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What To Know About The Impact Of Competition On Pricing Strategy

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Written by Linda P. Morton

Tuesday, 13 May 2008

Judging the impact of competition on pricing strategy requires that you learn about your competitors' products and how they are similar and different from your product.

by LindaP.Morton

Judging the impact of competition on pricing strategy requires that you learn about your competitors' products and how they are similar and different from your product.

Many criteria contribute to price. These include distribution methods, customer service, business reputation, price range, product features and target market.

However, this article will not cover all of these. It will instead concentrate on just three: the price range, the people who are expected to buy the product, and the features that the product provides that competitive products do not.

To illustrate what I mean, I'll compare one of my products to competitive products.

Impact Of Competition On Pricing Strategy: Know the Range Of Prices That Your Competitors Charge For Their Products

The first impact of competition on pricing strategy is the price range for similar products.

Knowing the price range of competitors' products will help you to determine what you should charge for yours.

For instance, I did some research on Amazon.com and discovered that the competition for my market segmentation book ranges from $6.95 to $159, with a median of $82.98. So I know to price my book somewhere in this price range.

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: Learn The Features Provided By Competitive Products

You need to know how features influence the prices of competitive products.

It's not enough to just provide the features that all similar products provide. To stand out in your customers' minds and to get a good price, your product should provide something more.

To illustrate, let's say that my book just covered basic information that's included in every other market segmentation book. Would you want to buy it?

But the exact process to conduct market segmentation can differ drastically. Some processes require complicated statistical analysis that are usually conducted and understood only by marketing agencies specializing in market segmentation. Others use simpler processes that require less complicated statistics. Very few require no statistics. So ease of the market segmentation process covered in my book is a feature that relates directly to readers' benefits.

Impact Of Competition On Pricing Strategy: Determine How Your Target Market Differs From Competing Products

The third major consideration regarding the impact of competition on pricing strategy is the target market. The product's intended users determine the price for a product because some target markets will pay more than others. And you can always sell a product at a higher price if its designed for target market.

If you choose a target market not served by your competitors. and design your product to meet your target market's needs, you can charge more.

For instance, the target market for most market segmentation books are either student or professional marketers, managers of large businesses, or businesses in a large industries.

Few target small business owners and are simple enough that this target market will read and use them.

Impact Of Competition On Pricing Strategy: Summary

In summary, if you research what your competitors charge for their products, what special features they offer, and whom they are targeting, you'll gain great insight into pricing 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.

Just as I arrived at a good price by considering the impact of competition on pricing strategy, you can too.

About the Author:

To learn more about pricing strategy, see my post on The Effect of Competition on Pricing Strategy. Learn more about Marketing Your Small Business for just shipping. You can get a unique content version of this article from the Uber Article Directory.

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