicated to your website and updated, why are you therefore still maintaining those particular positions?
And it may be because you've got, for example, a margin calculation that has gone awry, you've got an incorrect cost price that's being assigned to that product. So, really it's about supporting you to update the associated data points that may be forcing you to be in that position or stopping you from moving and making a counter move.
2. Percentage or Real Term Difference from Lowest, Average Highest Market Price
The second thing that I generally encourage people to do when they are looking to support their decision-making is make access to our competitor report. And what this is doing is basically showing you a view of all of the products that you have in your inventory and giving you data points, showing, for example, your market position, showing which competitors are at the lowest price, which competitors at the highest price, and a whole host of other competitor insights.
And within this particular competitive report, we recommend that people sort and filter this data on the difference between the lowest market price or the average price, and a percentage difference from the highest price. Therefore, you can just simply sort which is the greatest number, because that in itself, depends on what market position you're trying to follow is again going to give you the greatest impact on your business.
And a percentage difference enables you to, I guess, standardize your inventory whereby you might have products that cost thousands and thousands of pounds, and alternatively, you might also have products in your inventory that cost only a few pounds. So, percentage difference really enables you to compare more apples to apples, whereas we also show you the real term difference in terms of pounds and pence. And that in itself is probably where we recommend that you start by using the real term difference because if you are £300 more expensive than the highest market price. Again. If you're £300 more expensive than the market average. If you reduce the price and become more relevant. More market relevant. That real-term difference again is going to make the biggest difference inside your organization. If you can bridge that gap, especially as I said, if you're the highest price in the market, it's likely you're not getting many sales on that particular product. So simply by reducing the gap where the furthest away that is going to deliver the greatest impact to your business.
3. What Products Have Changed Price
The third tip that we recommend that you use Black Curve to support your decision-making is to use the Price Change Report. So, this really comes into its own if you're on top of your pricing decisions, if you've got automated pricing that's going on daily, or if you're doing it in a manual process for each day you're logging on and checking the insights, this price change report shows you what has changed in the last 24 hours or the last seven days.
Okay, so as I said, this is really only relevant if you are on top of your pricing decisions. But that in itself is a way of slicing the data and minimizing the amount of data that you have to look at because it's just simply saying, right, these products have changed in the last seven days or the last 24 hours. Does that materially make a change to my current market position? And therefore in its way, it limits the amount of data that's being presented to you and therefore means that you have to eyeball and view fewer data.
4. Number of Competitors
The fourth area that we generally recommend people look at is again staying within our competitor report itself, but it should filter and look at the products that have the highest number of competitors. Now we've spoken previously on podcasts about you can use the volume of pricing changes to determine how competitive a product is. So, if a product is changing price a lot more frequently than others, that's an indicator that this particular product is market driven.
But if you don't have access to that data point, the secondary data point, which is actually really useful is seeing how many competitors does this product have? And the reason I say that is because a lot of time retailers come to us and say hang on, I'm not interested in X Company. I'm not interested in Y company. I'm only interested in these specific competitors. Now my argument to them is generally hang on a minute. Especially if you're in maybe more of a niche industry or especially if you're in the appliance market whereby brand of goods is everything. We generally laugh on this podcast around using Dyson as an example. Dyson Hoovers is such a powerful brand. Does that retailer really care if they buy it from a major high street brand or buy it from a relatively unknown retailer? Fundamentally they are buying the brand. They're not buying the retailer. Therefore the price is really important for products like this and therefore anybody that's selling that product and advertising that product, whether it be organically or buy paid ads inside the Google ecosystem, is relevant. Okay? And conversely, the products that have more competitors, the highest number of competitors shows that this product is widely available and therefore that is an indicator in itself that this product is market driven. This product is competitive driven people will more likely because if it's readily available people more likely to vote based on price.
So, you can simply sort on the products that have the highest number of competitors and make sure your decision-making is primarily on those particular products because as I said the consumers the customers are voting with pounds and pence rather than necessarily do they like one retailer over the other.
