case study competitive pricing

How to do competitive pricing analysis and beat your competition (with examples)

Alex Walton

You and your team have spent thousands of hours and hundreds of thousands of dollars bringing your newest product or service into existence. Would you pluck the price out of thin air?

If you think that doesn’t sound smart, you’d be right. So how do you make an informed decision on how to price your products?

The answer: competitive pricing analysis.

Don’t know what that is? Sit tight, we’re about to break it down for ya. 👏

In this article, we cover:

• How pricing analysis can help you win more market share and position your products more effectively.
• Six powerful sources of pricing data (including some you definitely haven’t thought of)!
• Why code doesn’t help in pricing analysis as much as you might think.
• Two examples of how a B2B and B2C business might perform a pricing analysis on their competitors.

Want to jump right into the action?

Here are the steps to conduct a competitive pricing analysis:

• Identify the competitors to analyze.
• Pull pricing data (plus details on how to do it).
• Compare and analyze that data for conclusions.
• Put together an action plan.

What is competitive pricing analysis?

A competitive pricing analysis sees you gather the prices of your competitors’ products over time. You’ll use this data to draw comparisons and conclusions about which direction your own pricing strategy should head in. Competitive pricing analysis can alert you to shifts in market trends as far as product pricing goes, and can help you position your products more effectively.

Benefits of a competitive pricing analysis

So, that’s competitive pricing analysis in a nutshell. But what’s the point really ?

Glad you asked! Truth is, there are tons of great reasons to perform a competitor pricing analysis. Here are a few:

• Stop losing profits to competitors, so you can reinvest more in your products, creating a self-reinforcing spiral of product awesomeness and brand domination. 🏋️‍♂️
• Optimize your pricing strategy to win more market share , ensuring no wasted expenses and maximum ROI, making you the darling of the business. 😊
• Improve understanding of buyer behavior, so you can make smarter decisions about your product’s future, and be responsible for huge surges in revenue. 📈
• Identify and get ahead of competitive pricing trends, eliminating stressful surprises, and making your workplace an ocean of calm despite all the winning. 🐳

Let’s dig into each in a bit more detail.

Avoid losing profits to competitors

Who decided on the prices of your products? And how did they do it?

They didn’t just pull a number out of thin air. When you’re pricing a product, your competitors are (naturally) the first place you look. In fact, you’re likely to look at how competitors price their products before you even get to the drawing board for that product. 🎨

That’s because you need to know how much you can charge your customers before you commit to the costs of production. If every comparable product on the market retails for 50% of what you’ll have to charge, given the production costs you’ve been quoted, your product idea’s a non-starter!

No. You need an idea of how your competitors are pricing their products so you can create a winning positioning strategy. One that includes details on how you’ll price your own products. It should go further than that, though. You want to figure out which unmet customer needs your product will meet, which of their problems it’ll solve, and the experience it’ll offer while doing so.

Positioning with pricing

If you’re offering a premium experience and meeting as-yet unmet needs, you can charge a premium. So long as your price is justified, and you communicate those justifications to your target audience in a way that makes them happy to pay a premium (wave to your wonderful marketing team!), you’ll have happy customers and a profitable product.

Ok, but how does this help you avoid losing profits to competitors?

You won’t think to double-check your messaging to make sure it communicates your product’s worth. You won’t think to wonder how your competitors can sell so cheaply, and look for creative ways to cut supply chain or manufacturing costs.

Or, if competitors are charging higher prices than you for a similar product, you won’t start asking what it is about your product that’s failing to win you more market share despite the cheaper price.

To sum up, performing a competitor pricing analysis regularly keeps you on top of changes to your competitor’s prices, so you can react swiftly with your own changes where necessary. It acts as a trigger for reflection and innovation, so you don’t lose profits to your competitors.

Optimize pricing strategy to win more market share

To make strategic decisions, you need intel. ♟️

That holds true for pricing, too. The more you know about how your competitors price their products, and why, the smarter the decisions you’ll be able to make about your own pricing.

And if you want to win more market share from your competitors, you want to be making the smartest decisions you can about your prices. Whether you decide to compete on price, or to communicate value with a prestige pricing strategy , it pays to start by getting your hands on as much intel as possible by doing a competitive pricing analysis.

Improve understanding of buyer behavior

Price is just one factor in why a customer does or doesn’t buy. And it’s never as simple as “cheaper is better”.

Depending on the niche, premium prices are often actually more attractive to consumers and decision-makers than cheaper prices. When risk is high, people would rather pay more to be that much more certain they’re getting a quality service than cut costs and risk having to redo the job. Would you trust the cheapest consultant’s advice right before a huge merger or acquisition deal?

That’s why it pays to look at pricing data with an open mind. Get your hands on quality data, combine it with what you already know. Specifically, what you know about how your customers buy, and you’ll be rewarded with deeper insights into buyer behavior and how to optimize for it.

Identify and get ahead of competitive pricing trends

“The best time to plant a tree was 20 years ago. The second-best time is today.” — Chinese Proverb

To identify trends, you have to collect data over time. Without quality historical data, you’ll have too few data points to be able to draw real conclusions.

That’s why it pays to start collecting data right now. Sure, it’d help if you had decades of data to pull from, but a database starts from a single data point. And even if you only have one data point from each competitor for now, that’s a lot better than pulling a price out of thin air.

When you pull competitor pricing data regularly, you’ll soon enough have a set of historical prices going back months or even years, making it clear and easy to identify trends in those price movements.

Then, when you identify a trend or a shift, you can make informed decisions about what that means for your own pricing strategy.

How to do competitive pricing analysis

Much like any other aspect of competitive analysis, a pricing analysis involves three or four distinct stages:

• As a preliminary stage, identify the competitors you’ll be looking into.
• Gather the necessary data.
• Analyze the necessary data and draw conclusions.
• Share your conclusions and work with others to convert them into an action plan.

Let’s examine those stages in detail.

1 – Identify the competitors you want to pull data on

First, figure out the shortlist of competitors you want to study. As we’ll discuss a little later on, it’s simply not practical to pull data from dozens of competitors all at once.

Instead, prioritize your competitors into a shortlist of those most relevant to your business success. While it’s not wise to ignore indirect competitors entirely, you have limited resources.

What criteria should you use for this? Maybe beating these select competitors means vastly more market share for you than winning versus any others. These would make good candidates.

Or, their products might just be the most similar to your own, so you’ve decided it’s important to know how they’re pricing those products.

That makes identifying the competitors you want to pull data on a crucial first step in competitive pricing analysis.

2 – Pull pricing data

Now it’s time to actually pull pricing data from these competitors.

Depending on the industry and sector you work in, this isn’t always as easy as it sounds. Many businesses don’t make their prices publicly available. Some don’t list pricing information on their websites at all, making it difficult to pull accurate pricing information on their products without contacting the business. And if you’re not actually interested in using their product, you’re unlikely to get very far asking for a quote.

Other challenges include the accuracy of the pricing information and how frequently you need to update it. If yours is a dynamic industry, competitors can change their prices extremely often with fluctuations in the state of their supply chains, the exchange rate, and the prices set by their manufacturers. If you need very accurate pricing data, you’ll need to sample prices more frequently in accordance in these cases.

Here are a few different ways of getting your hands on pricing data:

• Ask your customers and prospects .
• Ask reps from other departments.
• Look for resellers and/or distributors .
• Look on competitors’ websites .
• Search on public forums .
• Speak to industry contacts and experts.

Here’s a bit more detail:

(I) Ask your customers and prospects

Even if price information isn’t listed on a competitor’s website, or in any physical location, there’s nothing to stop you asking your customers and prospects about their own findings.

Few will do more in-depth market research than prospects motivated to find a good deal. So during your win/loss interviews, or any other stage of your competitive intelligence research that touches base with customers, make sure to do some digging on pricing information. You’ll soon get a sense for how much your main competitors are charging.

You can even ask whether competitors have put prices up or down recently. If the prospect or customer has recently adopted, or moved away from, one of your competitors, they might just have the answer.

(II) Ask reps from other departments

Even if your business doesn’t do a ton of customer research yet, your sales and customer success teams will still regularly hold conversations with won and lost prospects. If you can get these groups to systematically ask and log information about pricing as a part of these conversations, you’ll have access to pricing info you might not find elsewhere.

(III) Look for resellers and/or distributors

With a bit of detective work, you can usually identify a reseller. They’ll typically use similar language and messaging as your competitor, but with subtle differences in branding, like different packaging, or colors.

Some of these businesses won’t have the same qualms about listing pricing information publicly as your competitor has. If you can sample a few at a time, you’ll get a decent spread of prices that have a direct correlation to the price of your competitor’s products.

(IV) Look on competitor websites

This one’s obvious, but you shouldn’t overlook it. Not all businesses are against making their prices publicly visible. In some industries, it’s even the norm, making it very easy to access up-to-date, accurate price data.

(V) Search on public forums

Noticing a theme, here? Pricing information is collected through many of the same channels as your other competitive intelligence data. Online forums like Reddit or even LinkedIn are home to groups of people with no qualms about candidly discussing their experiences with your competitors. That includes what they paid.

(VI) Speak to industry contacts and experts

Any business leader wondering how to price their products probably has a network of contacts in their industry. There’s nothing stopping you from consulting with these people (whether as a favor between friends or as a professional contract with industry consultants) and getting hold of pricing data that way.

3 – Compare and analyze your pricing data

With pricing data in-hand, it’s time to put it to work.

The more data points you have, the easier it’ll be to identify trends, as we mentioned earlier.

But a single set of up-to-date prices for each of the competitors on your shortlist is more than enough to get started with. Combine this information with what else you know of their positioning strategies. Are they the budget option? Are they the luxury, premium option? What else about their messaging and branding gives you that impression? And where are the open gaps in the market you can position yourself to fill?

