How to determine price competitiveness in product advertising

As we covered previously, how your price compares to that of your competitors has a huge impact on the success of your Shopping campaigns. Price your products too high and Google will display them lower in the paid results or refuse to show them at all. Price too low, and you lose margins – a race to the bottom is never fun.

The key to a good pricing strategy is to identify a few high-impact products and make sure that they are priced correctly within the competitive landscape. To do this, you’ll need a way of measuring how pricing affects your Product Advertising efforts on Google Shopping.

Focus on products with a lot of impressions, since these products play a huge role in acquiring new shoppers, a few key price adjustments can have a dramatic effect. Sounds simple in principle, but the reality is slightly more complicated.

Here’s how you can identify which products you should be monitoring, how to do that monitoring at scale and how to derive actionable insights from the data you collect.

Identify high-impact products

First off, you want to make sure your Product Feed contains valid GTINs. These will help you match your products with the products from your competition. Relying on some other matching criteria like the product name or description at scale will get you lots of mismatches and your data will need a lot of cleaning. You also want to ensure that the products you’re monitoring are in stock.

Next, you need to decide how many competitors a product needs to be relevant to you. We recommend only looking at products with at least three competitors. Any less than that and the conclusions you can draw on pricing aren’t going to be very reliable.

Your final criteria should be how many impressions each product has received in the last 30 days. Remember that you’re looking for products that are gateways to your website. The number you choose here will depend on a number of impressions your account gets in general, but a good place to start for most retailers is 300.

Product criteria

  • Valid GTIN
  • 3 or more competitors in Shopping
  • >300 Impressions in the last 30 days

Once you’ve applied these product filters, you’ll be left with a list of products that have the potential to make a big impact on the overall success of your business. Now it’s time to compare your prices for these products to those of your competitors.

Gather intelligence

PPC Managers are typically short on time. So unless you have an automated solution, we’d recommend sorting your high-impact products even further. For the sake of simplicity, start with a top 20, then you can use one of these sources to find out how your competitors price these products:

Shopping Comparison Sites

Typically, each country has its own popular Shopping comparison site. For example, in the UK, common sites include ciao and pricerunner.

Price data vendors

You can buy price data from companies like PriceAPI.com. The advantage with this solution is that these companies offer programmatic access to their data via APIs, so you can run queries in bulk instead of entering each GTIN into a Shopping Comparison site.

Merchandising teams

Your merchandising team or buying department may already have a solution for monitoring price levels. They may be able to provide you with price data for the products you’ve selected.

Crealytics

As part of our Retail Intelligence Platform, we created the Price Advisor, which automatically identifies a few high impact products and gives price recommendations based on the competitive landscape and search data.

Actionable price insights

Once you’ve identified a list of high-impact products and found out where you rank in terms of the competition, you can separate these into two basic categories – too competitive and not competitive.

If you’re too competitive, it means that your product price is well below the next lowest price. In this case, you’ll likely want to recommend raising the price to a level that is still the most competitive but will deliver greater margins.

If you’re not competitive enough, it means that your product is significantly more expensive than the minimum or average price. In this case, you would want to recommend lowering the price of that product to something more competitive.

Here’s the million dollar question: By how much should you recommend changing the price?

Your exact formula will differ depending on your business and it’s objectives. However, a good formula is one that includes your price ranking; price difference from the minimum, maximum and average price; performance data and how aggressive or conservative you want your pricing strategy to be. Your formula should allow you to make informed pricing recommendations that don’t simply suggest you go straight to the lowest price. The final step is to take your newfound pricing insights to the relevant department.

If the pricing department agrees to change a few prices, it’s important to monitor the PPC performance of these products over time to understand exactly how the change affects performance. We recommend building your cohort filter in AdWords and observe how impressions, clicks, CPC and conversion rates change over time.

Additional resources

The role of price on Google Shopping performance

Bridging the gap between Marketing and Merchandising

Get the product price right for Google Shopping

A study into Google Shopping’s low price bias (and 4 ways to overcome it)

ABOUT THE AUTHOR


Andreas Reiffen

Andreas Reiffen is the founder and CEO of crealytics and data-driven online marketing strategist with his focus concentrating on online retailers.

    Find more about me on:
  • linkedin