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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.

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.

But this article will primarily concentrate on the impact of competition of pricing strategy based on the price range of competitive products, their features, and target market.

To illustrate what I mean, I'll compare one of my products to competitive products.

Impact Of Competition On Pricing Strategy: Determine The Price Range Of Competing Products

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

Knowing the price range of competitors' products will help you to determine what you should charge for yours.

For instance, I did some research on Amazon.com and discovered that the competition for my market segmentation book ranges from $6.95 to $159, with a median of $82.98. So I know to price my book somewhere in this price range.

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

The second impact of competition on pricing strategy relates to 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'.

To illustrate, let's say that my book just covered basic information that's included in every other market segmentation book. Would you want to buy it?

Most market segmentation books rely on statistical analysis. Some are very complicated, and most are too much so for the average reader. So my book uses a simple process that requires no statistics and can be used by almost anyone. That distinguishes it from competing products.

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

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.

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.

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: Synthesis

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.

If you use the information in this article, you can also set a good price for your product by noting the impact of competition on pricing strategy.

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