Competitor Pricing: What Is It, Benefits and Drawbacks

Competitor Pricing

For internet retailers, competitive price research is a vital tool. It aids in setting market prices, offers guidance on pricing, and draws attention to the advantages and disadvantages of rivals. When this e-commerce tool is ignored, businesses become less competitive and lose market share to better-informed competitors.

This post explains rival pricing and discusses the benefits and drawbacks of using it to determine prices for your online store.

Competitive Pricing: What Is It?

As part of their marketing strategy, companies that use competitive pricing base their rates on those of their rivals. This tactic, often referred to as competitor-based pricing, is frequently used in offline and online marketplaces to grow market share and draw in more clients. Therefore, many businesses use competitor price monitoring software, which makes their work easier and saves time. But for competitive pricing to work, companies must comprehend the value perceptions of their customers and the price tactics used by their rivals.

While there isn’t a set formula for determining which rivals are important, popular approaches include looking at competition revenue, staff count, customer reviews, social media followers, digital traffic share, and/or product overlap.

If you are a retailer of items in a certain niche, like “medical instrument,” you probably have some rivals in that niche. You will probably face a wide spectrum of rivals if you offer products in many markets. It is much too simple to choose your rivals based just on intuition. This might lead to unintentionally overlooking a well-known rival who has been using search engine optimization to great effect, increasing their internet presence.

If you are gathering information straight from a competitor’s website, you must identify them. You may use specialized price scraping tools or do your own manual searches. This is due to the fact that you must state up front which competitors pique your attention.

The Benefits of Prices Set by Rivals

The majority of consumers, according to Statista, shop around before making an online buy. If your products are much more costly than the competition in an area where branded items are sold in several places, your consumers will look elsewhere. On the other hand, if you’re too inexpensive, they will probably assume something is off, that the offer is too good to be true. To avoid losing out on sales, it is crucial to be abreast of market price and positioning.

A relevance score is one of the metrics Google looks at to calculate how much you must spend on your Ads to attain the visibility and desired page position. The pricing strategy of your rivals influences this relevance score. The less you have to spend on your ads, the more relevant you are. Therefore, even if you’re not actively monitoring the link, you will instantly improve your Cost Per Acquisition (CPA) by using a competitive pricing plan.

The Drawbacks of Price Matching

The pricing of competitors is a lagging indication. You have to wait for a rival to take action before changing your pricing. Then, all you have to do is take the inevitable step to hold onto your position or choose to disregard the competitor’s price adjustment. Saying no is your only power.

The pricing practices of competitors may result in unfavorable outcomes for all participating merchants. Frequently called a race to the bottom or even the top, businesses find themselves in a vicious loop where they constantly adjust their pricing in response to one another’s price movements. This is why, whether you set your rates automatically or manually, we always advise making sure you have the right security measures in place.

Customers will often pay extra for a well-known brand. As a result, setting pricing only based on competition data may not accurately represent the value that consumers place on buying from you. This is the reason it’s critical to identify relevant rivals. Consumers won’t be as concerned about the store when the product has a great brand. The store brand takes on even more significance when it comes to specialty products. This is also the point at which it becomes crucial to include more data in your pricing decision-making process. 

For example, may you utilize stock, sales, or marketing data to determine where a product should be positioned in the market or even where it may be ignored? By using these data sets, you can ensure that the prices of all of your items are optimized and can even be used to price products with no competitor overlap.


Starting with competitor pricing involves gathering information, evaluating rivals, and determining a position. Gradually adjust the data regularly, then use pricing automation to maintain the stance and enhance performance metrics. Once the position is effective, gather more reference data and question competitors’ assumptions to extract more profits. This approach helps in enhancing key performance metrics and maximizing profits.


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