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To maintain an edge in the market where customers have many options to choose from, conducting a pricing analysis is essential. This analysis helps you leverage insights into competitive pricing, understand market trends, and assess the perceived value of the products. With these insights, you can optimize your pricing strategy to maximize profitability, enhance market positioning, and attract customers.
In this blog, we will look into the various ways you can design your competitive pricing strategy and the steps to conduct a competitive pricing analysis.
The process of competitive pricing analysis includes monitoring, evaluating, and comparing the prices of your company’s offering with the similar products that your competitors offer. The aim of this research is to gain insights into the market, the pricing strategy of competitors, and customer satisfaction towards your pricing plan.
The process helps you determine how to devise an optimal price for the company offerings that maintain competitiveness.
The two terms are distinct and differ in their core focus.
Pricing analysis is a broader term with focus beyond competitive pricing. This includes understanding and factoring incustomer behavior, their willingness to pay, and competeritor’s strategy to design a pricing strategy that aligns with company’s goal.
The focus of competitive pricing analysis is to determine how to craft a pricing strategy for your offerings to maintain competitiveness. It enables you to achieve three insights:
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When crafting a competitive pricing strategy, a company can position its strategy in three ways – above the competitor, same, or below the competitor. Here, we will briefly explain the three positions before we delve into how to do competitive pricing analysis.
Depending on your research on market share and the customer’s perception and loyalty for your brand, you can price your offerings above the market price. While, this caries the risk of losing potential customer it also demonstrates that you are competing for quality of the product that justifies the price.
When you desire to compete on price alone, you can decide to craft a pricing strategy that matches the competitors. You can benefit from it by demonstrating the value proposition along with the price range to potential customers.
However, it is important to monitor the fluctuations in price to ensure you are not falling behind.
If you want to show your price as a differentiator, you can position your offerings below your competitor’s pricing strategy. While this might risk a loss, it can also attract customers to purchase and explore your company’s additional offerings.
Competitive pricing analysis should become an ongoing process to make sure your pricing strategy stays relevant and competitive with the changes in market trends. This will allow you to make sure your strategy sets you apart in the market and help you win over your target audience.
Here are four steps on how to do competitive pricing analysis.
In the first stage of your competitive pricing analysis, you should start by defining your direct and indirect competitors.
Identifying your direct competitors will help you understand how they are positioning their products/services to the same or similar target audience. Identifying indirect competitors will allow you to determine how to adjust your strategy to compete with the alternatives.
In your analysis you should also examine the value offered by your competitor’s products to determine if you will be competing on price alone or other aspects as well.
Gathering information on your competitors is not as easy since businesses don’t always make their pricing strategy publicly available. Moreover, you also need data on the frequency or trend in changes made to the prices. One way to gather insight into this is by asking the audiences and prospects.
Conduct in-depth market research to learn from the audiences how your competitors are pricing their offerings. This can also help you gather insights into price changes throughout the year and identify the reason behind the fluctuations.
With data in hand, you can now filter the competitors’ products and services by using various value propositions and the prices they set for these. All the data points enable you to create a holistic picture of the overall strategy such as how a new promotion or a seasonal change impacts their pricing strategy.
You can now establish a competitive pricing strategy based on the value propositions and competitive analysis. To market your offerings against competition, you can implement a pricing strategy in the three ways we have mentioned before.
At this stage, you can also decide how you want to factor in market conditions to stay competitive.
Customers often compare prices of similar products/services before making a final purchase decision. Implementing a competitive pricing strategy helps you stay on top of consumer behavior and differentiate your offerings from competitors.
A static pricing strategy is not an ideal plan in a competitive marketplace. Its important to keep pace with your competitors and monitor the changes in prices so you can take advantage of it and adjust your pricing strategy. The best way to monitor this is by conducting a competitive pricing analysis.
Analyzing competitive pricing strategies in your industry gives you insights into how competitors are differentiating and identifies opportunities on how you can differentiate and highlight your value proposition.
Conducting an analysis can help you determine whether you want to market your offerings based on prices alone or also leverage value proposition. Moreover, the analysis enables you to identify the optimal price for each customer segment and determine marketing and sales strategies to position the product/service.
A huge advantage of conducting competitive pricing analysis is identifying opportunities to leverage potential profits. A highly competitive marketplace means there is a tiny profit margin. A competitive pricing analysis can help you utilize such opportunities and swing a good profit.
Tracking the market and competition allows you to notice a pattern in market changes. You can gather insights into how competitors are adapting to the changing customer needs and demands and adjust your competitive pricing strategy accordingly.
Implement your dynamic pricing strategy based on the findings from your competitive pricing analysis. To stay competitive and relevant you should adopt a flexible pricing model that also incorporates value-based positioning. Regularly monitoring the market conditions will enable you to adjust the prices and gauge competitor’s actions.
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