A competitive pricing analysis tends to go hand-in-hand with a competitive gap analysis or a market opportunity analysis for this reason. A comprehensive analysis of the competitive landscape and your place within it compared to your competitors can give you a clear view of where to plant yourself to capture the largest possible market share.

4 – Come up with an action plan

So, knowing what you know of your competitors’ prices, what will you do?

Does your competitive pricing strategy need to change? Will you change your own pricing? Or can it stay the same?

Can you identify any new trends in pricing behavior by combining your newest data with historical data?

It’s worth noting at this stage that it’s usually not the job of the competitive intelligence professional to devise and implement an action plan. That usually falls to leadership, or some other group of stakeholders.

What you should be prepared to do, however, is to communicate your findings while presenting a clear and defensible point of view. From there, you can work with these groups, if necessary, to chart a clear course of action in light of what you’ve found.

Is your competitive program effective enough?

Imagine if you could:

• Set up your listening stack to gather competitive intel with ruthless efficiency , giving you more time to analyze, enable, inform, and become your business’s champion. 💪
• Set up win/loss interviews to unveil the powerful reasons why customers aren’t choosing you, even if you’ve got no time or resources. 🔎
• Deliver a competitive news briefing that gets people talking , no matter which set of stakeholders you serve. 📣

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That sounds like a lot of work… why can’t you just use code to do this for you?

The majority of retailers have an online store. Online stores have pricing information. Since it’s information that’s open to the public, you’re well within your rights to log this information for your own records.

So why not just use Python’s BeautifulSoup library, or something similar, to scrape all the data you can from as many competitor websites as possible and call it a day?!

Well, web scraping actually goes against the terms of service of many websites. Many will block suspicious scrape-like activity. In some places, it’s actually illegal. 😬

What’s more, it’d be a hard task if you wanted to track pricing on a bunch of competitor websites at once. Different websites have different layouts, and are built on different code bases. Both these facts create problems for those wanting a single script to scrape the data from a list of user-defined websites, for example.

That’s why it’s best to decide, from the start, which select few competitors you want to track pricing information for.

So, while manual data entry might not be what gets you out of bed in the morning, stick by the eternal CI mandate to prioritize ruthlessly, and the job won’t take too long.

Plus, with only a shortlist of competitors to check up on, it’s easy to check their terms of service and see if web scraping is something they do allow. Depending on who those competitors are, some websites even offer an API to make extracting price data quick and easy. Amazon’s Product Advertizing API is one example.

Competitive pricing analysis examples

To really hammer these points home, we thought we’d walk you through a couple of competitive pricing analysis case studies.

Case study one: B2B workout equipment manufacturer and supplier

Who we are: We’re “Carbon Strength & Fitness,” a manufacturer and supplier of top-of-the-line workout and gym equipment. 😏

What we do: We work with distributors to get our equipment out to high-end gyms for professional athletes and dedicated amateurs.

Our competitors: We consider our primary competitors to be Prime Fitness USA and Atlantis Strength. Both are based in the USA, whereas we are based in Europe, giving us a slight competitive advantage geographically when it comes to serving these regions.

Our product: We’re launching a new plate-loaded upper back- and lat-pulldown machine, and need to know how to price it. Atlantis Strength doesn’t list a price point on its website but, luckily, Prime Fitness does. Their machine is the current market leader, rapidly growing in demand thanks to its articulating handles and multiple possible loading patterns. These empower gym-goers to alter the movement’s resistance profile and arm path.

These are design features we’ve incorporated into our own product, while using more cost-effective materials in favor of a higher maintenance frequency. Our great relationship with suppliers and patented interlocking parts make our manufacturing costs lower than Prime’s and Atlantis’s.

The pricing analysis: We predict the lower initial outlay will make us a popular option for newly launching gyms with lower budgets that still want the best for their members. For that reason, we decide to charge a premium price, while undercutting Prime Fitness’s plate loaded pull down , which is priced at $3,072.00 per unit.

We’d like to price ours somewhere between this and Atlantis’s pull down machine, which a search on Reddit revealed has been sold in good but used-condition for around $950 . From speaking with our network of contacts in the industry, we know used equipment tends to hold its value pretty well, never selling for much less than 70% of its original value so long as it’s well-maintained.

Judging by the condition of the piece, plus the fact it was purchased five years ago, we’ve adjusted for inflation and estimate the original value of the piece to be around $1500.

Since our machine is mechanically superior to the Atlantis, but we want to pass savings onto our customers and make additional profits in volume of sales, we decide to price our product at a little over $2000USD.

Case study two: B2C acoustic musical instrument manufacturer

Next, a B2C manufacturer of musical instruments.

Who we are: We’re “X Drums”, and we make acoustic drum kits.

What we do: We’re looking to launch a new range of affordable mid-range drum kits for students and casual players looking to get a great sound for less.

Our competitors: Mapex and Pearl drums are our two biggest competitors in this price range. Although other classic brands, like Gretsch, sell kits in this range, they tend to be smaller four-piece kits right in the lowest price ranges they sell at.

The pricing analysis: Although Mapex and Pearl don’t list prices on their websites, it’s not difficult to find prices for their drum kits on distributor websites. We know that drum kits in these price ranges cost around $1000.

With our manufacturing costs, we know we won’t be able to turn much of a profit selling at $1000. Since we don’t see a way to position our new brand name above our established competitors, we’ll price similarly, but offer deals that up-sell our other products. These will include items like kick drum pedals and our own-brand cymbals, allowing us to turn a profit on the bonuses in these package deals.

By now it should be clear, from the sample case studies and everything we’ve discussed in this article, how you can get started with competitive pricing analysis.

Here’s a quick summary of what we’ve learned:

• Competitive pricing analysis has you gather your competitor’s prices over time and use this data to make data driven, strategic decisions about your own products.
• Competitive pricing analysis helps you position your products more effectively while getting and staying ahead of evolving trends.
• It can be tricky to find accurate pricing data, but if you’re resourceful, and tread the path less traveled in your search, you’ll find information you can work with.
• Programmatic pricing analyses are often unethical and often less practical than you might think (though aren’t impossible).

Looking for the secrets to CI success?

Did you know most competitive intelligence professionals struggle?

The main reasons why they struggle are:

• They don’t know where to focus their time and attention.
• They lack the necessary frameworks to get the work done efficiently.
• They don’t know how to share their findings in a way that gets people talking productively.

We’ve got a new course out with all the answers. Click below to check it out.

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Alex is the tech-addicted copywriter behind much of what you'll read here at Competitive Intelligence Alliance. He's obsessed with producing content to maximize your competitive edge.

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Mastering the Pricing Case Study: A Comprehensive Guide

• Last Updated November, 2022

Setting the optimal pricing for products or services is important for a company as it directly impacts profitability. So every management consulting firm helps its clients with pricing strategies. The primary goal of a pricing case is to recommend a price that maximizes profit, taking costs for product/service and market considerations into account.

A typical pricing case interview would start something like this –

A manufacturer of kitchen knives sells a range of products, from low-end to professional, to customers at different price points. They’ve developed a new line of knives in collaboration with a celebrity chef and would like help setting the prices for these products.

Pricing cases might not seem straightforward initially, but with the right frameworks and practice cases, we will help you prepare for it.

In this article, we’ll discuss:

• Examples of pricing cases.
• The alternative pricing methods.
• How to approach a pricing case interview.
• An end-to-end pricing case example.

Let’s get started!

Pricing Case Examples

How to approach a pricing case interview, what are the most common pricing strategies, an end-to-end pricing case example, the relevant pricing strategy for our pricing case examples, 6 tips for solving a pricing case interview.

As companies mature, pricing becomes more complex because:

• Companies develop multiple products with different cost structures.
• Clients have different product/service needs and price sensitivities.

Pricing can also be a source for driving revenue growth if you can identify opportunities to price based on value to the customer or in a way that optimizes the tradeoff between revenue and costs. Let’s explore a few situations where consultants can help with pricing:

New Art Museum

A new modern art museum is scheduled to open next year in a major European city. The project lead has requested your help with the pricing of the admission tickets. He has two questions: How would you approach selecting a pricing method for the museum? What price would you recommend and why?

Nail the case & fit interview with strategies from former MBB Interviewers that have helped 89.6% of our clients pass the case interview.

Animal Healthcare

Our client provides healthcare services for animals and develops veterinary drugs. The client has recently developed a product that enables cows to increase milk production by 20%. They have turned to you to figure out how to price this new product in order to maximize profits.

California Municipality

Your client is a local municipality in California. The town recently built a complex of six parking lots, encircling a nearby community center and outdoor mall, which features shopping, restaurants, and some light attractions. In total there are 20,000 parking spots in these lots. Our client wants to maximize the profit it generates from the parking lots with a focus on revenue generation. How would you think about different types of pricing structures and revenue models for the parking lots?

In most pricing case questions, you’ll have to work through one or a combination of the following pricing strategies:

Most companies use a combination of these alternative pricing strategies to maximize profitability. For example, a manufacturer of diet pills that costs $10 to produce may be able to charge $100 per bottle if the target customers have low-price sensitivity and high perceived value (a savings of many hours working out in the gym and/or eliminating the negative health effects of being overweight).

Note that for these examples, multiple correct solutions are possible. The important thing in pricing case interviews is to back up your answer well with analysis and logic.

Relevant pricing strategies + sample approach:

• Since the costs of running the museum are mostly fixed (e.g., staff, maintenance, and utilities), a cost-based pricing strategy will not provide much insight. 
• The new museum should therefore use a combination of demand-pull and market-based pricing.
• Since the museum is new, they should set their pricing below the average market price in order to draw in early customers to check out the museum and spread awareness to their friends.
• Do a check that the proposed price point will cover a good portion of the museum’s costs with expected attendance numbers.
• Note that for a museum, ticket sales are probably not expected to fully cover costs. Exhibit sponsors, grants, and donations will be additional sources of funding.

