Day 12 of 20 · AI for E-commerce

Competitor Analysis & Pricing Strategy

⏱ 7 min 📊 Beginner

Most store owners set their prices based on a gut feeling, a quick glance at one competitor, or a simple cost-plus calculation. That works until it doesn't — and when it doesn't, you're either leaving money on the table or losing sales to someone who priced smarter.

Today you'll learn how to use AI and tools like Perplexity to do proper competitive research — the kind that large companies pay consultants thousands for. You'll analyse competitor pricing, positioning, and customer feedback, then feed it all into AI for actionable pricing and differentiation strategies.

Competitor research with Perplexity

Perplexity is an AI-powered search engine that synthesises information from across the web. It's perfect for competitor research because it pulls data from product listings, review sites, articles, and forums — and summarises it clearly.

Here's the research process:

Step 1: Identify your competitors. Search Perplexity for "top [your product category] brands online" or "best [product type] stores Shopify." You'll get a curated list with pricing, positioning, and market share information.

Step 2: Analyse their pricing. For each competitor, note their price range, whether they offer discounts, their shipping costs, and any bundles or subscriptions.

Step 3: Read their reviews. Search for "[competitor name] reviews Reddit" or "[competitor name] trustpilot." Focus on 1-star and 2-star reviews — that's where you find the gaps.

Step 4: Map their positioning. What do they promise? Who's their target customer? What's their brand voice? This tells you where they've planted their flag — and where the open territory is.

Knowledge Check

Why should you focus on competitors' negative reviews during research?

To confirm your product is already better

Negative reviews reveal unmet customer needs — gaps you can fill with your own store

Products with bad reviews aren't worth competing against

To find ammunition to use against them in your ads

One-star and two-star reviews are a roadmap of opportunity. If customers consistently complain about slow shipping, you can compete on speed. If they say the product is good but overpriced, you can offer similar quality at a lower price. If they mention poor customer service, you can make service your differentiator. Complaints tell you exactly what the market wants and isn't getting.

Building your competitor matrix

Once you've researched 5 competitors, organise everything into a matrix. AI can help you build and analyse this:

|--------|-------------|-------------|-------------|------------|

| Price range | $45–$80 | $30–$50 | $60–$120 | ? |

This matrix instantly reveals patterns. If Competitor A is premium and Competitor B is budget, and nobody owns the "great quality, fair price" middle ground — that's your opportunity. If everyone has slow shipping complaints, free express shipping becomes your differentiator.

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ChatGPT

online

I sell handmade ceramic coffee mugs online, priced at $32 each. Here are my 5 main competitors: 1. MudLove — $28, mass-produced, 4.1 stars, complaints about thin walls and generic designs 2. East Fork — $38–$55, artisan, 4.7 stars, complaints about high prices and long wait times 3. Etsy sellers (average) — $18–$25, handmade but inconsistent quality, 3.9 stars average 4. Anthropologie — $14–$22, trendy designs but fragile, 3.6 stars, lots of breakage complaints 5. NotNeutral — $20–$35, specialty coffee focus, 4.5 stars, complaints about limited designs Analyse this competitive landscape. Where should I position myself? What pricing strategy do you recommend? What gaps can I exploit?

Here's your competitive analysis: **Pricing landscape:** - Budget tier: $14–$25 (Anthropologie, Etsy average) - Mid-range: $28–$35 (MudLove, NotNeutral, YOU) - Premium: $38–$55 (East Fork) **Your position: Premium mid-range ($32–$38)** You're sitting in the most strategic spot in the market. Here's why: **Gap 1: Quality + Accessibility** East Fork has the quality but the price excludes casual buyers. Etsy has the handmade appeal but inconsistent quality scares people. You can own "artisan quality without the artisan price tag." Raise to $35–$38 — it signals quality without hitting the East Fork pain point. **Gap 2: Durability** Anthropologie and MudLove both have breakage/thin wall complaints. Make durability a headline selling point: "Built to survive your morning fumble." Feature your wall thickness, kiln process, or a satisfaction guarantee. **Gap 3: Design variety** NotNeutral has a loyal following but "limited designs" is their top complaint. If you can offer seasonal collections or custom colour options, you steal their customers who want variety. **Gap 4: Speed** East Fork has weeks-long wait times. If you can ship within 3–5 days, that's a major advantage for gift buyers and impulse purchasers. **Pricing recommendation:** Raise from $32 to $36. Here's the math: - At $32 (100 sales/month) = $3,200 - At $36 (even if sales drop 10% to 90/month) = $3,240 - At $36 with a "2 for $65" bundle = higher AOV + gift market The $36 price point also creates clear separation from the budget tier ($18–$28) and positions you as aspirational without being exclusive. **Differentiation strategy:** Own the message: "Handmade mugs that last. Shipped this week, not next month." This directly attacks East Fork's weakness (speed) and Anthropologie's weakness (durability) while keeping the artisan appeal.

