COMPETITIVE ANALYSIS
Definition
Competitive analysis is the process of observing, comparing, and interpreting competitors' pricing strategies in order to make more informed pricing decisions.
As part of a pricing strategy, it goes beyond simply collecting price data; it also involves analyzing promotions, product assortments, positioning, product availability, and perceived value.
Its goal is to identify opportunities for differentiation, maintain the company's competitiveness, and simultaneously optimize sales, margins, and price image.
Why it's important
- Protecting your price image: Avoiding a negative price gap on key products helps prevent a loss of traffic.
- Identifying profit opportunities: pinpointing the products where you’re cheaper than the competition allows you to raise prices without risk.
- Anticipating market disruptions: Continuous analysis detects new entrants, structural price declines, or changes in product assortments.
Example
A home appliance retailer is implementing a weekly analysis of 12 competitors across 3,000 product SKUs.
The study reveals that for 18% of its products, prices are more than 5% higher than the market low, which damages its price image.
Conversely, for 22% of products, its prices are more than 5% lower without any profit margin. The streamlining generates a +1.8-point margin increase for the category without any loss in revenue.
How do you measure/use it?
An effective competitive analysis consists of four steps:
1) Define the scope (relevant competitors, benchmarks to follow, frequency),
2) collect data (web scraping, in-store surveys, partners),
3) consolidate and clean up (product matching, promotion management),
4) Analyze and make decisions (positioning by category, by product, by competitor). Analytics tools integrate these steps into a standardized workflow.
Mistakes to Avoid
- Comparing non-equivalent products: incorrect product matching skews all conclusions.
- Tracking too many competitors: spreading your analysis across 30 brands dilutes the insights; it’s better to focus on the 5 to 8 that are truly competing.
- Confusing data collection with analysis: simply collecting prices isn’t enough; you also need to put them into context and use them to make decisions.
Frequently Asked Questions
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