Our client provides healthcare services for animals and develops veterinary drugs . The client has recently developed a product that enables cows to increase milk production by 20%. They have turned to you to figure out how to price this new product in order to maximize profits.

• The cost of making a dose is $30.
• The competition charges $300 per dose.
• Clients are willing to pay $300 per dose because the 20% increase in their revenues will more than offset the product’s price.
• Therefore, the client should set its price based on a combination of market-based pricing and demand-pull.
• The recommendation of whether to price above or below the competitor’s $300 price depends upon how our product compares to theirs. If the client’s product is superior in any way, we may be able to command a higher price. If we are entering the market late and with a comparable product, we’ll need to set our price lower in order to provide an incentive for customers to try our product.
• At $300, this will provide a very attractive gross margin of close to 90%.

Your client is a local municipality in California. The town recently built a complex of six parking lots, encircling a nearby community center and outdoor mall, which features shopping, restaurants, and some light attractions. In total there are 20,000 parking spots in these lots. Our client wants to maximize the profit it generates from the parking lots with a focus on generating additional revenue. How would you think about different types of pricing structures and revenue models for the parking lots?

• Costs are mostly fixed (staff salaries and bond payments for garage construction), so a cost-based strategy doesn’t provide much insight. 
• Competitive garages are priced similarly, but less convenient for shoppers.
• Excess capacity provides the opportunity to identify additional revenue sources by driving higher utilization of the parking spaces and offering customers additional services while parked in the garage. 
• Brainstorming options to increase revenue identifies a variety of options (offer monthly passes, charge stores monthly fees to validate customer parking, provide valet parking and car washing, use excess capacity for concerts, fairs, or other large events that require parking spaces.)
• Do a check that the proposed price point, including value-added services, will cover salary and bond payments.

Like any other case interview, you want to spend the first few moments thinking through all the elements of the problem. Also, there is no one right way to approach a pricing case study but it should include the following:

• Cost-based: What is the cost of making the product or delivering the service?
• Market-based: What is the pricing of a comparable product or service? Can we price above what the competition is charging?
• Value-based: What is the customer’s willingness to pay? Will we lose customers if we charge higher prices? Are there incremental services we could provide that customers would value?  
• What is the volume impact of the alternative pricing model? What is the incremental revenue expected?
• What significant costs will be incurred if the pricing model changes?
• What revenues and costs will be realized if value-added services are launched?
• It can be hard to raise prices once customers are used to a low price. Price anchoring (establishing a higher price but discounting it) may be needed for some time to transition customer expectations.
• What is the expected response from the competition?
• What is the impact on the brand if we reduce prices?
• What is the impact on volume if we increase prices?

Let’s go through the pricing case for the California municipality with 6 parking lots. Remember that the instructions said to focus on incremental revenue. As you develop your structure for the case, remember the key components of our pricing issue tree approach:

• Pricing strategies including offering value-added services
• Financial Impact

Tailor Your Pricing Case Approach for this Client

The first thing you will need to do in a pricing case study, as well as any other consulting case, is to ensure you understand the problem you need to solve by repeating it back to your interviewer. If you need a refresher on the 4 Steps to Solving a Consulting Case Interview , check out our guide.

Second, you’ll structure your approach to the case. Stop reading for a moment and consider how you’d structure your analysis of this case. We gave you some hints in our sample cases section. After you’ve outlined your approach, read on and see what issues you addressed, and which you missed. Remember that you want your structure to be MECE and to have a couple of levels in your Issue Tree . 

• What is the municipality’s cost structure? 
• How much revenue is required to cover costs?
• How much of a profit expectation does the municipality have? Do they want to generate as much revenue as possible or cover their costs and provide a service to their community at an attractive price?
• What are the municipality’s current pricing structure and prices?
• How do the municipality’s current prices compare to alternative parking options?
• What alternative pricing structures could the municipality use (hourly rates, daily rates, monthly rates, store validation, etc.)
• What non-price considerations are there? (Proximity to popular destinations, roof vs. no roof, lighting/safety, cleanliness)
• What services could the parking lots provide in addition to the parking spot?
• How much space would providing additional services require?
• How much revenue would they generate?
• What are the expected revenues of alternative pricing models?
• What are the expected revenues of value-based services?
• Would additional costs be incurred?
• How might customers react to alternative pricing models?
• To value-based services?
• How might competitors react?

Pricing Case Brainstorming Exercise

After you structure your approach, the interviewer asks you to brainstorm some revenue growth opportunities for the California municipality. Again, stop reading for a moment to do this exercise yourself because you’ll learn more if you do. When you’re done, note the ideas you didn’t consider. Few candidates hit every possibility, but to move on to the next round of interviews, you’ll definitely want to go beyond the straightforward responses. 

• Charge store owners for parking spots to offer free parking for visitors.
• Charge higher pricing for spots closest to the stores.
• Offer annual/monthly parking passes.
• Valet parking
• Car washing
• Quick car servicing (e.g., oil change)
• Locate public transportation/bus stops adjacent to the lots and provide parking to commuters at a monthly rate.
• Rent space to event attendees (e.g., sporting events, concerts, fairs).

When you ask about the municipality’s current pricing and parking space utilization rates, your interviewer provides you with the following exhibit and asks you to calculate the daily revenue. Note that the parking lot has two sources of revenue:

• Tourists/shoppers buying parking tickets for an hourly rate.
• Store owners buying monthly parking permits for their staff.

Calculation of current daily revenue:

• 3 hour parking: Revenue = (20,000 parking spots) * (30% of total lot occupancy for tourists/shoppers) * (75% of tourists/shoppers occupancy for 3hr parking) * ($2/hr) * (*3hrs) = $27,000
• 5 hour parking: Revenue = (20,000 parking spots) * (30% of total lot occupancy for tourists/shoppers) * (25% of tourists/shoppers occupancy for 5hr parking) * ($10 flat fee) * = $15,000
• Total tourist/shopper revenue – $42,000
• Store owners: Revenue = (20,000 parking spots) (5% lot occupancy for owners) *($240/month) (1/30 to convert to daily revenue) = $8,000
• Total tourist/shopper + store owner daily revenues= $50,000

Alternative Pricing Model: Store Validation

If we move to a store validation model, in which a store validates the ticket of any customer who buys something, the spots taken would increase to 10,000, or 50% of available capacity. This is because the cost of parking is currently a deterrent to customers shopping at this mall. More shoppers at the mall would be a significant benefit to store owners.

The cost per validation would be $5 to the store. Assume every person parking a car purchases something. The number of store owner permits would drop to 750 since store owners will likely decide to save money on permits to pay for visitor parking spots.

What would be the impact on daily revenue?

• Increase in the tourist/shopper revenues = $8,000 = (10,000 spots) * ($5 per spot) – $42,000
• Store owner revenues would decrease by $2,000= (750 permits) * ($240 per permit/30 days per month) – $8,000 
• Change in total daily revenue = + $6,000
• A good candidate will recognize that the increase of 12% in daily revenues is a positive move forward.

Risks to the Change to a Validation Pricing Model

Do you see any risks to a validation pricing model? Do you think you’re likely to run into any resistance? From which types of stores and why?

• Stores with low price per transaction (such as ice cream shops) will likely lose money if they pay for the $5 validation fee, therefore 100% of stores will not be willing to participate.
• An alternative validation model would be to charge stores based on a percentage of transactions or profits. This would get less pushback.
• Under the percentage model, there would need to be a cap on the price charged to stores. A 5% charge on an ice cream may be reasonable but a 5% charge on a $1000 handbag would not be.
• You could note that while the focus of this case is on revenue generation, the costs to run a validation model might be slightly higher because the municipality will need to process the validation numbers and bill the stores.

Recommendation

Lastly, provide your recommendation for the client. Try coming up with your own before reading our sample.

The California Municipality should proceed with the transition to the validation pricing model because it provides an incremental $6000 per day or an increase in revenue of 12%. While doing this, it should study the risk of pushback from store owners with low transaction value and the possibility of charging based on a percentage of the transaction. Additionally, the municipality should roll out revenue growth opportunities such as renting out excess capacity and offering value-added services (e.g., valet parking) over time.

Determine the relevant pricing strategy to apply (e.g., cost-based vs. market-based or demand pull).

Brainstorm all possible changes in pricing methodologies that might bring in additional revenue (e.g., hourly, daily, or monthly pricing, a store-validation model for our parking lot case), don’t forget that charging for value-added services could be part of a broader pricing & revenue generation strategy (e.g., oil changes, car wash for our parking lot case)., calculate the incremental revenues from suggested changes in pricing., always have an answer to whether to proceed or not., detail the risks associated with the pricing changes..

– – – – –

In this article, we’ve covered:

• Examples of pricing cases
• Approaches for solving a pricing case
• Different pricing strategies 
• Tips for solving a pricing case

Still have questions?

If you have more questions about pricing case study interviews, leave them in the comments below. One of My Consulting Offer’s case coaches will answer them.

Other people prepping for pricing case studies found the following pages helpful:

• Our Ultimate Guide to Case Interview Prep .
• Types of Case Interviews .
• Consulting Case Interview Examples .
• M&A Case Study Interview.
• Market Sizing Case Questions .

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2 thoughts on “Mastering the Pricing Case Interview: A Comprehensive Guide”

In the Alternative Pricing Model: Store Validation

The original tourist/shopper revenue is $42,000 Under the alternative pricing model, (10,000 spots) * ($5 per spot) = $50,000, an $8,000 increase

The original store owner revenue is $8,000 Under the alternative pricing model, (750 permits) * ($240 per permit/30 days per month) = $6,000, a $2000 decrease.

