PRICE COMPARISON
Definition
Price comparison refers to the process of comparing the price of a product with that of one or more equivalent products, whether they are direct competitors, substitutes, or variants from the same manufacturer. For retailers, it is a fundamental aspect of pricing strategy.
For consumers, this has become second nature, a process accelerated by online comparison tools, mobile apps, and the transparency required by certain regulations.
Why is this important to know?
- Identify pricing discrepancies: those that could damagethe brand's image or present a margin opportunity.
- Justify repricing decisions to sales and finance management using objective data.
- Anticipating consumer decision-making: Consumers can now compare products in just a few seconds on their phones, even while they're in the store.
Example
A home appliance retailer monitors the prices of 500 major products at 12 direct competitors.
The monthly analysis shows that 8% of the products are priced more than 5% above the median market price, including 23 KVI products.
For these 23 SKUs, the retailer is implementing a gradual price alignment over three weeks, while tracking changes in category volume. The result: a 4.5% increase in sales for the SKUs subject to price alignment, with no negative impact on the others, and a margin loss limited to 0.3 percentage points.
Common Mistakes
- Comparing a private label to a national brand without taking into account the difference in perceived value: a raw analysis skews the decision.
- Ignore promotions and coupons: A price listed at €19.99 with an immediate €3 discount at checkout is not comparable to a price listed at €19.99 (final price).
- Updating too infrequently: A price dashboard that's a month old is outdated in most categories.
Frequently Asked Questions
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In retail, management requires a careful balance between profitability and customer perception through strategic pricing segmentation of the product assortment. By identifying key performance indicators (KPIs) for competitiveness and margin drivers for profit, we stabilize the price image without sacrificing economic viability. A price index close to 100 ensures consistent positioning in the market.
Price perception is a subjective view shaped by a brand’s key products (KVI), not by an overall statistical average. For the reader, mastering this lever makes it possible to build customer loyalty without sacrificing overall profitability. A key point? Just 2% of a brand’s products account for 80% of its price perception.
An effective pricing strategy relies on a rigorous segmentation between image products (KVI) and margin drivers to maximize profitability. By balancing perceived value and competitive data, this approach can increase EBITDA by up to 15%. Clear governance and automated rules ensure consistent execution in the face of market fluctuations.