Research competitors’ pricing strategy
Research competitors’ pricing strategy
1. Create a spreadsheet with tabs for Direct, Indirect, and Substitute competitors, and columns for Competitor, Core products, Direct sales channels, Indirect sales channels, Highest price, and Lowest price.
2. List 10 direct, indirect, and substitute competitors. Add each to the Competitor column in its applicable spreadsheet tab, one per row.
Direct competition: Companies that have identical offerings to what you sell and are marketing to the same audience as you. For example, Dell versus HP. Indirect competition: Businesses that are solving the same customer needs or meeting the same customer desires as you, but with slightly different products. For example, Netflix versus YouTube. Substitute competition: Companies that have completely different products and meet completely different needs, but are still competing for the same audience’s attention. For example, a fast-food restaurant versus a frozen meal brand.
3. Review the websites for each competitor and list their main products in the Core products column.
If time allows, include secondary products. If you’re short on time and resources, focus on the specific core offerings that are most similar to your own core offering.
4. Fill in the Direct sales channels and Indirect sales channels cells for each competitor. Include brick-and-mortar stores, third-party retailers, ecommerce marketplaces like Amazon, and reseller platforms like Facebook Marketplace, eBay, and Overstock.com.
Review sales and About pages to see if your competitors sell through third-party channels. Consider using a competitive intelligence software platform to automate this process. Platforms that have built-in competitor tracking include Prisync, Klue, and Skuuudle. These platforms will still need you to specify the competitors and products you want them to track, so the spreadsheet you’ve built can be useful even if you go the automated route.
5. Record how much your competitor's core products are sold for on their main website and any other direct or indirect sales channels.
If you’re using a competitive intelligence software platform, specify which products or SKUs you want it to track. The software will generate the price for those specific items across all of your competitors’ sales channels. Follow the instructions for the specific platform you’re using, as every software provider takes a different approach.
6. Identify the highest and lowest price points of your competitors’ core offering and add these to the Highest price and Lowest price columns of your spreadsheet.
If you’re using a competitive intelligence software, the platform can instantly tell you the highest and lowest price points used by your competitors.
7. Use your competitors’ pricing to decide whether you want to compete with them on price or value.
Common strategies are to sell at the same or lower price point, introduce sales that beat them on discounts, or provide more bonuses or better customer service so that your higher price point appears justified to consumers.