The new total daily revenue = $56,000 Original daily revenue = $50,000

Shouldn’t the change in total daily revenue be = $56,000 – $50,000 = $6,000, a 12% increase?

I’m confused about the change in total daily revenue $2,000 and 4% numbers.

Yes, good catch! We’ll make the change. Sorry for the confusion.

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The Good-Better-Best Approach to Pricing

• Rafi Mohammed

Companies often crimp profits by using discounts to attract price-sensitive customers and by failing to give high-end customers reasons to spend more. A multitiered offering can use a stripped-down product (the “Good” option) to attract new customers, the existing product (“Better”) to keep current customers happy, and a feature-laden premium version (“Best”) to increase spending by customers who want more.

There’s nothing new about this concept, of course—think of the different grades of fuel at any gas station and the varying packages marketed by cable TV providers, to name just two examples—yet many companies and industries have failed to embrace it. The author, a consultant who has helped many organizations adopt G-B-B pricing, presents a step-by-step guide to devising, testing, and launching the strategy. Key steps include identifying “fence” attributes that will prevent current customers from trading down from the existing offering; carefully choosing features and names to create clear differentiation and value; and setting prices using feedback from in-house experts and, when possible, drawing on conjoint analysis and other market research.

Why every company should consider a tiered model

Idea in Brief

The problem.

Companies often crimp profits by using discounts to attract price-sensitive consumers and by failing to give high-end customers reasons to spend more.

The Solution

A multitiered offering (typically with three options) can use a stripped-down product to attract new customers, the existing product to keep current customers happy, and a feature-laden premium version to increase spending by customers who want more.

The Implementation

Key steps include identifying “fence” attributes that will prevent current customers from trading down from the existing offering; carefully choosing features and names to create clear differentiation and value; and setting prices using feedback from in-house experts and, when possible, drawing on market research.

For decades the auto insurance industry operated on a simple assumption: Consumers are highly price-sensitive, and most will buy the least-expensive plan they can find. But in the early 2000s Allstate conducted some research that caused it to revisit that assumption. Price does matter, it learned, but there’s more to the story: Many drivers worry about being hit with premium hikes if they’re in an accident. And drivers with clean records want to be rewarded.

• Rafi Mohammed is the founder of Culture of Profit, a consultancy that helps companies develop and improve their pricing strategies. He’s also the author of The Art of Pricing: How to Find the Hidden Profits to Grow Your Business (Crown Business, 2005) and The 1% Windfall: How Successful Companies Use Price to Profit and Grow (HarperCollins, 2010). cultureofprofit

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Pricing Case Study: How to Write and Analyze a Pricing Case Study

1. understanding the importance of pricing case studies, 2. identifying the key questions to address, 3. collecting relevant information for the case study, 4. examining the factors influencing pricing decisions, 5. communicating the results of the case study, 6. assessing the effectiveness of the pricing strategy, 7. summarizing the key takeaways from the case study, 8. providing actionable insights for pricing improvement, 9. reflecting on the value of pricing case studies.

Pricing case studies are an essential tool for businesses to understand how to price their products and services effectively . They provide insights into how other companies have approached pricing, what worked, and what didn't. By analyzing pricing case studies , businesses can learn from the successes and failures of others, and apply those lessons to their own pricing strategies. Pricing case studies can also help businesses understand how to price their products and services in different markets, and how to adjust their pricing strategies over time .

Here are some insights from different points of view:

- From a business perspective, pricing case studies can help companies understand how to price their products and services in a way that maximizes profits while remaining competitive.

- From a consumer perspective, pricing case studies can help consumers understand how prices are set, and what factors influence pricing decisions.

- From an academic perspective, pricing case studies can provide valuable insights into the theory and practice of pricing, and can be used to teach students about pricing strategies and tactics .

Now, here's a numbered list that provides in-depth information about the importance of pricing case studies:

1. Pricing case studies can help businesses understand how to price their products and services effectively .

2. Pricing case studies can provide insights into how other companies have approached pricing, what worked, and what didn't.

3. Pricing case studies can help businesses understand how to price their products and services in different markets, and how to adjust their pricing strategies over time.

4. Pricing case studies can help businesses understand how to price their products and services in a way that maximizes profits while remaining competitive.

5. Pricing case studies can help consumers understand how prices are set, and what factors influence pricing decisions.

6. Pricing case studies can provide valuable insights into the theory and practice of pricing, and can be used to teach students about pricing strategies and tactics.

I've been an entrepreneur and venture capitalist in the cryptocurrency industry for a long time, working with numerous projects. Brock Pierce

### Setting the Stage

Before diving into the specifics, let's consider the viewpoints of different stakeholders involved in pricing decisions:

1. Company Perspective: Maximizing Profit

- From the company's standpoint, the primary objective often revolves around maximizing profit. This involves finding the optimal price point that balances revenue generation with cost considerations.

- Example: A software company aims to price its new subscription service to maximize long-term revenue while covering development and maintenance costs .

2. Customer Perspective: Value Perception

- Customers evaluate prices based on perceived value. Understanding what features, benefits, or experiences customers associate with the product or service is crucial .

- Example: A luxury car manufacturer must justify a premium price by emphasizing superior performance, safety features, and brand prestige.

3. Competitor Perspective: Market Positioning

- Competitors' pricing strategies impact market dynamics. Companies need to position themselves relative to competitors .

- Example: A budget airline might intentionally undercut competitors' prices to gain market share , while a premium airline focuses on differentiation.

### Key Questions to Address

Now, let's break down the critical questions to address when defining pricing objectives:

1. What Are We Trying to Achieve?

- Clarify the overarching goal. Is it profit maximization, market share growth , or customer retention?

- Example: A startup launching a new mobile app might prioritize user acquisition initially (market share) and shift to monetization later (profit).

2. Segmentation and Targeting: Who Are Our Customers?

- identify customer segments based on demographics, behavior, or needs. Tailor pricing strategies accordingly.

- Example: A hotel chain might have different pricing tiers for business travelers, families, and leisure tourists.

3. Value Proposition: What Makes Our Offering Unique?

- Understand the value drivers. Is it quality, convenience, exclusivity, or cost savings?

- Example: A gourmet coffee shop emphasizes artisanal blends and cozy ambiance, justifying higher prices.

4. Cost Structure: What Are Our Fixed and Variable Costs?

- Calculate costs associated with production, distribution, marketing, and overhead.

- Example: An e-commerce platform needs to cover server costs, payment gateway fees , and marketing expenses.

5. Pricing Elasticity: How Will Demand Respond to Price Changes?

- Analyze how sensitive demand is to price fluctuations . Elastic demand allows for more aggressive pricing.

- Example: A movie theater might experiment with matinee discounts to attract price-sensitive customers .

6. Channel Strategy: Where and How Will We Sell?

- Consider online vs. Offline channels, direct sales vs. Intermediaries, and pricing consistency across channels.

- Example: A luxury fashion brand maintains consistent pricing across its boutiques and authorized retailers.

### Examples in Action

Let's illustrate these concepts with examples:

- Apple iPhone Pricing : Apple positions its iPhones as premium devices, emphasizing design, ecosystem integration, and brand cachet. Despite higher prices, demand remains strong due to perceived value.

- Freemium Software Models : Companies like Dropbox offer free basic services (freemium) while charging for premium features. The objective is to acquire a large user base and convert some to paying customers .

Remember, pricing decisions are dynamic. Regularly revisit objectives and adjust strategies based on market shifts, customer feedback, and competitive landscape. By thoughtfully addressing key questions, we pave the way for effective pricing analysis and decision-making.

Identifying the Key Questions to Address - Pricing Case Study: How to Write and Analyze a Pricing Case Study

1. Understanding the Context :

Before collecting data, it's essential to grasp the context of your pricing case study. Consider the following viewpoints:

- Customer Perspective : understand your target audience . What are their pain points, preferences, and buying behaviors? Conduct surveys, interviews, or focus groups to gain insights.

- Competitor Perspective : Analyze competitors' pricing strategies. Investigate their product offerings, pricing tiers, and promotional tactics.

- Internal Perspective : Collaborate with your organization's sales, marketing, and finance teams. They can provide valuable information on historical pricing, cost structures, and revenue goals.

2. Data Sources :

Collect data from diverse sources to build a comprehensive picture:

- Primary Data : Gather firsthand information through surveys, interviews, or experiments. For instance, conduct a conjoint analysis to understand customer preferences .

- Secondary Data : Utilize existing data from market reports, industry publications, and internal databases. Look for pricing data, market trends, and competitor analyses.

- External Data : Explore external APIs, databases, or publicly available datasets. For example, use economic indicators or demographic data relevant to your market.

3. Quantitative vs. Qualitative Data :

- Quantitative Data : Numeric data (e.g., sales figures, pricing metrics) provides statistical insights. Use regression analysis or correlation coefficients to identify relationships.

- Qualitative Data : Descriptive data (e.g., customer feedback, expert opinions) adds depth. Qualitative insights can guide pricing decisions based on customer perceptions.

4. Sampling Techniques :

- Random Sampling : Randomly select a subset of your target population. Ensure it represents the entire group.

- Stratified Sampling : Divide the population into subgroups (strata) based on relevant characteristics (e.g., demographics, geographic regions). Then sample from each stratum.

- Convenience Sampling : Collect data from readily available sources (e.g., existing customers, website visitors). Be cautious of potential bias.

5. data Collection methods :

- Surveys : Design well-structured surveys with clear questions. Use Likert scales, multiple-choice questions , or open-ended responses.

- Observations : Observe customer behavior in real-world settings (e.g., retail stores, online platforms).

