Every store prices with its competitors in mind, even the ones that say they don’t. A shopper who finds the same kettle $15 cheaper two tabs over will notice. Competitor-based pricing just makes that explicit: you decide where you want to stand against each rival, product by product, and you keep watching.
Competitor-based pricing is setting your prices from what your competitors charge for the same or similar products. You choose to sit below them, level with them or above them, then adjust when they move.
The three strategies
| Strategy | What you do | When it works | The risk |
|---|---|---|---|
| Below the market | Price a little under your main rivals | Identical products, price-led shoppers, a lower cost base | Margins thin out, and rivals follow you down |
| At parity | Match the going price | Products shoppers compare side by side | You compete on everything else, so that has to be good |
| Above the market | Price over your rivals on purpose | Better product, faster shipping, a brand people ask for | You have to show why, on the page |
Most stores use all three. The bestseller everyone compares sits at parity. An exclusive or own-brand product sits above. A slow line you want to clear goes below.
Three examples
The store and its rivals below are made up, to show the arithmetic. The patterns are common.
Below the market, on purpose and briefly. A coffee roaster sees its closest rival start a 15% sale on its house espresso. Its own house blend is a like-for-like match, its best entry product and the one new customers try first. It cuts the price 10% for the length of the rival’s sale and puts it back the day the sale ends.
At parity, on the products shoppers compare. The same roaster sells a well-known hand grinder that three rivals also carry. Shoppers compare it on price alone, so it matches the lowest of the three, and stops matching if that rival goes below its own floor.
Above the market, with the reason on the page. Its single-origin beans cost $3 more than the nearest rival’s. The page says why: roasted to order, shipped within 24 hours, with the farm and the harvest date on the bag. A shopper who reads that has a reason to pay more.
How to do a competitor pricing analysis
- Pick the competitors that matter. Three to six stores your shoppers really choose between, not every store in the category. The stores that rank next to you in Google for your main searches are a good start.
- Match products. Pair each of your products with the competitor product a shopper would weigh instead: the same item if they sell it, the closest equivalent if they don’t. Note which pairs are exact and which are close.
- Record the full price. List price, sale price, any code shown on the site, shipping to your main area and whether it’s in stock. A $2 cheaper product with $7 shipping isn’t cheaper.
- Work out the price index. Your price divided by theirs, times 100, per pair. Average it per competitor and across the market.
- Write your rules. For each product group, where you want to stand (below, level, above) and the floor you won’t go under.
- Keep watching. Prices are a moving target. Check your most compared products every day and the rest every week.
A worked price index
| Your product | Your price | Rival’s product | Rival’s price | Index |
|---|---|---|---|---|
| House Blend 12 oz | $16.00 | House Espresso 12 oz | $15.00 on sale | 107 |
| Burr Grinder | $95.00 | Burr Hand Grinder | $88.00 on sale | 108 |
| Decaf 12 oz | $18.00 | Swiss Water Decaf 12 oz | $18.00, sold out | 100 |
Against this rival, the store is about 5% dearer on average, but only because of two sales that started on the same day. A week later, with both sales over, the same table might show it level. That’s why one reading isn’t a strategy.
Note the sold-out decaf. A rival out of stock on a product you sell is a different signal from a price cut. It’s a week to make sure yours is easy to find, not a week to cut your price.
See your competitors this week
Type your address. We find the sites that turn up next to yours in Google, in your country and language, and read them every week.
3 days free, then from $49 a month. Cancel any time.
A free template to start with
Download the competitor price tracking template (CSV, opens in Excel, Numbers or Google Sheets). It has a column for each thing worth recording: the date read, your product and price, the competitor’s product, list and sale price, any promo code, shipping, stock and the price index, with three example rows.
A spreadsheet works for a handful of products and a couple of rivals, if someone fills it in every week. Past that, the reading is what slips, and an empty week is a gap you can’t fill in later.
Mistakes that cost margin
- Reacting to every move. A rival’s weekend sale isn’t a new market price. Wait to see whether a move lasts before you follow it.
- Comparing products that aren’t the same. A 12 oz bag against a 10 oz bag, or a kit against the item alone, gives you a false index. Compare like with like, or compare price per unit.
- Leaving out shipping and codes. Shoppers see the total at checkout. So should your analysis.
- Following the lowest price in the market. One store going out of business can set a price nobody can live on.
- Forgetting promotions. Many price cuts never touch the product page. They live in a banner, a code or a free gift. Read the homepage, not only the product.
- Matching on everything. You can’t be cheapest on every product and stay in business. Pick where price wins the sale and stand above the market elsewhere.
How to keep track without a spreadsheet
Price monitoring software reads your competitors’ product pages on a schedule and keeps the history, so the reading never slips. There are two kinds. Repricing tools change your own prices by rules. Monitoring tools report what rivals charge and leave the decision to you.
Over the Fence is the second kind. It reads the rival products that matter most to you every day, every other page every week and each rival’s homepage banners every day, then tells you what moved, with the page it read it on. It starts at $49 a month.