How to Price Competitively Without Putting Your Brand Down?
When a customer buys something, price is almost always a factor. Even if your company is more convenient, delivers faster, has better customer service, or has a better brand, many customers will still choose the cheaper option.
Customers will be more likely to buy from you if you set prices that are competitive with similar products or services on the market. But you could also set your price too low and not be able to pay for your overhead and other costs.
Use these steps to set a price that will help you compete with your competitors and bring in sales without stopping your business from growing.
Assess if You’re in a Price War
A price war is when two competitors keep dropping the prices of their products to try to undercut each other and get a bigger share of the market.
Small business owners can find themselves in a price war if a big company is trying to drive them out of the market by making it impossible for them to keep dropping the price of a product.
A price war can hurt the business of everyone. “Price wars can cause situations that are both bad for the economy and bad for people’s mental health.
This can have a huge effect on the profits of an individual, a company, or an entire industry,” wrote Harvard Business Review. “It seems that no matter who wins, both sides end up worse off than they were before the fight.”
If you see that your competitor is having a price war, you might need to change how you compete with their prices. Price wars can quickly drain a company’s resources and hurt the way customers feel about the company. Be careful about doing things that could possibly cause this to happen.
Complete a Competitive Pricing Analysis
The next step, if you’re not in a price war, is to do a competitive pricing analysis. In this step, you’ll look at your product line, your budget, and how much your competitors are charging for similar products.
Start by making a table of comparisons. Write down your product’s key features, target market, value proposition, costs, and margins in the first column. Do the same thing for each of your competitors and include the price they charge for a product that is similar to yours.
“Are they going after the same people as your product? If not, who are your rivals trying to sell to? The price of a product is affected by both of these things. Some customer personas are willing to pay more for a product that is important to them,” Shopify wrote.
Use this table to get a better idea of what your competitors offer, how their products differ from yours, and what customers are willing to pay to solve their problems.
Set a Pricing Strategy
Based on this competitive pricing analysis, you could use one of three pricing strategies: penetration pricing, promotional pricing, or captive pricing.
- Penetration pricing is when a business starts selling a new product or going into a new market by offering a lower price at first to bring in customers.
- Promotional pricing is when a business offers a temporary discount for a limited time to bring in customers and get rid of old stock or build momentum.
- Captive pricing: The company sells one main product and several other products that go with it. These are called captive products. For example, a smartphone that comes with wireless headphones and other add-ons.
Depending on where your business is in its growth, you can choose one of these strategies or use them all. Each of these plans has its own pros and cons. In the end, you want to drive sales based on what makes your company different, not what your competitors are doing.
Compete on Other Features
When you compete on price, it’s easy to over discount your product or service and hurt the value of your brand. If you don’t want your product or service to become a commodity, stress the other things that make your company stand out.
Use your analysis of the competition to find something that makes your brand stand out from the rest. “Not every product is the same. “Many customers pay more for better quality,” Shopify wrote.
As the market starts to lower the price of their product, it can be tempting to do the same. Instead, you should think about keeping your prices the same and changing your message.
Focus on quality, excellent customer service, and other things that make the customer feel like they are getting a great deal.
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