- Experimentation : Conduct pricing experiments (e.g., A/B tests) to evaluate different pricing strategies.

6. Examples :

- Imagine you're analyzing a software product's pricing. You collect data on user engagement (quantitative) and conduct interviews with users (qualitative) to understand their pain points .

- In the retail industry, you might analyze historical sales data (secondary data) and conduct mystery shopping (observation) to assess pricing consistency across stores.

Remember that data quality and relevance are paramount. Validate your data sources, maintain consistency, and triangulate findings from multiple angles. By meticulously gathering relevant information, you'll lay a solid foundation for your pricing case study.

Feel free to ask if you need further elaboration or additional examples!

Collecting Relevant Information for the Case Study - Pricing Case Study: How to Write and Analyze a Pricing Case Study

## Understanding Pricing Strategy

1. Customer-Centric Perspective:

- Segmentation and Targeting: Companies analyze their customer base to identify distinct segments with varying needs, preferences, and willingness to pay. By tailoring pricing strategies to specific segments, businesses can maximize revenue.

- Value Perception: Customers perceive value differently based on factors such as quality, brand reputation, and convenience. Pricing should align with the perceived value to avoid overpricing or undervaluing products.

- Price Elasticity: Understanding how demand responds to price changes helps determine optimal pricing . Elastic products (where demand is sensitive to price) require careful pricing adjustments.

2. Cost-Based Considerations:

- Cost-Plus Pricing: Some companies adopt a cost-plus approach, adding a markup to production costs. While straightforward, this method ignores market dynamics and customer preferences.

- Break-Even Analysis: Calculating the breakeven point (where total revenue equals total costs) informs pricing decisions. Beyond breakeven, profit margins increase.

- marginal Cost pricing : In industries with high fixed costs (e.g., software development), pricing based on marginal costs (additional cost per unit) ensures profitability.

3. Competition and Market Positioning:

- Competitor-Based Pricing: Monitoring competitors' prices helps set benchmarks. Companies can choose to price above, below, or at par with competitors.

- market Share goals : Aggressive pricing may aim to gain market share , while premium pricing emphasizes exclusivity and quality.

- Positioning Strategies: Brands position themselves as luxury, value-oriented, or innovative. Pricing reinforces this positioning.

4. Psychological Factors:

- Price Endings: Ending prices in 9 (e.g., $9.99) create the perception of a bargain. Rounded prices (e.g., $10) signal quality.

- Reference Prices: Consumers compare prices to reference points (e.g., previous prices, competitor prices) when evaluating a purchase.

- Price Framing: Presenting prices in context (e.g., monthly vs. Annual subscription) influences decision-making .

5. External Factors:

- Economic Conditions: During recessions, price sensitivity increases. Companies may adjust prices to maintain demand.

- Legal and Regulatory Constraints: Antitrust laws and price-fixing regulations impact pricing decisions .

- exchange Rates and global Markets: Multinational companies must consider currency fluctuations and local market conditions.

- Apple: Apple positions itself as a premium brand, pricing its iPhones higher than competitors. The perceived value (innovation, ecosystem) justifies the premium.

- McDonald's: McDonald's uses value pricing for its Dollar Menu, targeting price-sensitive customers.

- Amazon: Amazon's dynamic pricing algorithm adjusts prices based on real-time demand, competitor prices, and inventory levels.

Remember, pricing decisions are multifaceted, requiring a blend of quantitative analysis, market insights, and strategic thinking. By examining these factors, businesses can optimize their pricing strategy and achieve their financial goals .

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Presenting the findings is a crucial step in communicating the results of a case study . In this section, we delve into the various aspects of effectively presenting the findings to ensure clear and impactful communication.

1. Start by providing an overview: Begin the section with a comprehensive introduction that sets the context for the findings. This introduction should highlight the purpose of the case study, the research methodology employed, and the key objectives.

2. Present insights from different perspectives: To provide a well-rounded view, it is essential to include insights from various stakeholders or perspectives. This could involve incorporating perspectives from customers, employees, industry experts, or any other relevant parties. By doing so, you offer a comprehensive understanding of the findings.

3. Utilize a numbered list for in-depth information: When presenting detailed information, using a numbered list can help organize the content and make it easier for readers to follow. Each point in the list should provide in-depth information about a specific aspect of the findings. This approach ensures clarity and facilitates easy comprehension.

4. Incorporate examples to highlight ideas: To enhance understanding and engage readers, it is beneficial to include relevant examples throughout the section. These examples can illustrate key concepts, demonstrate the impact of the findings, or provide real-world scenarios that support the conclusions drawn from the case study.

Remember, the goal of presenting the findings is to effectively communicate the results of the case study. By following these guidelines and incorporating insights, numbered lists, and examples, you can ensure that your presentation is informative, engaging, and impactful.

Communicating the Results of the Case Study - Pricing Case Study: How to Write and Analyze a Pricing Case Study

## 1. Customer Perspective: perceived Value and Willingness to pay

From the customer's viewpoint, pricing directly influences their perception of value. Here are some considerations:

- Perceived Value : Customers evaluate a product or service based on the value it provides relative to its price. A well-executed pricing strategy aligns the perceived value with the actual price. For instance, a premium smartphone priced significantly higher than its competitors must justify the premium features it offers (e.g., superior camera, build quality, and ecosystem integration).

- Willingness to Pay (WTP) : Understanding WTP helps assess the upper limit of what customers are willing to spend. Surveys, conjoint analysis, and A/B testing can provide insights into WTP. For example, a subscription-based software company might discover that users are willing to pay more for advanced features like real-time collaboration .

## 2. Financial Metrics: Profit Margins and Revenue Impact

Financial metrics provide a quantitative lens for evaluating pricing strategies:

- Gross Profit Margin : This metric compares the difference between revenue and the cost of goods sold (COGS). A higher margin indicates better profitability. For instance, if a retail store reduces prices during a seasonal sale, it may sacrifice margin but gain increased sales volume.

- price Elasticity of demand : Elasticity measures how sensitive demand is to price changes. If demand is highly elastic (responsive), a small price change can lead to a significant shift in sales volume. Conversely, inelastic demand implies that price changes have minimal impact. For example, essential medications often have inelastic demand.

## 3. Competitive Landscape: Positioning and Market Share

Pricing decisions are influenced by the competitive environment:

- Competitive Positioning : Analyze where your product stands relative to competitors. Are you positioning as a premium, mid-tier, or budget option? Pricing should align with this positioning. For instance, luxury car manufacturers maintain high prices to reinforce exclusivity.

- market Share impact : Aggressive pricing can lead to increased market share , especially in price-sensitive markets . However, it's essential to balance market share gains with profitability. Consider the "razor and blades" model, where razors are sold cheaply to drive blade sales.

## 4. Long-Term Effects: brand Equity and Customer loyalty

Pricing decisions have lasting effects on brand equity and customer loyalty :

- Brand Perception : Consistent pricing reinforces brand identity. Frequent price changes can confuse customers and erode trust. Apple's premium pricing strategy contributes to its strong brand image.

- Loyalty Programs : Reward loyal customers with discounts or exclusive offers . Starbucks' loyalty program encourages repeat visits and higher spending.

## Examples :

1. Netflix : By offering tiered subscription plans (Basic, Standard, Premium), Netflix caters to different customer segments. The pricing aligns with the value customers perceive (HD streaming, multiple screens, etc.).

2. Airbnb : Dynamic pricing adjusts rates based on demand, seasonality, and local events. During peak travel times, prices increase, maximizing revenue.

In summary, evaluating pricing effectiveness involves a holistic approach that considers customer perception, financial metrics, competition, and long-term implications . Remember that pricing isn't static; it requires continuous assessment and adaptation to stay competitive and profitable.

Assessing the Effectiveness of the Pricing Strategy - Pricing Case Study: How to Write and Analyze a Pricing Case Study

In this pivotal section of our pricing case study, we delve into the art of drawing conclusions. As we dissect the data, consider various perspectives, and scrutinize the evidence, we unearth valuable insights that can shape business strategies and drive success.

1. The Multifaceted Lens: Viewing Conclusions from Different Angles

When summarizing a case study, it's essential to adopt a multifaceted lens. Here's how different stakeholders might interpret the same findings:

- The CFO's Perspective : The chief Financial officer (CFO) zeroes in on the financial implications. Are the pricing changes sustainable? What impact do they have on the bottom line ? The CFO seeks cost-effectiveness and long-term viability.

- The Marketing Maven's View : The marketing team focuses on customer behavior. How did the pricing adjustments affect demand? Did they resonate with the target audience? The marketing maven considers brand perception and customer loyalty .

- The Operations Guru's Insight : Operations managers analyze logistics. Did the new pricing structure streamline processes or create bottlenecks? Were there supply chain disruptions? Efficiency and scalability are their watchwords.

2. The power of Data-driven Conclusions

Numbers don't lie, but they can be misleading if not interpreted correctly. Let's explore data-driven conclusions:

- Regression Analysis : By examining correlations between pricing changes and sales volume, we can quantify the impact. For instance, a 10% price reduction led to a 15% increase in sales—a compelling insight.

- Segmentation : Segregating customers based on demographics, behavior, or preferences reveals hidden patterns . Perhaps the price hike affected high-income buyers less than budget-conscious ones. Segmentation guides targeted strategies.

3. case Study examples : Illuminating the Path

Let's illustrate our points with examples:

- Scenario 1: The Luxury Hotel Chain

- Finding : The hotel raised room rates by 20%.

- Conclusion : High-end clientele appreciated the exclusivity and perceived value, resulting in increased bookings.

- Lesson : Sometimes premium pricing enhances desirability.

- Scenario 2: The E-Commerce Startup

- Finding : A flash sale with 50% discounts boosted sales.

