Do the same for each of your competitors and include the price point they charge for the comparable product. In the first column, record your product’s key features, target market, value proposition, and costs and margins. In this step, you’ll assess your product line, your competitors' pricing for equivalent products, and your budget. Complete a competitive pricing analysisĪssuming you aren’t in a price war, the next step is to perform a competitive pricing analysis. To avoid the risk of your product or service becoming a commodity, emphasize the other unique selling points of your company. Be careful about engaging in behavior that can potentially trigger this event, too.Ĭompeting on price can quickly lead to over-discounting your good or service and devaluing your brand. Price wars can drain a company’s resources quickly and impact the customer experience. If you find that your competitor is engaging in a price war, you may need to take a different approach to competing with their prices. “No matter who wins, the combatants all seem to end up worse off than before they joined the battle.” “Price wars can create economically devastating and psychologically debilitating situations that take an extraordinary toll on an individual, a company, and industry profitability,” wrote Harvard Business Review. Unfortunately, small business owners can find themselves in a price war if a big enterprise is trying to drive them out of the market by making it untenable to continuously drop the price of a product.Ī price war can be bad for everyone’s business. Assess if you’re in a price warĪ price war is when two competitors continuously lower the price of their products in a strategic attempt to undercut one another and capture greater market share. Compete with your competitors’ pricing using these steps to set a price that generates sales without stifling growth.
But you may also risk setting your price too low to cover your overhead and other expenses. While your company can win on convenience, delivery speed, customer service, or branding, ultimately many customers simply choose the more affordable option.Ĭompetitive pricing - benchmarking the price you set for your product or service based on comparable competitors in the market - can help you win customers.
Price is almost always a factor when a customer makes a purchase decision. From performing a competitive pricing analysis to setting a pricing strategy, there are several key ways business owners can price their products without stifling growth.
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