You need to know the impact of competition on pricing strategy i to price your product competitively. This requires comparing and contrasting your products to your competitors’.
Many criteria contribute to price. These include distribution methods, customer service, business reputation, price range, product features and target market.
But this article will primarily concentrate on the impact of competition of pricing strategy based on the price range of competitive products, their features, and target market.
To illustrate what I mean, I’ll compare one of my products to competitive products.
Impact Of Competition On Pricing Strategy: Determine The Price Range Of Competing Products
To determine how to price your product, do a bit of research and determine the range of prices that your competitors charge.
Knowing the price range of competitors’ products will help you to determine what you should charge for yours.
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.
Knowing the price range is just the first step in deciding on your price, you also need to consider its features and target market.
Impact Of Competition On Pricing Strategy: Learn The Features Provided By Competitive Products
The second impact of competition on pricing strategy relates to features.
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.
I’ve not found one that is designed for small business owners. And most are just so complicated that, even if a small business owner bought these competitive books, they wouldn’t finish reading them.
Impact Of Competition On Pricing Strategy: Summary
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.
To illustrate how to use this information, I priced my market segmentation for the specific target market so I didn’t go to the high end of the price range. After all, small business owners have limited resources. Still I didn’t go to the lowest of the range because my book provides features not available with competing products. Although I know that my book has quality, I decided to price it barely half of the median price. First I wanted to price it right for my target market, and second, it’s presently sold only as an e-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.