- Conclusion : urgency and scarcity drive purchases. customers fear missing out.

- Lesson : Strategic discounts can create buzz and urgency.

4. The Art of Communicating Conclusions

Conveying findings effectively is an art. Consider these techniques:

- Visual Aids : Graphs, charts, and infographics simplify complex data. A trendline showing revenue growth post-price adjustment speaks volumes.

- Narrative Flow : Weave a coherent story. Start with the problem, introduce the solution (pricing changes), and culminate in positive outcomes.

- Recommendations : Conclusions lead to action. Suggest actionable steps: "Implement tiered pricing," "Leverage bundling," or "Fine-tune discounts."

In summary, drawing conclusions isn't merely about crunching numbers; it's about extracting wisdom from raw data. As we wrap up this section, remember that every conclusion is a stepping stone toward better decision-making and business excellence.

1. Understand Customer Segmentation:

- Insight : effective pricing strategies begin with a thorough understanding of your customer base . Segmentation allows you to tailor pricing models to different customer groups based on their preferences , behaviors, and willingness to pay.

- Example : Imagine an e-commerce platform offering both budget-conscious shoppers and premium buyers. By segmenting these groups, the platform can offer personalized discounts to the former while maintaining higher margins for the latter.

2. Leverage price Elasticity analysis :

- Insight : Price elasticity measures how demand responds to price changes. It's crucial for determining optimal price points .

- Example : A coffee shop analyzes elasticity to decide whether a 10% price increase will lead to a significant drop in sales volume. If the demand is inelastic (e.g., for morning coffee), they might proceed; otherwise, they'll reconsider.

3. Monitor Competitor Pricing:

- Insight : Keeping an eye on competitors' pricing helps you stay competitive and adjust your own prices accordingly.

- Example : A smartphone manufacturer tracks rival brands' pricing for similar models. If a competitor lowers prices, they might respond by offering additional features or bundling accessories.

4. Implement Dynamic Pricing:

- Insight : Dynamic pricing adapts to real-time market conditions , demand fluctuations, and inventory levels.

- Example : Airlines adjust ticket prices based on factors like booking time, seat availability, and seasonal demand. A seat booked months in advance costs less than a last-minute booking.

5. Conduct A/B Testing:

- Insight : A/B testing involves comparing two pricing strategies (A and B) to determine which performs better.

- Example : An online subscription service tests two pricing tiers: $9.99/month with limited features (Plan A) versus $14.99/month with additional perks (Plan B). They analyze conversion rates and revenue to make an informed decision.

6. Bundle Products Strategically:

- Insight : Bundling complementary products can increase overall revenue and perceived value.

- Example : A software company bundles its basic antivirus software with a premium firewall tool. Customers get both at a discounted price, encouraging upsells.

7. Optimize Psychological Pricing:

- Insight : Consumers perceive prices differently based on their format (e.g., $9.99 vs. $10.00).

- Example : Retailers use "charm pricing" (ending prices in 9 or 99) to create a perception of affordability. It's a subtle but effective psychological trick.

8. Consider Price Anchoring:

- Insight : Anchoring refers to using a reference price to influence customers' perception of value.

- Example : A luxury watch brand introduces a limited-edition model priced at $10,000. Later, they release a standard model at $5,000, making it seem like a great deal in comparison.

9. Communicate Value Proposition Clearly:

- Insight : Customers need to understand why your product justifies its price.

- Example : A premium skincare brand emphasizes its use of organic ingredients, cruelty-free testing, and dermatologist endorsements to justify higher prices.

10. Regularly Review and Adjust Pricing Strategies:

- Insight : Pricing isn't static; it evolves with market dynamics, consumer behavior, and business goals.

- Example : An online marketplace analyzes sales data quarterly, adjusting prices based on trends and performance.

Remember, actionable insights are only valuable when put into practice. So, take these recommendations, adapt them to your specific context, and watch your pricing strategy flourish!

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In the realm of business strategy and decision-making , pricing plays a pivotal role . Organizations constantly grapple with questions like: "How should we price our products or services?" or "What pricing strategy will maximize our profits while maintaining customer satisfaction ?" Pricing case studies serve as valuable tools for understanding these complex dynamics . In this concluding section, we delve into the significance of pricing case studies from various angles, drawing insights from practitioners, academics, and real-world examples .

1. Practical Insights:

- Pricing as a Strategic Lever: Pricing decisions are not isolated events; they reverberate across an organization. A well-executed pricing strategy can boost revenue , enhance market share , and even influence customer behavior . Case studies provide practical examples of how companies have leveraged pricing to achieve their business goals .

Example:* Consider the airline industry. Airlines employ dynamic pricing algorithms that adjust ticket prices based on factors like demand, time of booking, and seat availability. By analyzing historical data and optimizing pricing, airlines can maximize revenue while ensuring planes fly at optimal capacity.

- Segmentation and Personalization: Pricing case studies often highlight the power of segmentation and personalized pricing. Different customer segments have varying willingness-to-pay, and tailoring prices accordingly can lead to better outcomes.

Example:* E-commerce platforms use personalized discounts and offers based on user behavior . By analyzing browsing history, purchase patterns, and demographics, they create targeted pricing strategies that resonate with individual customers.

- Pricing Psychology: Case studies delve into the psychology behind pricing. Factors like anchoring (using reference prices), decoy pricing (introducing a less attractive option to make another seem more appealing), and price framing (presenting prices in a certain context) impact consumer decisions.

Example:* Apple's pricing of its iPhone models—offering a high-end version alongside a slightly cheaper one—creates a psychological contrast that influences consumer preferences .

2. Academic Perspectives:

- Game Theory and Nash Equilibrium: Pricing case studies often intersect with game theory. Concepts like nash equilibrium help explain competitive pricing dynamics. analyzing case studies through this lens provides deeper insights into strategic interactions .

Example:* The cola wars between Coca-Cola and PepsiCo involved intense pricing battles. Both companies adjusted prices based on their rival's moves, leading to a dynamic equilibrium.

- Economic Models: Academic research contributes to pricing theory. Models like price elasticity, cost-plus pricing, and value-based pricing guide practitioners. Case studies validate or challenge these models in real-world scenarios .

Example:* Luxury brands often employ value-based pricing, emphasizing brand prestige and exclusivity. Case studies explore whether this approach consistently yields superior results.

3. Real-World Examples:

- Uber's surge pricing : Uber's surge pricing during peak hours exemplifies dynamic pricing in action. case studies analyze how this strategy balances supply and demand while managing customer satisfaction .

- Pharmaceutical Pricing: The pharmaceutical industry faces scrutiny over drug pricing. Case studies shed light on the delicate balance between innovation, affordability, and profitability.

Example:* The controversy surrounding the pricing of life-saving drugs like EpiPen highlights ethical considerations in pricing decisions .

In summary, pricing case studies serve as rich repositories of knowledge, bridging theory and practice . They illuminate the art and science of pricing , offering valuable lessons for businesses navigating the intricate landscape of value, competition, and consumer behavior.

Remember, pricing decisions are not static; they evolve with market dynamics. As you analyze case studies , consider the broader context and adaptability of pricing strategies. Whether you're a business leader, analyst, or student, pricing case studies provide a treasure trove of insights to inform your strategic choices .

I've crafted this comprehensive section on the value of pricing case studies, drawing from various perspectives and real-world examples. If you need further elaboration or additional content, feel free to ask!

Reflecting on the Value of Pricing Case Studies - Pricing Case Study: How to Write and Analyze a Pricing Case Study

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Blogs & articles, conduct a competitive pricing analysis in 5 steps for a robust competitive pricing strategy.

Here’s how to conduct a competitive pricing analysis in 5 steps.

Competitive pricing analysis is a crucial step for businesses selling similar products. It involves gathering and analysing data about your competitors' pricing strategies to gain insight into the market and make informed decisions about your pricing strategy.  

This blog post will discuss the steps required to conduct a comprehensive competitive pricing analysis. First,  let's look at competitive pricing and why it is essential.  

What is Competitive Pricing?

A competitive pricing strategy helps a business adjust its pricing based on the prices of its competitors in the market. The goal of competitive pricing is staying competitive with other companies offering similar products or services in the same market.  

In a competitive pricing strategy, a business typically sets its prices lower than its competitors' prices to gain market share. However, if a company has a unique selling proposition, such as higher quality or better service, it can set its prices higher than its competitors without losing market share, leading to an increase in profits. This, yet, requires a good understanding of the market and its competitors' pricing strategies.  

What is Competitive Pricing Analysis?

Competitive pricing analysis is a process that involves gathering and analysing data on the pricing strategies of your competitors. The intent is to gain insight into the market and make informed pricing decisions. The goal of competitive pricing analysis is to identify the strengths and weaknesses of your competitors' pricing strategies and use that information to develop your pricing strategy.  

Moreover, to conduct a competitive pricing analysis, businesses typically start by:  

• Identifying their direct and indirect competitors. You can then gather data on their pricing strategies by visiting their websites and physical stores or purchasing their products. Price tracking tools like SYMSON can monitor competitors' prices and provide real-time updates;  
• Analysing the data to identify patterns and trends in their competitors' pricing strategies. They look for pricing premiums, promotional, volume discounts, and bundle pricing.  
• Determine their pricing strategy. They decide whether to price their products higher or lower than their competitors and at what price points to offer their products or services. They also consider product differentiation, target market, cost of goods sold, and brand positioning when developing their pricing strategy.  

Competitive pricing analysis is an ongoing process that requires monitoring competitors' pricing strategies regularly. This allows businesses to stay up to date and adjust their pricing strategy to remain competitive. For example, if a competitor lowers their prices, a company may also need to lower their prices to stay competitive. If a competitor raises their prices, a business may also be able to raise its prices, and failure to recognise such opportunities could result in leaving money on the table.