5. Marketing Data
And last but not least we have the A marketing report. Now inside BlackCurve this is available as a plug-in. And what this does is this piggybacks off your Google Ads ecosystem and it pulls in all of your key marketing metrics. I'm talking about impressions, share of impressions, the sum of clicks, click-through rates, advertising costs, and so forth.
Now retailers out there I'm sure you're listening to this and smiling and nodding spend thousands and thousands and thousands of pounds each month inside the Google machine to drive traffic to their website. Now price is a lever for how well your marketing performs.
So, your competitive price position determines your relevance, and the number of times you change the price again determines your relevance. So, if you can identify how price does impact your relevance you are going to deliver the greatest benefit for your business. Okay? So, this is about supporting focus here. If you import your impressions and you sort on products that have the greatest number of impressions in turn if you make a price change this is a product that has the greatest share of search and therefore this is a product where you're going to have the greatest impact on your business if you change a price.
Again, if you search on total clicks and sort on total clicks for your product this again in turn if you change the price is where you've got more eyeballs on this product. Therefore, in turn, by changing a price you have the opportunity to assess whether you can use price to drive better conversion and on the flip side, you can use price to identify how can you improve advertising costs so where you are and to give an example of this, you may decide to filter on where you are spending the most of advertising costs. You may not be responsible for advertising costs yourself, sorry, you might not be responsible for managing the paid element, you might have another colleague or third-party agency that's responsible for advertising inside the Google ecosystem.
But if you can see and use the BlackCurve report where you are spending the most amount of money, we in turn will suggest recommendations. For example, you may have instances where you are spending a lot of money on Google ads. However, you are the highest price in the market and therefore the advertising metrics is telling us that you have low relevancy and therefore you're effectively giving money to Google but not
actually appearing, you're having to spend more and more and more money to get a share of impression.
However, Google is penalizing you because of your price position so therefore it's costing you a lot more to get the eyeball for that particular product. So, in turn as the person responsible for pricing if you can reduce the price for those products you will see over time that actually the advertising costs will come down, the cost per acquisition will come down and in turn, your share impressions will improve. So just to summarize, we've gone through five areas to support your decision-making in order to limit the amount of data to look at.
Summary
Just to recap, BlackCurve can support you to top and tail market segments. So, you can see incrementally how many products I have that are the furthest away from the market average or the lowest price in the market, or the highest price in the market. So that's the furthest away in terms of lower and the furthest away in terms of more expensive.
For the second one, you can use our competitor report to identify real-term pounds and pence or percentage differences from each market position. If you can sort based on the highest number again this means that you're focusing where you're going to deliver the greatest benefit for your business.
BlackCurve also provides you with a price change report. So if you're on top of your pricing decisions and you're doing it every day or every few days, you can therefore use our price change report to show what has changed in the last day, the last few days, the last seven days and so forth and that, in turn, will limit the amount of data you have to look at to make decisions on.
We come back to our competitor report using the data point of the number of competitors as opposed to filtering on specific competitors is a powerful lever for assessing which products are market driven. And therefore if your position has changed on the products where you have the highest number of competitors that is an indicator that this is where you should focus your pricing decisions.
And last but not least, we generally always recommend customers opt for the marketing plugin because these retailers are spending thousands and thousands of pounds a month on Google and anything you can do to improve that is especially important. And often prices are blind to what's going on in terms of the marketing world and often because it's managed by a third-party agency. And conversely, the marketing agencies don't have much awareness of what's happening in terms of a pricing perspective and this marketing plugin bridges that gap and gives the price the opportunity to see the marketing metrics and filter on the marketing metrics that are important to the pricer in order to again focus decision making.
This has been Ecommerce Matters, the UK's first eCommerce pricing podcast brought to you by Blackcurve. Blackcurve is your ecommerce pricing HQ. We help eCommerce businesses understand their competitors and use prices to improve digital marketing performance. Until next time.
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