How To Determine The Impact Of Competition On Pricing Strategy
You need to know the impact of competition on pricing strategy i to price your product competitively. This requires comparing and contrasting your products to your competitors’.
Many criteria contribute to price. These include distribution methods, customer service, business reputation, price range, product features and target market.
It would take more than reasonable article length to cover all of these. So instead this article will cover only price range, product features and target market.
To illustrate what I mean, I’ll compare one of my products to competitive products.
Impact Of Competition On Pricing Strategy: Know the Range Of Prices That Your Competitors Charge For Their Products
To determine how to price your product, do a bit of research and determine the range of prices that your competitors charge.
Every product has a price range. For some this range is small, and for others it’s large. You may need to do a little research to determine the price range for competitive products.
For example, I have a book on market segmentation. If you search on Amazon.com for market segmentation, you’ll find many books listed from $6.95 to $159. So my book should be priced somewhere within this broad price range. The median price in this range is $82.98.
Knowing the price range is just the first step in deciding on your price, you also need to consider its features and target market.
Impact Of Competition On Pricing Strategy: Learn The Features Provided By Competitive Products
The second thing you need to learn about the impact of competition on pricing strategy is that price varies by features.
Every product has certain features that customers have grown to expect as standard. All products should provide these standard features. It’s the additional features that distinguish your product from your competitors’.
For instance, if my book only provided a definition of market segmentation and other standard market segmentation information, it would be hard to sell. People expect that information so it’s not a selling feature.
Most market segmentation books rely on statistical analysis. Some are very complicated, and most are too much so for the average reader. So my book uses a simple process that requires no statistics and can be used by almost anyone. That distinguishes it from competing products.
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 large business managers, and a few target specific industries.
Small business owners just aren’t being served well by these competitive market segmentation books.
Impact Of Competition On Pricing Strategy: Summary
Once you know the price range of competing products, the extra features offered by each, and the target market for each, you will have a much better 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. Although 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.
Filed under: Business