Three Ways To Judge The Impact Of Competition On Pricing Strategy

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.

In order to demonstrate these three ways of judging the impact of competition on pricing strategy, I'll use one of my 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.

Research on competitive products will tell you the low and high prices, and the range between them.

As an illustration, my market segmentation book has many competitors. A little research on Amazon reveals that the prices for competitive books range from a low of $6.95 to a high of $159. This tells me that my book should be priced somewhere within this range, probably near the median of $82.98.

You need to discover the price range of your competitor's products as you determine your price. Whether your price should fall on the low or high side of the price range for competitive products depends upon your product's features compared to your competitors'. It's also influenced by your 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.

Now your research should go beyond core features. Customers expect all products to have core features. To get more than the minimum price, your product should provide at least one feature that makes it different from all competitive products.

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.

So for my book to sell, it has to provide something different. It provides detailed and thorough information on market segments that can be used by laymen to get professional results. Unlike many market segmentation books, it requires no statistics and uses a simple process. That makes it different and provides a selling feature.

Impact Of Competition On Pricing Strategy: Learn The Target Market Of Competitive Products and Go After A Different One

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.

Although your product may be similar to competitive products, you can charge more if you design it for a specific target market.

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

Once you know the price range of competing products, the extra features offered by each, and the target market for each, you will have a much better idea of how to price 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.

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To learn more about pricing strategy, see my post on The Effect of Competition on Pricing Strategy. And get my DVD "Marketing Your Small Business" for just shipping. Get a totally unique version of this article from our article submission service

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