• SEO
    • Content
  • Business
  • Social Media
  • Branding
  • Ads
  • How To

Competition Based Pricing Guide

39.7KShares
736.6KViews

Research is the foundation of an effective pricing strategy that takes competitors into account.In order to set prices for your product or service's rates, you need to know how your top competitors are pricing their products and how that pricing affects customers' expectations.

Software as a service (SaaS) and subscription businesses must pay close attention to market alignment.You cannot survive in a competitive market if you don't meet your customers' expectations when it comes to price, whether you're under or over the current trends.

One of the best ways to find this match is to use competitor-based pricing.To better structure your own pricing, it helps to see how competitors set their pricing tiers, what features they emphasize, and what they consider to be their core value.

Video unavailable
This video is unavailable

What Is Competition Based Pricing?

COPYRIGHT_MARX: Published on https://marxcommunications.com/competition-based-pricing/ by Keith Peterson on 2022-01-15T11:11:57.482Z

Comparable pricing, as the name implies, involves setting a product's price based on what the competition is charging.That being said, this strategy does not account for the upfront costs and only considers the selling prices of the competition's goods.

With competitor-based pricing, you must find a product that is exactly the same in order to set the price of your productThis means that if you intend to employ this strategy, you must first determine which products are your direct competitors.Competitor price monitoring software allows you to automatically connect from the EAN code of the products to do this efficiently.

In addition to cost-based pricing and market-based pricing, two other common pricing approaches are competitor-based pricing and pricing based on demand.In this post, we'll discuss pricing strategies based on the competition.

Concept And Advantages

As previously stated, competitive pricing is based on competitors' prices.The exact price level can vary depending on a company's brand, penetration tactics, or market aggressiveness.For example, to gain market share, a company must have one of the lowest prices.To build a successful brand image, a company should sell higher-priced products to convey a quality signal to consumers.

This pricing method is also commonly used in established and competitive markets.This is because in this type of market, competitors are already setting their prices at the equilibrium price.With this method, a company can move towards economic equilibrium while minimizing the risk of setting an inefficient price.

This method is simple because competitors' prices are often displayed publicly, making them easy to copy.As a result, it is often easier to copy competitors' prices than to implement a new pricing strategy.Using this method, the firm lets competitors bear the costs of determining a price.

This method is risk-free.If competitors' prices do not bankrupt them, it is likely to be the same for other firms on the market.While this method may cause some temporary inefficiencies (on one specific product) that may spread to the entire market, such situations are rare.

In this way, equilibrationEvery day, millions of customers and sales occur in the retail industry.Assuming that most retail players use competitive pricing, the market can reach a stable equilibrium price.

Firm “A” has been selling coffee makers for years and has two distinct products: a $25 entry-level model and a $50 high-end model.Years of testing different prices led to this equilibrium.Firm “A” would lose margin and market share if the entry-level product was cheaper.Likewise for the best coffee maker.Let us call this company B. It enters the market with two coffee makers, an entry-level and a premium.It is assumed that “A” has identified the best prices aimed at maximizing profit and reaching price equilibrium.The coffee maker market is mature, and consumer preferences are well-known.

Firm A and firm B diagram for costly pricing method and competitive pricing
Firm A and firm B diagram for costly pricing method and competitive pricing

This model illustrates the competitive pricing principle by allowing firm "B" to identify prices that are efficient for them without incurring any costs of price setting.

When Is It Best To Use Competition Based Pricing?

  • The most common use of competition-based pricing is for low-cost and commodity goods.
  • When a product's manufacturer or brand is of no interest to the customer, competitive pricing works
  • This approach is best suited for products that can be used in place of the original.

When Is It Not Advisable To Use A Pricing Strategy Based On Competition?

  • Is it possible for your product to stand out from the competition?It's a question of whether or not you're more productive than your competitors.
  • Is it possible to convince customers that paying more for your product is worth it because of the advantages they gain from purchasing and owning it?
  • Do you think your customers would be forced to pay more if you didn't provide your product or service?
  • How much are customers willing to pay for what they get?
  • Is your customer base truly 'shopping around' and comparing prices?Is this the whole gang, or just a few of them?The few people who do speak to sales teams frequently, and the rest of the time, they don't hear from them at all.

In order to determine if a competition-based strategy is the best option for your company, you can ask these questions.A value-based strategy may be a better option if one or more of the following questions are answered "yes."

Companies face margin erosion and a squeeze on profits as a result of rising inflation.As a result, the majority of businesses will have to look into ways to raise their prices in order to keep up with the competition.

