The truth about businesses, large and small, is that you need to understand your marketplace. This comes by knowing both your buyers and your competition. Proper pricing reflects how well you understand both so you can be effective.
In our previous article on developing your pricing strategy, we focused on customers, and in this article, we reflect on information about your competitors that will influence how you set your prices.
By getting to know the competition and the products or services they are selling that are like yours, you will get an idea of what your market wants, what they will pay, and how to position your products accordingly.
Don’t rest on believing that you know everyone in your competitive marketplace. You may think you know who they are but look; old competitors are leaving your market, and new ones are coming in every day.
Your playing field changes often, and you need to understand it.
Here are a few places that you can research to establish where your existing competition lives.
The first step here is finding the same type of competitors who compete for the same type of target customer as yourself.
Your mission is to develop the right price for your products or service, and that takes more than a roll of the dice. It entails asking the right questions to get the information you require.
Here is a list of questions to ask while researching.
Being a trendsetter is a good thing; however, the trends in business happen quickly, and you need to be on top of them when they happen.
Keep an eye out for new players in your arena.
Be progressive and ahead of the curve as often as possible. To do this, you can:
The fact is that whether you are a self-employed small business owner or an owner of a larger business, knowing your competition is mandatory.
All you need to do is look at technology. Then, you can almost be confident that if something is important, the “geeks” will build an app for it.
I simply asked Google how I could find data on my competition, and low and behold, up came several companies that currently offer apps for finding out all the news on your competitors.
These are often designed to assist larger companies, but by the time you read this blog, there will probably be a program for small companies, using the tools I have outlined above.
You can never know enough about the players in your playground!
Your goal is to have prices the market is willing to pay, and knowledge of your customers and your competition enables you to consider different strategies.
For example, one potential strategy businesses use is to be cheaper than their competitors to attract customers away from them. Alternatively, you may adopt a premium pricing model where you price your products or services above your competitors.
I am not suggesting that you adopt either of these strategies, and we will discuss the potential approaches in more detail in this series. Instead, I am emphasizing here that having intel on your customers and your competitors will assist you in developing the most appropriate pricing strategy for your business.
Next week we will look at another foundational element for setting prices and then part 4 will focus on creating a product strategy for your business. See you then.
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Ed Carey, AMG, LLC