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The interesting irrelevance of Google Shopping price benchmark

The interesting irrelevance of Google Shopping price benchmark

For quite some time Google launched the Price Competitiveness Report in their Google Merchant Center. This feature claims to give insight in the price level of the advertisers compared to the other vendors in the market. In order to be able to see the Price Benchmark indicator, you’ll need to have an EAN (GTIN13) available for the product. This is a requirement for seeing the price indication performance.

What does the Pricing Benchmark include and how is it calculated?

The interesting thing is that the Google Shopping price benchmark does not say anything about the statistical methods like average, mode, mean of the price ranges in Google Shopping. The individual scores (price per shop) are not provided. Thus you will not be able to see what shop is selling at what price. Also you are not able to see the complete price (lowest and highest ) range of the price levels per product.

The information that is provided is in how many cases (% of the total) your price is higher, exactly the same, or lower than competitors. The Price benchmark is calculated by taking all the clicks per offer/price and adding that to the total and then calculating the weighted average. The number that is provided is then the average of the prices that are mostly clicked on.

Example:

8 clicks on a price of 120 Euro

15 clicks on 125 Euro

12 clicks on 130 Euro

10 clicks on 135 Euro

6 clicks on 140 Euro

 

In this case the Google Shopping benchmark would be 128,90 Euro, although the average of the prices is 130 Euro. The median is 130 Euro and the mode is 125 Euro. This is all with taking the number of clicks into account as well. But as a webshop you are interested in the lowest and highest price and how often a certain price is offered. Also you want to follow certain webshops and leave for example the lowest (and highets) prices outside your scope.

Also the number of clicks per offer is a result of many factors, of which price is only one of them. Also the brand name of the vendor, the delivery time, the shipping cost, etc. etc. are part of this. So taking the number of clicks into account is comparing you on all these combined factors with your competition: all in one. You want to know how you rank on all these individual aspects compared to your competition, right?

So summarized: In all cases the Google Shopping price benchmark does not fit your scope for your pricing strategy and does not answer your questions concerning ceomptitive pricing, because you still do not know what the competition is offering.

 

Then the question arises, what can you learn from the price benchmark and what options do you have after taking it into account? The only thing that an advertiser will get from the benchmark pricing feature is a not-at-ease feeling that he/she is missing out on something. Then there are two things to do: adjust the price level and lower the price (this will reduce the margin of the retailer). The othe thing to do is spend more on advertising, in this case Google Shopping, to get more clicks (this will reduce the margin of the advertiser as well). So the result in both cases will be: reduction of the margin. And more clicks in Google Shopping at a higher price for the advertiser and for sure lower margin.

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