Share: Twitter | Facebook | Linkedin

About The Authors

Keith Peterson

Keith Peterson - I'm an expert IT marketing professional with over 10 years of experience in various Digital Marketing channels such as SEO (search engine optimization), SEM (search engine marketing), SMO (social media optimization), ORM (online reputation management), PPC (Google Adwords, Bing Adwords), Lead Generation, Adwords campaign management, Blogging (Corporate and Personal), and so on. Web development and design are unquestionably another of my passions. In fast-paced, high-pressure environments, I excel as an SEO Executive, SEO Analyst, SR SEO Analyst, team leader, and digital marketing strategist, efficiently managing multiple projects, prioritizing and meeting tight deadlines, analyzing and solving problems.

Recent Articles

  • How To Fix The Samsung Logo Boot Loop (7 Possible Solutions)

    Tech Tips

    How To Fix The Samsung Logo Boot Loop (7 Possible Solutions)

    The Samsung logo screen is often an iconic symbol of reliability and performance, but what happens when a Samsung Galaxy stuck at Samsung logo screen? A frustrating and perplexing problem indeed!

  • Is Broadcasting A Good Career Path?

    Career

    Is Broadcasting A Good Career Path?

    Broadcasting, also known as mass communication, involves transmitting information and entertainment content to a large audience through various media platforms, including television, radio, and the internet. It is a dynamic and ever-evolving field that offers exciting opportunities for those looking to pursue a career in it. But is broadcasting a good career path? Let's take a closer look

  • Transformer Response Optimization - Techniques For Improved Performance

    SEO

    Transformer Response Optimization - Techniques For Improved Performance

    The Transformer model has been widely used for response generation due to its ability to capture long-range dependencies and produce high-quality responses. Transformer response optimization is a technique used to improve the quality of generated responses.

  • Off-Page SEO Hacks - Drive More Traffic To Your Website

    SEO

    Off-Page SEO Hacks - Drive More Traffic To Your Website

    If you are looking to improve your website's ranking on search engine results pages (SERPs), you need to focus on both on-page and off-page SEO. While on-page SEO includes optimizing your website's content and structure, off-page SEO is about improving your website's authority and credibility on the internet. In this article, we will discuss some off-page SEO hacks that can help you boost your website's ranking.

  • Understanding SEO Poisoning - Protecting Your Online Security

    SEO

    Understanding SEO Poisoning - Protecting Your Online Security

    Search Engine Optimization (SEO) poisoning is a type of attack that involves manipulating search engine rankings to drive traffic to malicious websites. This tactic is used by cybercriminals to spread malware, steal personal information, and conduct phishing attacks. In this article, we will explore what SEO poisoning is, how it works, and what you can do to protect yourself.

  • Top 12 Proven Ideas To Make Money On TikTok

    Money

    Top 12 Proven Ideas To Make Money On TikTok

    Are you ready to turn your TikTok addiction into cold, hard cash? Well, you're in luck because today we're going to be discussing how to make money on TikTok! Yes, you read that right - you can actually get paid for scrolling through your For You Page and creating content that makes people laugh, cry, or dance like crazy.

  • What Is A Zero-Based Budget, And How Do I Utilize One?

    Money

    What Is A Zero-Based Budget, And How Do I Utilize One?

    Are you tired of feeling like your money is disappearing into a black hole? Do you find yourself struggling to make ends meet at the end of the month, despite your best efforts? If so, it's time to try a different approach: zero based budgeting!

  • What Do Transportation Jobs Pay?

    Career

    What Do Transportation Jobs Pay?

    Transportation jobs are an essential part of the economy, as they ensure that goods and people are moved efficiently from one location to another. Whether you're interested in becoming a truck driver, a pilot, or a railway worker, you may be wondering what do transportation jobs pay. In this article, we'll explore the salaries and job outlooks for some of the most common transportation jobs.

  • SEO Vs Web Developers - What Is Their Difference?

    SEO

    SEO Vs Web Developers - What Is Their Difference?

    In the world of website development, there are two key players that are essential for the success of any website: SEO vs web developers. While both are important, they often have different goals and objectives, which can sometimes lead to conflict.

  • Entity SEO - Why Every Business Needs To Implement It

  • IPhone Speaker Broken Or Not Working? Let's Fix It With 8 Ways

  • Nintendo Switch Controller Not Connecting? How To Fix It

  • Is Data Entry A Good Career Path?

  • Enterprise SEO Trends - What You Need To Know