In today’s day and age, where customers are bombarded with multiple options and substitutes for a product, pricing can make or break the business. All it takes is a simple Google search by your customer to compare the prices and products offered by your competitors.
FUN FACT: according to a study, 80% of shoppers compare prices online before purchasing a product.
Pricing can be a tricky business- if you price the product too low, the brand image deteriorates; if you price it too high, you lose potential customers.
How can you determine the right pricing strategy for your brand to help you stay parallel with your competitors? The answer is by adopting the competitive pricing strategy for your brand.
This blog will enable you to adapt to the competitive pricing strategy for your brand.
What is a competitive pricing strategy?
To put it in layman’s terms, a competitive pricing strategy requires you to price your products after considering the prices set by your competitors. The ever increasing competition in the retail market has made this pricing strategy a hero and most sought after pricing strategies.
Once the product is a part of the mature market, i.e., it has many competitors and substitutes, and little scope for product improvement, your competitor’s pricing can be a deciding factor of your profits.
Keep reading if you want to understand the steps involved in creating a competitive pricing structure:
Steps to carry out competitive pricing analysis for your brand:
1. You need data- at the core of any successful decision lies research and data.
Answer the following questions to have a better understanding of the pricing landscape.
- List down your competitors: This will include brands offering products with little to no product differentiation. Brands that are targeting a similar customer base.
- Analyze and list the geographical area of your competitors.
- What are the niches they deal with?
- What’s the average price range of the product across competition?
- How many times do they change their prices?
- Are the competitors generating profit at the said price?
- Features of their products list down the similarity and differences.
- How long have they been in business?
- Are they a well-established brand?
2. Identify the total cost of ownership for the production.
Before doing the competitive pricing analysis, find out the explicit and implicit costs involved with the production. You have to make sure your prices justify your cost of production. If not, then you should re-work your explicit costs to attain a similar pricing structure.
3. Compare competitor pricing and keep updating the data.
The quality and freshness of the data play an important role. You can use competitor pricing tracker tools and data analysis software to be updated with any and all price changes of your competitor’s products.
Once you have carried the competitive pricing analysis, there are three ways to go forward with pricing, depending upon the data. Keep reading to learn more.
3 Types of competitive pricing strategy.
1. Low price strategy:
In this strategy, you price your product slightly lower than your competitors. This strategy works best if your competitors have established a name for themselves in the market. You will need to have the cost of production advantages to carry out this strategy.
Say Shop A that is established in the area for two years, sells a certain product at 100 rupees, then Shop B, who is newly opened in the area, should sell the same product for 95-98 rupees to attract new customers.
2. High price strategy:
In this strategy, you price your product slightly higher than the average price of your competitors. This pricing module works best if you offer certain additional value to your customers.
Say Shop B chargers 110 Rupees instead of 100 but provides with free home delivery.
3. Same price strategy:
This involves pricing the product, similar to the average price of your competitors. This works best when there is little product differentiation.
Factors to consider while deciding the optimum price for your brand.
Before deicing the pricing strategy, consider these questions:
- How price-sensitive and elastic is your brand: That is, to what extent the changes in competitors pricing affect your own brand?
- What is your objective? I.E., Do you wish to increase profit per unit, or are you interested in increasing the volume of sales?
Conclusion:
A competitive pricing strategy, when done right, shows promising results. It not only helps with increasing your profit margin also helps with reducing the market loss.
Visit our website and learn how we use A.I. to track your competitor’s pricing and establish a competitive price for your brand. We also help you with tracking the prices set by your sellers.
