COMPETITIVE BENCHMARKING
Definition
Competitive benchmarking is the systematic comparison of prices, product assortments, and promotional offers between a retailer and its direct competitors. More structured than simple price monitoring, it incorporates summary metrics (price index, promotion rate, assortment depth) that enable retailers to manage their competitive position over time and by category.
Why it's important
- Objectively assess pricing strategy: replace perceptions with quantitative metrics derived from a panel of competitors.
- Managing by category: A department-by-department benchmark reveals where we are competitive and where we need to make adjustments.
- Internal communication: A shared benchmark dashboard with the sales department helps facilitate decision-making.
A concrete example
A fresh food retailer compiles a monthly benchmark based on 7 competitors (4 brick-and-mortar chains, 3 online grocery retailers) across 1,200 SKUs. The dashboard reveals an overall price index of 102 (2% more expensive than the market average), with variation by department: 95 for dairy (very competitive), 108 for meat (expensive), and 100 for fruits and vegetables (in line with the market). Targeted price adjustments can bring the overall index down to 99 within six months.
How to measure/use it
A structured competitive benchmark includes: 1) a clearly defined scope (competitors, benchmarks, frequency), 2) reliable data collection (web scraping, field surveys, panels), 3) rigorous product matching (EAN, NLP, computer vision), 4) calculation of weighted indices (by volume, by margin), 5) presentation in a dashboard that is easy for operational staff to read. Pricing analytics solutions automate these steps.
Common Mistakes
- Benchmarking on too broad a scale: including irrelevant competitors skews the metrics.
- Unweighted index: Simply averaging prices gives a bestseller the same weight as a niche title, which skews the analysis.
- Static benchmark: A quarterly benchmark is too slow for a market that changes every day. Aim for at least a weekly update.
Learn more
- Research & Data: Price tracking and web scraping to build a reliable benchmark.
- Solutions: Pricing Analytics to automate the calculation of indices and dashboards.
- Tip: Operational Pricing to structure benchmark governance.
- Resources: See our pricing FAQ to learn the difference between price monitoring and benchmarking.