No matter what business you are in, you have at some point tracked your competitors pricing. To review and keep track of your competition is always a sensible thing to do. You can always learn a lot from your competition, but this might not be true if you look at their pricing. Overall, looking at your competitors pricing is a way to formulate a pricing strategy – but it is far from the best strategy.
Well, to a certain extent you can. The easiest way to scout your competition is online. Most companies and business publicly share their pricing online, meaning it’s free for you to review their pricing as well. Although you should keep an eye on their online prices, don’t hold it as one source of truth. Your competitor might be giving out huge discounts on their end – which is not visible when just reviewing the website. So can you be sure that the prices they communicate online would be the final selling price.
Another important note is that you don’t know your competitors margins. They might have a better deal with their suppliers, factories etc. Thus ensuring their margins.
Not necessarily, of course there is always a risk that you might loose some of your customers. This is especially true for your more price sensitive customers. But the whole idea with price walls, is that the demand is higher at that price level. In short, you win some and you loose some.
It’s important to remember that humans are not 100% rational, this means that prices are subjected to our feelings. This means that if a product or service is too high, we might desire it but can not afford it. In contrast, when something is priced too low, we might perceive it as lower quality. When we perceive something of low quality we are also reluctant to buy it.
But it is important to remember that when we change the prices we might find that we should lower them, because we are on the wrong side of a price wall. In other words, a lower price might help us capture a larger part of the market share. However, we cannot be dim, a lower price will effect our margins, but this may in some scenarios be offset by the larger market share.
This is complicated to drill down to a few bullet points, to do something correct and sophisticated you need the expertise by someone who knows pricing strategies. Although, the more you can start thinking about it the better you can collaborate with your pricing consultant. Of course, we are always happy to answer any question that you may have regarding your pricing strategy.
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Atenga Insights is a fast-growing, global company that is challenging the pricing consulting industry. Using our unique proprietary PDA™ technology, we identify the price and positioning that will generate higher sales and profits for our clients.