What is the thing that every customer loves or demands? Without a second thought, it’s getting products at the best possible price. Yes, customers always prefer products or services that suit their budget or are available at the best price. If you and your competitor are offering the same product at different prices, certainly customers would opt for the one that is priced low. But as a seller or retailer, you will always think that would pricing low than your competitors affect your profit. This is when the competitive pricing strategy comes into the picture.
What is competitive pricing?
It is the price of the product or service set by the business based on the price set by the competitor. It is the closest price. Since the business considers the market price instead of figuring out its own price, competitive pricing is also called as market-oriented pricing.
A competitive pricing strategy usually comes into action when the market is competitive especially when the on stores are offering common products. And that is why a competitive pricing strategy is most effective for eCommerce business as there is cut-throat competition among online sellers.
Competitive pricing analysis
The best and time-tested way to conduct a comprehensive competitor pricing analysis is by finding answers to some most vital questions which are:
- Who are the top 3 competitors of your business?
- What are the niche products and services your competitor deal with?
- What is the type of pricing strategy they follow?
- Are your competitors making a profit?
- If yes, how much profit do they make?
- Since when are they in the online business?
- What are their positive and negative traits?
- What is their growth rate?
- What makes their business different from yours?
Answering these questions will certainly help you gather the required data that is essential for effective competitive pricing.
Using competitor price tracking software
Smart pricing is definitely going to grab the attention of your potential customers. The effective and foolproof way to attain such prices is by making use of competitor price tracking software. These web apps gather the prices of the tracked products from your competitors’ websites, analyze and come up with a smart price for your product. It monitors and effectively compares the price and makes sure both the business and customers are benefiting from it.
3 options for competitive pricing strategy
If you have decided to adopt a competitive pricing strategy, then here are 3 options that you can consider:
Low pricing – This means reducing the price of goods or services as compared to your competitors. So if you are considering this option make sure you don’t run into a loss. The better way for you would be to produce products in bulk as it will reduce production costs and accordingly, you can lower the price of the products without hampering the profit margin.
Matched pricing – This means keeping the product price, the same as the competitor. It is challenging as you may have to convince your customers enough that your product qualities or features are much better. Focus more on quality. If the customers get convinced, they will automatically choose your product.
High pricing – This means the cost of your products or services is higher than competitors. To ensure the customers choose your online store to make the purchase, offer additional features and benefits that will attract them. Highlight what your competitors are missing and what you have.
How to use competitive pricing to maintain a regular flow of customers?
Customers like never before are smart enough to compare product reviews and prices and make the purchase. Especially when it comes to online shopping, customers can easily open various sites selling similar products compare their prices, refer to earlier customer reviews, and accordingly make a wise choice. Unlike before now, there is no need to run up and down a hundred stores and get the desired product at the best possible price, eCommerce has made everything a cakewalk.
So if customers are thinking smart then online businesses need to think much smarter to maintain their regular flow of customers. Compared to other pricing strategies, competitive pricing relatively helps online stores to have a stable customer base. This pricing technique allows the customer to compare prices before making the purchase.
Pricing as per your brand
Sometimes you want to price your product higher than your competitors. Only by indicating your USP, you can convince the customers that you are the best choice. Customers would definitely consider alternatives that are less priced but if you succeed in convincing your customers that your brand product is more useful and valuable then they might consider you as a better choice.
You need to understand your competitors completely, particularly their positive and negative traits, and then come up with a compelling pricing strategy.
Pricing as per your customer’s want
Ever thought about why your potential customer prefers your competitor’s product rather than yours? Unless you don’t understand what your customers want, you can’t sense their willingness to pay. As a seller, you have to understand the needs of your customers and price the products as per their desires. Make sure the customers find the price acceptable and make the purchase.
Play with numbers
It’s human psychology how they react to numbers. Expensive tags never tend to attract shoppers. Here the arrangement of numbers in the pricing plays a significant role. We’ll explain how. For example – if your competitor is offering a certain product at $200 and you are offering the same product at $199, your product is likely to catch more attention because of the digits and arrangement of numbers. Though the difference is just $1 still it can have an impact on their buying decision.
Similarly, if you have decided to sell a product at a price less than your competitor, instead of directly displaying the reduced price on your website, try to show it at a discounted price. If the competitor is selling a product at $100 and you are selling the same product at less price say $90 then instead of directly displaying the price you can show like “ABC product – $100 is now available at 10% discount.” this will grab more attention. If you directly showcase the lowered price, the quality of your product can be questioned. So it is better to play safe, understand human psychology, and use the numbers effectively.
So if you are planning to undertake a competitive pricing strategy for eCommerce business, follow the above guidelines for your business advantage.
