Pricing is an art form that takes time and skill. But there are some pricing strategies that you may want to consider before setting prices on your own. One such strategy is the competition-based pricing strategy where you price your products in relation to the competition.
Competition-based pricing is defined as pricing your products in relation to the prices of competitors. This strategy is great for digital products, events and physical goods (products) that are highly competitive with other sellers.
When using this pricing strategy, you should think about who your target market is and how much they will be willing to pay for your product or service; it’s not a one-size-fits all approach. For example, if you sell digital services like graphic design but know there isn’t a lot of competition out there right now because no one else offers what you do, then charge more than what it would cost someone else to create something similar from scratch.
If you are an event organiser then competition-based pricing would be a good strategy to use when selling event tickets. You should also try and find out who the main players in the industry are so that they can either use the same distributor or price their event in a way that will give them an advantage over these competitors.
If there are many competitors in your area that hold events that cater to the same audience as yours, competition-based pricing allows you to price your offerings according to what is being sold by the competition. For example, let’s say there are two companies who sell an event ticket – one charges $50 while the other charges $25. You might charge somewhere in between these prices, say $30, so that your customers will choose you over one of those competitors because they feel like they get more value at less cost by buying it from you instead of them!
If retailing products, then competition-based pricing depends primarily on how many competitors there are for your product and also the volume of sales each competitor gets. You should always try and observe at least four competing businesses before determining which one has better prices (higher profit margin) but most importantly you should always try and determine what the average price of your products is.
When comparing your products to those of competitors, make sure you get as many details as possible, such as:
- Are they selling nationally or internationally?
- What market share do you think they have?
- Are their products organic, fair trade or certified in any way/
- How much demand is there for these products?
- How much supply is in the market?
- How many competitors are there?
- What does their pricing structure look like per piece, ml, g, kg? This is especially important as you want to compare apples with apples
- What is their USP?
- What is your USP and what value would you place on it?
You can also use this strategy when selling digital downloads such as eBooks, PDFs or digital courses. You may price your digital downloads the same or close to what they are priced on other websites so that people who buy from you will have less of an excuse not to purchase since it is cheaper than if they were to go another place where it might cost more.
It’s easy to compare prices on competitors’ websites since each one has their own product page. This way you will know how much profit margin should come with each sale so that it’s enough incentive for people not just go elsewhere and buy from someone else instead! For manufacturers who are selling through wholesalers, you will need to find the end-retailer’s website to find out the final RRP.
Pricing your products can be a daunting task, but it’s important that you do so or risk missing out on sales or worse, that you make a loss. There are many different pricing strategies to consider before setting prices for yourself, and we recommend considering the competition-based pricing strategy where you price slightly below average of what your competitors charge. If this sounds like something you want help with, contact us today!
Would you like to see how our pricing calculator can help your pricing strategy? Download it now! Or get in touch with our team today.