Competitive Pricing Strategy – How to Price Products?
An efficient pricing strategy is crucial to assist a business in maintaining competitive pricing in such a way that it can set and provide prices corresponding to the competition.
Any business can choose from different pricing strategies depending on different factors. You can set prices to stop competitors entering the market, or rise its market share, or stay steady in the market. Any business can set pricing for maximizing profitability on every unit sold or complete market share.
Pricing is among the most vital components when making marketing strategies. Pricing is among the initial things a consumer observes about products and is among the decisive factors when deciding whether to purchase them.
With eCommerce sales increase and frictionless comparison of shopping digital e-commerce, competition in the market has become much more destructive and real-time. A business needs to observe its competitor’s price strategy when setting prices and get much required competitive edge in today’s market. Comparing pricing online is very easy, and customers know a product’s monetary value. These factors are important considerations when setting the correct eCommerce prices.
Some factors which companies study while setting the prices include costs, price sensitivity, and competition. To ensure sustained profitability, companies must set prices that cover production costs, back company overhead costs, and offer suitable profits.
Many competitors are avoiding different pricing methods and models in favor of competitive pricing, but setting the price strategies depending on competitors’ actions isn’t easy.
This blog gives a glimpse of all key eCommerce pricing strategies and dives deep into competitive pricing strategies utilized by most companies across the globe.
Cost-Plus Price Strategy
A cost-plus price strategy is among the easiest ways to determine product pricing. This method adds prefixed profit margins to the total product cost, which becomes a selling price. An eCommerce price strategy is not always the finest way of establishing the correct product pricing. It is generally determined using minimum research and does not reflect consumer demands or competitor pricing strategies.
Demand Price Strategy
In the demand price strategy, prices are associated with demands to maximum sales during higher demand periods. Take the example of the airline company. In higher demand periods, including weekends and the holiday season, pricing increases with the increase in demand and the other way around. The hotel segment also follows a similar strategy.
Penetration Price Strategy
This strategy is generally used for entering a new and competitive market. Vendors enter the marketplace at a low price point to generate demand and consumer bases and increase the prices when recognized.
Competitive Pricing Strategy
Because of ever-increasing retail market competition, competitive pricing has quickly become among the most preferred pricing strategies. Regarding competitive pricing strategy, the buying customers’ behavior is a significant criterion. Once a product becomes part of the mature market and combatting with a comparatively higher number of competitors and substitutes, the price actions of competitors might well be a factor that drives your profits. Setting pricing as per the competitors has become among the most widespread pricing tactics, known as a competitive pricing strategy.
Three options are there — price products lower, higher, or equal to your competitors:
1. If you want to set a price above the competitor’s, then you’d have to provide new product improvements and features, which might justify the augmented price.
2. Pricing less than your competitor’s pricing relies on your sources. It might be an excellent tactic for you if you can raise the volumes without disturbing the production cost considerably. Though there’s a risk of lessening profit margins, you could recover your defeated cost or even experience bankruptcy.
3. If you set prices equivalent to competitors’ prices, then separating factors stop existing. The focus moves to the product itself, and if you can provide more superior features, it will be a win-win situation for you as your competitors would fall behind.
Therefore, competitive pricing has a game to play for. Competitive pricing intelligence requires comprehensive knowledge of the market and targeted audience.
Competitive pricing analysis is essential to competitive price strategies. Lots of efforts go into the procedure of creating the pricing based on the competition. As per a current survey, minor price variations can low down or increase profit margins by over 20 to 25%. Let’s review a few competitive pricing examples to understand this process better.
Competitive Pricing Examples
The competitive pricing concept is best recognized when there are two competing participants. For instance, if two companies manufacture washing detergent, both brands will try to keep their pricing in proportion to each other and promote their product using features and quality to participate with other brands.
Even corporate giants sometimes recourse to competitive pricing strategies to increase their market share. They must set a price almost equal to their competitors, although the production cost is high. They need to jump about and adjust packaging, distribution, and advertising pricing for higher production costs.
As nearly 92% of shoppers are comparing pricing at any point while doing online shopping, many companies need to recourse to competitive pricing to make sure that their consumers don’t move to any other competitors for low costs. Benchmarking tools and competitor intelligence are usually key decision-making sources to determine competitive prices. Using these intuitive pricing tools, sellers can optimize pricing in near to real-time to benefit from the market movements while maintaining gainful margins and control over the competition.
To know more about how competitive pricing affects consumers or why what the competitors charge affects pricing, contact Actowiz Solutions now! You can also reach us for all your mobile app scraping and web scraping services requirements.
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