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.

A lot more goes into determining a product's price than just the product. The manner and speed of delivery, the way that customers are served, and the product guarantee contribute to the price that customers are willing 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: Know the Range Of Prices That Your Competitors Charge For Their Products

You have to know how your competitor's price their products and the range between their prices.

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: Know the Features That Your Competitors Provide With Their Products

The second thing you need to learn about the impact of competition on pricing strategy is that price varies by features.

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: Determine How Your Target Market Differs From Competing Products

Another element in the impact of competition on pricing strategy is the target market. If you create your product for a particular group of people, you can charge more than if you create it for everybody. And if that is an exclusive group, you can charge even more. For instance the highest priced market segmentation books are written for marketing agencies. They can afford to pay top dollar for information that they can mark up to their clients.

If you choose a target market not served by your competitors. and design your product to meet your target market's needs, you can charge more.

For instance, the target market for most market segmentation books are either student or professional marketers, managers of large businesses, or businesses in a large 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: Conclusion

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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