Importance of Competitive Pricing for Pricing Analysis

According to research , 80% of buyers compare pricing and offers of the same/similar product by other brands before buying. This practice happens often and within less time. So, companies need to brace themselves with a clever tactic for pricing. Competitive pricing helps your brand stay on top when consumers plan to buy a product.  

Moreover, with proper competitive pricing analysis, companies can increase their market share while enhancing their brand identity. Enterprises that leverage competitive pricing for their product assortment witness significant sales and revenue. You can read more about the advantages of competitive pricing for B2B companies. However, it may only be relevant for some businesses.  

How to Conduct Competitive Pricing Analysis?

Before jumping to the steps, you should read a little about the 3 pricing factors of competitive pricing . Now, let's take a deep dive into understanding the steps behind developing a robust competitive pricing analysis.  

Step 1: Identify & Categorise Your Competitors

The first step in conducting a competitive pricing analysis is identifying your competitors. That is, finding companies that offer similar products or services to yours and serve the same target market. Now, you may have already identified your competitors. So, you would need to categorise them.  

Look for direct competitors who offer the same products or services as you. You can also consider indirect competitors who offer similar products or services but serve a different target market.  

• Primary competitors: Competitors who serve the same audience as your business.  
• Secondary competitors: Competitors offering a high-end or low-end version of your product assortment.  
• Tertiary competitors: Competitors serving the same target audience but offering a product / service that is related to your brand's products or services are tertiary competitors. Such a group can be a potential business partner or a future competitor if they expand their business.  

Upon categorising competitors, businesses find it easy to prioritise analysing direct competitors. It is a crucial step while conducting competitor pricing analysis. They can also consider secondary competition in the long term and be prepared to partner with or compete with their tertiary counterparts.  

A data-driven strategy also helps to define and categorise competition. If you are a retailer selling a small number of SKUs, you can manually organise competitors. However, intelligent competitor pricing analysis is the only option for large sellers with thousands of products available across multiple pricing zones.  

Aside from that, the market environment for each product is changing as other retailers' strategies shift, and new competitors enter the market. Therefore, competitive price analysis and categorisation must be recurring processes depending on the product type or market segment.  

Step 2: Determine Data Quality and Gather Pricing Data

The next step is to define relevant parameters of competitive pricing data so you can start gathering the information. Here are some aspects you can consider for starters:  

• Product availability: Studying the availability of competitors' stocks helps businesses price smartly. You can understand the supply of the product category and set your prices for maximum revenue or profits.  
• Competitor's additional offers: To be on par with your competitors' offers is crucial. Tracking discounts, promo codes, and other recommendations will help you introduce different offers that attract your target audience. However, this, of course, depends on your product assortment.  
• Price index: This aspect tracks the company's market position for a particular product category or service within a period.  

As mentioned earlier, you can collect pricing data by visiting competitors' websites and physical stores or purchasing their products. Better yet, you can use price tracking platforms to collect data that monitors competitors' prices and provide you with real-time updates. To create a competitor analysis pricing strategy, you must gather accurate pricing data regularly to ensure you have the most up-to-date information.  

Step 3: Analyse Pricing Data

After collecting pricing data, the next step is to analyse the data. In this step, you must look for patterns and trends in the data. This will help you identify the pricing strategies your competitors are using. For example, are they pricing their products at a premium or a discount? Are they using promotional pricing or volume discounts? Are they offering bundle pricing? Look for the strengths and weaknesses of your competitors' pricing strategies.  

Moreover, you will also find different information that will help you position yourself accordingly. Understanding patterns in their data will help you anticipate their next move and prepare to stand out.  

Step 4: Determine the Pricing Process using Pricing Data

The next step in competitive pricing analysis is to monitor pricing data on an ongoing basis. Keep an eye on your competitors' pricing strategies and adjust your pricing strategy as needed. If your competitors lower their prices, you may need to lower your prices to remain competitive. If your competitors raise their prices, you can also increase them. Keep an eye on market trends and adjust your pricing strategy accordingly.  

Step 5: Conduct a Smart pricing Analysis using reliable AI-driven Pricing Platforms

You must follow the process to maintain accurate data to set competitive prices. But manually doing market research, data scraping, and competitive price analysis can take forever. Plus, timing is crucial in a competitive market. If a business updates its prices late, revenue and profit will suffer significantly, hurting your brand identity.  

Therefore, to combat all such human errors, today's enterprises rely on AI-driven competitive pricing solutions like SYMSON. Such tools conduct competitive pricing analysis automatically and suggest optimal prices. It leverages mature data quality, collects competitor data through API and provides recommendations. Below are a few features you can typically find in a decent quality pricing platform:  

• Conducts comprehensive competitive market research  
• Leverages mature data quality  
• Scrapes accurate data from competitors  
• Provides optimal price recommendations  

You can watch our videos on tracking competitors, combining business rules and much more to build pricing strategies and maintain a sustainable business process.

Do you want a free demo to try how SYMSON can help your business with margin improvement or pricing management? Do you want to learn more? Schedule a call with a consultant and book a 20 minute brainstorm session!

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HAVE A QUESTION?

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What is Competitive Pricing and Price Comparison Analysis?

Competitive pricing analysis is an evaluation of the consumers' reaction to new prices using research based on historical data or polls. Most often, price analysis examines customers' responses to a price without considering the costs and potential profits for the business. After an initial price analysis, the pricing analyst team uses the findings along with the other pricing factors to craft an optimal offering.

A competitive pricing strategy is a pricing policy based on the use of competitors’ prices as a benchmark to set prices. This type of strategy is often referred to as competition-based or competitor-based pricing. In most cases, the business comes to a competitive pricing strategy after a cost-plus approach turns out to be no longer relevant.  

What Is the Difference between Price Comparison Analysis vs. Competitive Pricing Analysis?

These terms are distinct and not interchangeable. A competitive pricing analysis focuses specifically on evaluating your competitors' pricing strategies and determining how to set your product's price to maintain competitiveness. In contrast, "price comparison analysis" is a broader term encompassing considerations beyond competitors' prices. It takes into account factors such as consumer behavior and their willingness to pay. Essentially, a competitive pricing analysis is often a component within the broader framework of a price comparison analysis.

How to Comprehend Competitor Pricing Data?

When determining the price for a product or service, businesses face three options: setting it below, at, or above the competition costs.

Opting for above-the-competition pricing entails creating an environment justifying the premium, such as offering generous payment terms or additional features. In this scenario, the business competes on quality rather than price to justify charging a premium.

A business might choose to set the price below the market, potentially incurring a loss, with the expectation that customers will purchase other products from them once exposed to additional offerings. The profitability of these other products can then offset the economic loss incurred on the below-market-priced product, a strategy commonly known as a loss leader.

Alternatively, a business can opt to charge the same price as its competitors or adhere to the prevailing market price. Despite selling an equivalent product at an equivalent price, the business may still seek to differentiate itself through strategic marketing efforts.

Why Is a Competitive Pricing Strategy Important for Price Comparison Analysis?

According to 2022 Statista research , more than 82% of buyers compare the offers of several stores in search of a better bargain. Retailers who can collect and analyze market data, map their position against competitors, and offer optimal prices are the companies that catch these buyers’ eyes first and foremost.

Competitive pricing is a strategy that helps businesses attract more customers by optimizing prices using competitor products and pricing data. A successful pricing analysis can significantly increase sales, result in better cooperation with suppliers, and boost revenue.

What Are the Benefits of Competitive Pricing Analysis?

There are several benefits of competitive pricing analysis, which include:

Increased profitability: Competitive pricing analysis can help businesses identify opportunities to increase their prices without losing market share. By understanding the prices of their competitors, businesses can compare competitive price and adjust their own policies to make it both attractive and profitable.

A better understanding of the market: Competitive pricing analysis allows businesses to gain a better understanding of their market and competitors. This understanding can help businesses develop more effective marketing and sales strategies, and identify areas where they can differentiate themselves from competitors.

Improved product positioning: Competitive pricing analysis can help businesses to compare competitive price and determine the best pricing strategy for their products and services. This can include identifying the optimal price points for different customer segments and determining the right price to position the product as a premium or value offering.

Faster response to market changes: By regularly monitoring competitor pricing and market trends, businesses can respond quickly to changes in the market. This can help them stay ahead of the competition and adapt to changing customer needs.

Better customer acquisition and retention: By offering competitive prices, businesses can attract new customers and retain existing ones. Customers are often price-sensitive, and offering competitive prices can be a critical factor in choosing one business over another.

Overall, pricing strategies based on the analysis of competitor prices can help businesses make better pricing decisions, increase profitability, and gain a competitive edge in their market. The next question is how to compare competitors pricing with accuracy and efficiency.  

1. Determine Quality of Competitor Pricing Data

Complete and accurate data is crucial to analyze competitor costs. We surveyed our clients from several different countries to determine the following criteria as crucial to high-quality data:

• Depth of comparisons. Retailers need to take everything into account regarding product information: color, technical characteristics, and other product attributes are vital for high-quality data and are also not available on product cards.
• Percentage of errors. Most data matching is done using automation and is prone to a degree of error as a result. Manual comparison enhances automatic solutions and ensures better results.
• The ratio of planned and delivered data. Data can be incomplete since the algorithm may lack information that is not available on the competitor’s website. This means that the amount of data estimated before collection may exceed the amount of usable data that is delivered.
• Constantly updated data. Retailers should use the data collected no later than two hours before repricing.
• Data delivery time. Product and pricing data should be delivered to the retailer’s internal system every 20-30 minutes to make comparison analysis more effective.