↻ Replay conversation

Pricing psychology for e-commerce

Price isn't just a number — it's a signal. AI can help you test and optimise these psychological pricing strategies:

Charm pricing — $29.99 instead of $30. It works, even though everyone knows why. The left digit effect means customers perceive $29.99 as "twenty-something" rather than "thirty." Use it for everyday products.

Prestige pricing — $50 instead of $49.99. Round numbers signal quality and luxury. If you're positioning as premium or artisan, round numbers reinforce that.

Bundle pricing — "2 for $65" instead of "$36 each." Bundles increase average order value and make the customer feel they're getting a deal — even when the discount is modest.

Anchor pricing — Show the original price crossed out next to the sale price. "$55 ~~$70~~." The higher number anchors perception, making the actual price feel like a bargain.

Free shipping thresholds — "Free shipping on orders over $50" encourages customers to add one more item to hit the threshold. If your average order is $36, a $50 free shipping threshold reliably increases it to $50–$55.

Knowledge Check

Your handmade candles sell for $35 each. Your average order is $35 (one candle). What pricing strategy would most effectively increase average order value?

Adding a subscription option

Dropping the price to $29.99

Raising the price to $45

Offering a bundle like "3 for $89" and setting free shipping at $75

The bundle gives a clear incentive to buy more in one order — 3 for $89 instead of $105 at full price. The free shipping threshold at $75 means even customers who don't want the bundle will add a second candle ($70) and perhaps a small add-on to cross $75. Both strategies increase average order value without discounting your core product.

Differentiation strategies

Competing on price alone is a race to the bottom. AI can help you identify differentiation strategies that create real competitive advantages:

Speed — If competitors ship in 7–10 days, you ship in 2–3. For gift buyers and impulse shoppers, speed wins.

Specialisation — Instead of selling "candles," sell "candles designed for small apartments" or "candles for book lovers." A niche focus makes you the obvious choice for a specific customer.

Guarantee — A bold guarantee removes risk. "Love it or we'll refund you AND let you keep it." This costs almost nothing (most people don't abuse it) but dramatically increases conversion.

Unboxing experience — A handwritten thank-you note, branded tissue paper, a small freebie. The unboxing experience drives repeat purchases and UGC.

Transparency — Show your cost breakdown publicly. "Here's exactly what goes into a $36 mug." Radical transparency builds trust, especially with younger buyers.

Ask AI to analyse your specific competitors and suggest differentiation strategies based on their weaknesses and your strengths.

Knowledge Check

A competitor sells a very similar product for 20% less than you. What's the best response?

Match their price immediately

Ignore them and hope customers don't notice

Differentiate on value — faster shipping, better guarantee, superior experience — so customers choose you for reasons beyond price

Undercut them by going even lower

Matching or undercutting their price starts a price war you might not win — and it erodes your margins. Instead, give customers a reason to pay more. If your shipping is faster, your guarantee is stronger, or your product is genuinely better, communicate that clearly. Customers will pay a premium for confidence, convenience, and quality. Compete on value, not just price.

Gap analysis and market positioning

The final step is pulling it all together into a positioning statement that guides every decision you make:

Formula: "We help [target customer] who [problem/need] by [your solution] unlike [competitor approach] because [your unique advantage]."

Example: "We help home decor enthusiasts who want unique, handmade ceramics by offering artisan-quality mugs shipped within 3 days — unlike premium brands that charge $50+ and take weeks to deliver — because we keep our studio small and our process efficient."

This statement informs your ad copy, your product descriptions, your email marketing, and your pricing. Everything flows from knowing who you serve, what gap you fill, and why you're different.

AI can draft multiple positioning statements based on your competitive research. Test them in your ads and see which resonates most with your audience.

A two-axis positioning map with price on the vertical axis and quality on the horizontal axis, showing competitor positions and a highlighted gap where the user's store should position

Find the gap no one is filling. That's where your store belongs.

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Day 12 Complete

"Competitor analysis isn't about copying — it's about finding the gaps. Research their pricing, read their bad reviews, and position your store in the space they've left wide open."

Tomorrow — Day 13

Reviews & Social Proof

Tomorrow you'll master the art of getting more reviews and turning social proof into sales.

Continue to Day 13 →