How To Determine The Impact Of Competition On Pricing Strategy
You can determine the impact of competition on pricing strategy by determining how your competitor’s products compare to yours.
A lot more goes into determining a product’s price than just the product. The manner and speed of delivery, the way that customers are served, and the product guarantee contribute to the price that customers are willing to pay for your product.
However, this article won’t cover all of these. It will instead concentrate on just three: the price range, the people who are expected to purchase the product, and the features that the product provides that competitive products do not.
To illustrate what I mean, I’ll compare one of my products to competitive products.
Impact Of Competition On Pricing Strategy: Learn The Price Range Of Competitive Products
To determine how to price your product, do a bit of research and determine the range of prices that your competitors charge.
Research on competitive products will tell you the low and high prices, and the range between them.
As an illustration, my market segmentation book has many competitors. A little research on Amazon reveals that the prices for competitive books range from a low of $6.95 to a high of $159. This tells me that my book should be priced somewhere within this range, probably near the median of $82.98.
You need to discover the price range of your competitor’s products as you determine your price. Whether your price should fall on the low or high side of the price range for competitive products depends upon your product’s features compared to your competitors’. It’s also influenced by your target market.
Impact Of Competition On Pricing Strategy: Learn The Features Provided By Competitive Products
You need to know how features influence the prices of competitive products.
Now your research should go beyond core features. Customers anticipate all products to have core features. To get more than the minimum price, your product should provide at least one feature that makes it different from all competitive products.
For example, any book on market segmentation should cover basic market segmentation information, including what it is, what it does, its benefits, and basic criteria for conducting market segmentation research.
But the exact process to conduct market segmentation can differ drastically. Some processes require complicated statistical analysis that are usually conducted and understood only by marketing agencies specializing in market segmentation. Others use simpler processes that require less complicated statistics. Very few require no statistics. So ease of the market segmentation process covered in my book is a feature that relates directly to readers’ benefits.
Impact Of Competition On Pricing Strategy: Determine How Your Target Market Differs From Competing Products
The third impact of competition on pricing strategy requires knowing whom the products are marketed to. Some people are just willing to pay more for a product than other people. And all people are willing to pay more for a product especially for them.
Although your product may be similar to competitive products, you can charge more if you design it for a specific target market.
To illustrate, most competitors for my market segmentation book are written for present or future (student) marketing professionals. Some target big business managers, and a few target specific industries.
I’ve not found one that is designed for small business owners. And most are just so complicated that, even if a small business owner bought these competitive books, they wouldn’t finish reading them.
Impact Of Competition On Pricing Strategy: Synthesis
Once you know the price range of competing products, the extra features offered by each, and the target market for each, you’ll have a much superior idea of how to price your product.
To illustrate how to use this information, I priced my market segmentation for the specific target market so I didn’t go to the high end of the price range. After all, small business owners have limited resources. Still I didn’t go to the lowest of the range because my book provides features not available with competing products. Even though I know that my book has quality, I decided to price it barely half of the median price. First I wanted to price it right for my target market, and second, it’s presently sold only as an e-book.
If you use the information in this article, you can also set a good price for your product by noting the impact of competition on pricing strategy.
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