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 make these points easier to comprehend, I'll discuss one of my products as an example.

Impact Of Competition On Pricing Strategy: Learn The Price Range Of Competitive 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.

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 - Determine The Features Offered By Competing Products

You need to know how features influence the prices of competitive products.

Every product has certain features that customers have grown to expect as standard. All products should provide these standard features. It's the additional features that distinguish your product from your competitors'.

For example, any book on market segmentation should cover basic market segmentation information, including what it is, what it does, its benefits, and basic criteria for conducting market segmentation research.

But the exact process to conduct market segmentation can differ drastically. Some processes require complicated statistical analysis that are usually conducted and understood only by marketing agencies specializing in market segmentation. Others use simpler processes that require less complicated statistics. Very few require no statistics. So ease of the market segmentation process covered in my book is a feature that relates directly to readers' benefits.

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

The third major consideration regarding the impact of competition on pricing strategy is the target market. The product's intended users determine the price for a product because some target markets will pay more than others. And you can always sell a product at a higher price if its designed for target market.

Just because you have a product that is similar to competitors' doesn't mean that you sell your product to the same type of people.

To illustrate, most competitors for my market segmentation book are written for present or future (student) marketing professionals. Some target large business managers, and a few target specific industries.

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.

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.

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

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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. You can get a unique content version of this article from the Uber Article Directory.

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