How To Determine The Impact Of Competition On Pricing Strategy

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'.

Your customer service, type and speed of distribution, your guarantee, and your business reputation can all contribute to what your potential customers are wiling to pay for your product.

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

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: Know the Features That Your Competitors Provide With Their Products

The second thing you need to learn about the impact of competition on pricing strategy is that price varies by 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.

For instance, if my book only provided a definition of market segmentation and other standard market segmentation information, it would be hard to sell. People expect that information so it's not a selling feature.

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.

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 example, most market segmentation books are written for one of three target markets: marketing students, marketing professionals, and executives of large businesses.

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.

You can also determine the best price for your product by remembering the impact of competition on pricing strategy.

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