![]() What’s more, pricing lower than your competitors can also be used as a marketing technique (however, check in your jurisdiction as it is illegal in certain areas). However, you will need to be aware that there is a risk of eating into your profit margin, and you may not be able to recover your sunk cost and in the worst-case scenario, put yourself at risk of losing your business. If you can increase the volume of units without adding to your production cost to any great extent, then this could be a good pricing strategy for your business. ![]() Pricing below your competitor will depend on your company’s resources. ![]() It will be essential to prove to your customers that your product justifies its premium price tag. Today, hundreds of dot.com companies provide objective price comparisons. But beware, online consumer reports and other similar publications put objective product comparisons within the reach of everyone these days. If you are planning to set the price above the price of your competitors, then you would need to exhibit or introduce new improvements or features in your products that would justify the increased price.įurthermore, when pricing above your competition, it is sometimes possible due to the high price-quality association among your potential customers. With a Competitive Pricing Strategy, your business will have choice of 3 pricing alternatives -price your product higher, lower or the same as your competitors: 1. Your Company’s Competitive Strategy Pricing Choices Whichever price you choose in the example above (from $61 to $79 or any dollar figure in between), a Competitive Pricing Strategy is one way to stay on top of your competitors and maintain dynamic pricing. For example, if you are selling 10-pound bags of coffee and your competitors’ prices range from $60 to $80, you’d choose a price between those two numbers, say $72. When adopting a Competitive Pricing Strategy, you generally price your products slightly below your competitors, the same as your competitors, or slightly above your competition. Usually, companies decide to use a Competitive Pricing Strategy that usually compete in heavily saturated marketplaces, since just a small difference in price can make the deciding point of difference in getting the sale or not. A Competitive Pricing Strategy focuses entirely on publicly available information about your competitor’s prices, not customer value. It is a type of pricing strategy that is in direct comparison to other pricing strategies like cost-plus pricing or value-based, where prices are determined by analyzing other factors like consumer demand or the cost of production. What that means is that a competitive pricing strategy is a pricing method that involves setting the prices of your businesses’ products in relation to the prices of your competitors. What is Competitive Pricing Strategy? – The DefinitionĪ Competitive Pricing Strategy is also known across the pricing industry as competitive-based pricing or competitor-based pricing. To help you decide, let’s examine exactly what a Competitive Pricing Strategy is, your company’s competitive pricing strategy choices, refined competitive pricing strategy types to achieve specific outcomes, the most famous competitive pricing strategy and the strategy’s pros and cons. After reading this article, you may decide that a competitive pricing strategy might be just the thing for your business, but for another company it might not be suited at all. In this article we analyze just one example of several different pricing strategies Competitive Pricing Strategy Explained: The Pros & Cons.Īt Pricefx, we have assisted hundreds of companies over the last 10+ years in optimizing their pricing and learnt that no two businesses are identical in what they need from a pricing strategy solution. There are plenty of methodical pricing models and strategies that can help set the right prices for your customer and business objectives. Thankfully with each passing year, pricing is becoming more about science and less like a lucky flip of the coin. On the flip side, if you set your prices too high, you might risk not getting the sale in their first place. If you set your prices too low, you might leave valuable profit at the checkout. Pricing your products and services can be a tough assignment for any business.
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