The Strategic Approach to Creating  Competitive Price Zones

Expanding into a new market is a formidable challenge for any retailer. It requires a thoroughly planned-out strategy beginning with understanding your new customer demographics, market shift trends, and the competitive landscape. And success in one city or neighborhood doesn’t necessarily promise success in another one with a different customer base. In fact, a product that flies off the shelves in one store may sit untouched at the store just a mile away. That’s why it’s crucial to set up specific competitive pricing/shopping zones so that you can make sure you’re creating the best value in each market from price to category assortment.

Besides helping in-store operations one of the biggest advantages of defining your shopping zones is helping marketing target their messaging to the correct demographic.  So, in the end, it’s a win-win for every department involved, so where do you start?

Creating Competitive Pricing for Your Market

So your first task is to understand your consumer market. An area dominated by apartment-dwelling millennials, for example, is going to have a different set of “hot” items and competitors from a store in an established neighborhood of families or of older people. Your market for diapers is going to be vastly different in a suburban area then it might be in an urban multi-family community. Similarly, your market for certain prepackaged ethnic foods might find less of an audience in a neighborhood where there are plentiful local options for those foods. And in some affluent neighborhoods, having a higher price may actually work to your advantage.

Tools to Help Create Your Mapping

So the first step to competitive pricing zones is to understand the demographics of your various markets. You can look at gross income, education, age, and ethnicity for starters.

  • Research the market using city data for various zip codes, school districts and city council district maps.
  • Check city guides produced by chambers of commerce and real estate companies that tell how various neighborhoods developed and what kinds of renters or buyers are drawn to them.
  • Look at the successful restaurants and retail shops in the area. Is there a preponderance of coffee shops? Vegetarian restaurants? Target your category and pricing strategy to appeal to customers who might be more interested in eco-friendly or organic offerings.
  • Get a sense for your established or new competitors in the area. What is their role in the retail landscape? What shoppers do they appeal to, and why?

Your Data Is the Best Mapping Tool

But you’ll also want to use your own data. What trends are you seeing across stores? Neighborhoods? Categories? Once you’ve defined your pricing, keep tabs on how well products are selling and make adjustments to test different price points during different seasons. Dynamic pricing is helpful when customers are able to see competitors’ prices on their mobile devices. Though you’ll want to pick certain staple items in each market on which to maintain a low-cost lead. You may need to conduct several tests on different categories to get your pricing strategy just right.

Keep It Simple

Most of these strategies can be implemented with a little market research and a good data collection and analysis tool. You don’t want to make yourself crazy by creating micro markets that are too narrow, or you end up with diminishing returns. Just learn enough to set reasonable zones, create a baseline and continue to test your assumptions.

As every retailer knows, one size does not fit all. Competitive pricing zones are one way to intelligently approach a diverse market. The goal is to turn map A into map B.



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Seth Nagle, Senior Marketing Manager at RW3 Technologies understands the power of innovation but also its limitations. Attending Salve Regina in New England, starting his career in Silicon Valley, and now living in Austin, Texas; Seth provides a unique tech perspective to a complex CPG and Retail Grocery Industry that is in constant disruption.

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