Your Pricing and Your Competitors

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.

Finding Your Competition

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.

• Local Business Directories
• Local Chamber of Commerce
• Advertisements
• Press Reports
• Exhibitions and fairs
• Surveys and Questionnaires
• Internet searches
• Information provided by customers or others
• Flyers, brochures, and other marketing literature
• Similar products and services to yours
• Existing Clients

The first step here is finding the same type of competitors who compete for the same type of target customer as yourself.

What to Research

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.

• What steps does your competition take when marketing to their clients?
• What is their existing price scenario?
• Do they have a UVP (Unique Value Proposition)?
• Who are their customers?
• Search the internet for samples of their reputation. Read all the testimonials, online reviews, and any other market research you can find.
• What delivery method does your competitor use?
• Do they offer special services to their clients, and if so, what are they?
• If they are a public company, try and obtain a copy of their annual report.
• What sales volume do they have?
• Find out what their customers feel about their strengths and weaknesses.
• Can you find any testimonials of customer loyalty?
• Has their customer base experienced a rise or fall lately?
• What new products or services are your competitors releasing?
• How are they set with respect to financial resources?

Always Look Which Way the Wind’s Blowing

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:

• Find new blogs that provide a new look and feel to your industry.
• Subscribe to email newsletters that relate to your industry.
• Be a social media trend watcher.
• Show up to industry trade fairs and conferences whenever possible.
• Always be in contact with YOUR customers – asking questions and gathering information.

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!

How Does This Information Affect Your Pricing Strategy?

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.