Intro
Figuring out the right pricing for products is crucial for manufacturers. Not only does the right price convey the full value to customers, it also ensures profitability for the business.
However, devising the optimal pricing strategy isn’t that simple. There are various factors that contribute to the final price, such as price signaling.
Price signaling is a way for businesses to communicate their pricing strategy to customers and show them that the product offers excellent value for money. High price doesn’t necessarily mean high value and vice versa – manufacturers must hit the sweet spot between profit-making and maximum perceived value to ensure that they get the best from their pricing strategy. That’s why pricing strategy has to be a well-defined, clear and transparent part of a business’s overall marketing strategy.
Looking into competitor’s pricing strategy by doing a competitive pricing analysis can help make that task easier. It involves evaluating the buyers’ reactions to the new prices set by other businesses in your niche – the data is usually gathered from historical data, polls, etc. But there is a better and less time-consuming way to understand competitor pricing strategy and the effect it can have on your business.
Want to analyse your competitor's pricing strategy easily?
What’s A Competitor Pricing Strategy?
It is a pricing policy where competitors’ prices are used as benchmarks to determine product prices.
It involves using market dynamics to figure out which competitors and activities pose a threat to their business. It also encompasses analyzing their product lines and the quality, variety and prices of goods in each of those lines.
Additionally, it evaluates the customer’s reaction to new prices based on research and historical data, helping retailers and manufacturers map their positions against competitors. Mapping and presenting this data gives a comprehensive picture to businesses regarding their competition – it also helps them plan their pricing and promotions accordingly as they take upstream and downstream suppliers into account. This allows them to price their products optimally to attract buyers who would otherwise pick the competitors.
A successful competitor pricing strategy can help businesses increase sales, enhance understanding and cooperation with suppliers and grow revenues.
Businesses also undertake competitor pricing strategy analysis because it helps them:
· Highlight their strengths and weaknesses as well as the competitors’
· Uncover potential opportunities for the company
· Inform the value proposition that differentiates them from the competition
Businesses can use this strategy as an alternative to cost-plus based, value-based and demand-based pricing strategies.
Read the complete story on pricing strategies
Read the complete story on pricing strategies
Analyzing competitor pricing strategy – Here’s what you need to do
The competitor analysis tool can help you compare your company against its direct and indirect competitors.
This can prove to be a core advantage for your pricing strategy, but let us differentiate between the two first.
Direct competitors sell the same products as you, while indirect competitors may be in a different industry, but their products and services satisfy the same needs for your prospects.
Indirect competitors could switch their focus and come into direct competition with a company. For instance, a home insurance company could easily diversify into car insurance to capture the car insurance market.
Competitor pricing strategies can be analyzed by performing the following tasks:
1. Collect qualitative and quantitative information about competitors such as their overall pricing strategy used – this data could be on cost, value, demand, or competitor based. Ask these questions:
- How well do they follow through with their pricing strategy?
- How is their marketing in line with their pricing strategy?
- How often do they change prices?
- Are they first movers?
- Are they aggressive in defending their stance?
- Do they use pricing automation?
- Do they carry out price matching?
2. Collect information about products and services through supplier interviews and analyze competitor’s portfolios. Ask these questions:
- What are the leading brands and key categories of focus for competitors?
- Category depth and width (product lines and variety within lines)?
- Is their product or service differentiated?
- What’s the buying power of suppliers?
- How similar is the product to the ones you are selling?
3. Carry out customer research including customer segmentation, market focus and coverage
4. Clarify unique value proposition and marketing communications
5. Get a holistic view of strategic information, including strengths, weaknesses, opportunities and threats, as well as trends for the company, based on the following:
- Customer experience
- Level of innovation
- Pricing knowledge and resourcing
- Strength of partnership alliances
A tabular and graphical representation of this data gives a broader picture of the market.
Additionally, it also offers valuable insight into the qualitative and quantitative aspects of the competition. The resulting information can provide valuable insights for strategic decision making.
The Sniffie Competitor Pricing Strategy Analysis Tool
Once you have defined your vision for the product and how it solves specific pain points for the customers, you must understand how others in the same businesses are doing with your target audience.
Your research should focus on all the alternatives available to your prospects and leads, so you can find better, smarter and more lucrative ways to attract them to your products instead.
Sniffie’s Competitor Analyzing Tool is a time-saver that can help you do it all and create a sustainable competitive advantage for your business from the get-go.
Surpass the competition by using this tool carefully, fill out all the details with accurate info and it will deliver compelling data that can make pricing and business decision-making easy.
Why You Need Sniffie
It is possible to get a holistic view of the market, competition, customers and your own business without spending millions of dollars on research. Understand who your actual opposition is and where you need to direct marketing efforts and budget for maximum impact.
Competitor pricing analysis helps companies play on their strengths and minimize weaknesses, explore lucrative opportunities and keep up with trends in the market. And if you keep an eye on the data, it can offer you insights into marketing strategies that might potentially backfire and result in price wars.
If you’d like to learn more about how we can help you enhance your pricing strategies, get in touch with us today.
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