In markets where there is little differentiation or a commodity orientation, competitors are often priced the same. In the example below, the premium to the competition is $2/ unit, or 20%. Presumably you have a sense of how much the attribute(s) are valued to enable you to set the premium. These attributes may be real, as in the case of a concentrated soap that may deliver x% more volume of clean clothes, or perceived, as in the case of the luxury writing instrument. We feel able to charge some premium versus the competition because our product has attributes the purchaser values over the competition. This can be a simple and effective approach with the following options:
#Competitor based pricing strategy how to#
In this methodology, competing products are used as a benchmark for how to set your prices, rather than using your internal costs, customer demand or brand development as key factors for price determination. In essence, we are now venturing into the marketplace and legitimizing our position versus other competitors. This post is dedicated to Competition Based Pricing Strategies. We have covered Cost Based Pricing and have come to the conclusion that it is a myopic strategy because of its failure to consider important external influences as an internally focused strategy. Welcome to my series’ second blog post on different types of pricing strategies. And yet, as we saw in ‘How To Set Prices To Seriously Increase Profit’, we should recognize pricing for its true relationship to profit – a key lever in driving your company’s bottom line. Why? Because pricing takes as much nurturing, if not more, than any other marketing tactic but generally doesn’t get the superstar recognition of an advertising campaign or new product launch. The other day I heard someone refer to pricing as the bastard child of marketing. Boardroom Metrics provides RFP Consulting and Competitive Bid response Writing expertise to clients in the United States, Canada and Europe.
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