How To Determine The Impact Of Competition On Pricing Strategy
Linda P. Morton
You can determine the impact of competition on pricing strategy by determining how your competitor's products compare to yours.
A lot more goes into determining a product's price than just the product. The manner and speed of delivery, the way that customers are served, and the product guarantee contribute to the price that customers are willing to pay for your product.
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.
In order to demonstrate these three ways of judging the impact of competition on pricing strategy, I'll use one of my products.
Impact Of Competition On Pricing Strategy: Learn The Price Range Of Competitive Products
You have to know how your competitor's price their products and the range between their prices.
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.
If my book was very short or inferior, I'd price it on the low range. If it was very long and exclusive, I'd price it on the high range. But because it is 295 pages, packed with loads of research, I'll aim closer to the middle. But before I decide on the final price, I need to consider features that most benefit potential customers and what they are willing to pay for those features.
Impact Of Competition On Pricing Strategy: Know the Features That Your Competitors Provide With Their Products
The second impact of competition on pricing strategy relates to 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 example, any book on market segmentation should cover basic market segmentation information, including what it is, what it does, its benefits, and basic criteria for conducting market segmentation research.
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.
For example, most market segmentation books are written for one of three target markets: marketing students, marketing professionals, and executives of large businesses.
Few target small business owners and are simple enough that this target market will read and use them.
Impact Of Competition On Pricing Strategy: Conclusion
By knowing the range of prices for competing products, the unique features of each, and target markets, you'll be much better prepared to price your product.
For example, my market segmentation book targets small business owners. It presents a simple process that requires no statistics so small business owners can do it themselves. In other words, it's designed for a specific target market not served by competitive products. It provides unique features, and the median of the price range is around $83. But my target market has limited resources so I decided to price it just over half the media price. Plus, it is an e-book, instead of a traditional printed 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.
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