2. Define Data Parameters

Next, the company must determine price analysis techniques and parameters. Just a few competitive pricing graph examples:  

• Price Index. This competitive pricing graph displays the retailer’s position in the market for a given product or class of products over a certain time. The price index visualizes how market dynamics affect sales and delivers data on prices listed by competitors.
• Competitors’ promo activity. In the same study, Forrester Consulting indicated that at least a third of customers are trying to find discounts before buying an item. This means it is essential to continuously monitor discounts and sales of others in the industry to optimize promotional offers.
• Product availability. By monitoring competitors and their product stocks, retailers can adjust their prices based on the supply of an item or class of items on the market at a given point in time.  

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Many retailers think competitive pricing consists only of peer group analysis. However, competitive price analysis also requires a thorough study of internal company data (i.e. historical data) in addition to data revolving around competitors. It is impossible to set optimal prices and succeed with competition-driven pricing  without having a profound knowledge of the market and your position in it as a retailer.

The abovementioned parameters are just a small part of the competitor price data that can be monitored by retailers. Depending on business goals and logic and rules used while repricing, you can add another relevant competitive pricing graph, e.g. stock level, sales volume, eCommerce traffic, promotions, etc. 

3. Categorize Competitors

Once retailers have thorough data about their competitors, they need to classify competitors according to several factors including but not limited to the target audience and product quality. There are three main categories that market competition can be divided into:

• Primary — direct competitors who pursue the same buyer category.
• Secondary — competitors who focus on upscale/downscale versions of the retailer’s assortment. Analyzing secondary-level competitors allows businesses to develop a broader idea of their place in the market and boost their strategic skills accordingly.
• Tertiary — companies selling products that are indirectly relevant to those of the retailer. Analyzing this level of competition helps retailers willing to expand their assortment.  

Categorizing competitors makes market analysis less time-consuming and allows retailers to focus their attention in the right direction in terms of competition.

A data-driven price analysis techniques could also be applied while defining and categorizing the competitors. If you are a mono-brand retailer or sell a very limited number of SKUs, you'd probably be able to categorize competitors manually. But for large sellers with thousands of products offered across different pricing zones, the smart competitors' analysis has no alternative. 

Beyond that, each product's competitive landscape is unstable as other retailers change their strategy and new players enter the market. What it means is that competitive analysis and categorization are ongoing processes that should be done more or less often depending on the product type or market segment.

To cover this need, Competera offers a so-called 'True competitors' competitive pricing graph enabling retailers to find the real impact every player has on particular SKU sales by analyzing retailers' and competitive historical data.   

4. Perform a Smart Pricing Analysis  

It could be easily done by using machine-based pricing tools . Modern retail companies are increasingly leaning towards algorithms to collect and analyze data. Machines have significant benefits over manual approaches:

• Improved accuracy
• Can process large amounts of complex data
• Scheduled delivery
• Provide precise pricing recommendations .  

Arguably, the most important aspect of implementing automation into the price analysis techniques is that it allows retail teams to switch from routine tasks to strategic tasks regarding pricing strategy and price management .

When it comes to automated price analysis techniques, most retailers are afraid of extra costs. The fact is that these solutions are instead a means of cost reduction. For example, Wiggle CRC managed not only to reduce the repricing time by 50% but also to get a full view of the market at lower costs . The latter was achieved mainly through monitoring marketplaces instead of competitors' websites. 

If you want to know not just how to compare competitors pricing, but want to get tips on reducing competitive data monitoring costs, watch the video below. 

5. Track Competitors’ Online Activity

To have a better understanding of the market, retailers should monitor their competitors and their platforms such as official websites and social media accounts. There are several aspects businesses need to examine:

• Product descriptions
• Visual presentation
• Social media activity
• If the websites and social media accounts are mobile-friendly
• Customer support and feedback options
• Response rate  

In addition, retailers can sign up for official newsletters and become a followers of their competitors on social media. Businesses need to understand what attracts clients to their competitors’ products.

These are several examples of how retailers can benefit from open-source information. The more key points they identify and analyze, the better their information will be to base important pricing decisions on.

What Challenges May Occur with Competitive Pricing Analysis?

Businesses encounter various challenges in employing competitive pricing analysis. A significant hurdle involves ensuring the accuracy of the analyzed data, which demands meticulous collection and examination from multiple sources, often a time-consuming and costly process prone to errors or inconsistencies. Limited data availability poses another obstacle, particularly for smaller businesses striving to gather ample information on competitors' pricing strategies, hampering their ability to compete with larger counterparts. 

Identifying suitable competitors for analysis, especially in saturated markets, can be daunting. Merely examining competitors' prices in isolation may mislead, necessitating a comprehensive evaluation considering factors like product quality, customer service, and marketing strategies. Moreover, the dynamic nature of market conditions presents a challenge, demanding businesses to swiftly adapt to changes in competitors' pricing strategies for sustained competitiveness. While price competition solutions offer valuable insights, businesses must be cognizant of these challenges, taking measures such as refining data processes, investing in data acquisition tools, and considering broader market contexts to enhance the accuracy and utility of the analysis.

Creating a competitive pricing strategy from scratch is no easy feat. Many factors revolving around data, such as parameters and quality, must be carefully considered. Companies must decide whether they will utilize automation within their pricing process and if so, to what extent. Lastly, they also must thoroughly study their competitors to obtain a better understanding of their place in the market to excel in it truly.

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Competition-Based Pricing: A Comprehensive Guide with Real-World Examples

• You can leverage competition-based pricing to ensure your product prices resonate with customer expectations and market trends, crucial for SaaS and subscription models.
• Understanding and strategically implementing competition-based pricing can guide you to not only match but also exceed market standards by focusing on value addition.
• Competition-based pricing's role in B2B and B2C sectors, including CRM and web design examples, showcases its broad applicability and strategic importance.
• Despite its advantages like simplicity and market adaptability, relying solely on competition-based pricing risks missing out on maximizing profits and diluting brand uniqueness.
• Examples from Amazon's aggressive pricing strategies to Apple's premium pricing underscore the strategy's versatility across different industries.
• In the SaaS sector, complementing competition-based pricing with value-based pricing ensures a balanced, effective approach that respects both market standards and product value.

Aligning Your Market with Competitive Pricing

In the dynamic world of SaaS and subscription businesses, market alignment is more than just a strategy—it's a necessity. Your pricing must resonate with customers' expectations, mirroring the prevailing trends, or you risk being overshadowed in the fiercely competitive market . This is where competitor-based pricing, a powerful tool for achieving market alignment, comes into the picture.

Competitor-based pricing is the method of setting your product prices based on your competitors' prices. It's about examining how your competitors structure their pricing tiers, identifying what features they emphasize, and understanding their core value metrics. This insight can guide you to structure your own pricing more effectively, matching the market trend while ensuring your business's profitability.

Understanding the competition-based pricing strategy and its applications is crucial for your business's success. It's not about copying what others are doing. It's about using the competition's pricing as a benchmark and tailoring your pricing strategy to add value to your customers and differentiate your offerings.

However, like any strategy, competitor-based pricing comes with its own set of pros and cons. In the following sections, we'll explore these aspects, including who should and who shouldn't use this competition-based pricing method.

Understanding Competitor-Based Pricing: A Strategic Calculation

Competitor-based pricing, also known as competition-based pricing, is a method where you set your prices in relation to your competitors' prices. This strategy hinges on public information about competitors’ prices, bypassing the traditional focus on customer value.

As you delve into what is competitive-based pricing, it's essential to understand that it's not a random process but involves careful calculation and strategizing.

To maximize your profit margins using a competition-based pricing strategy, start by grouping your competitors. Arrange them in ascending order based on relevance to your product and brand. This alignment will provide a range within which your product fits in the market. Once you have found your product’s position, account for internal expenses like production costs. This forms the basis of your competition-based pricing method.

There are three primary methods for setting your prices once you have thoroughly analyzed your competitors:

1. Pricing above the competition

You can decide to price your products or services above your competitors. This approach is usually applied when your offerings stand out in quality, features, or benefits compared to your competitors.

2. Pricing on the same level

When you price your product similar to your competitors, it's crucial to focus on the added value your product offers. Even if your product shares features with your competitors, emphasizing unique benefits can make a difference.

3. Pricing below the competition

While pricing below the competition is not generally recommended as a long-term strategy, it can be used under certain circumstances. If your product has limited features or functionality compared to others, or if you want to attract customers, boost sales, and elevate your brand value, you might consider this approach.

Competition-Based Pricing: Real-World Examples

In the competitive world of business, understanding and adopting competition-based pricing can be a game-changer. Let's explore how some leading brands have leveraged this strategy for success.

Amazon: The king of competitive pricing

As a retailer, competition-based pricing is a critical method for setting product prices. Amazon, a global online retail giant, is an excellent example of this. They constantly analyze competitor pricing on a large scale, aiming to be the lowest-priced option in the market. This strategy has helped Amazon stay ahead in the fiercely competitive e-commerce industry.

Apple: Premium pricing with a competitive edge

Apple offers an intriguing spin on competitive based pricing. This tech behemoth consistently charges above its competitors' prices but justifies these higher price points with superior branding, marketing, and messaging. This approach is a blend of competitive and premium pricing strategies. Apple's high-quality products and services, coupled with a strong brand image, allow the company to maintain its high prices, demonstrating that competition-based pricing doesn't always mean being the cheapest.

Coca-Cola: Strategic pricing for global reach

Coca-Cola's competition-based pricing strategy illustrates how this method works in the global market. With a vast range of products sold across multiple markets, Coca-Cola implements diverse pricing strategies. For its flagship product, Coca-Cola, the company closely tracks the prices of its biggest competitor, Pepsi. This competitive based pricing strategy ensures that the brand remains in a strong position in the global beverage industry.

In the world of B2B business, a competition-based pricing strategy is a common tactic to stay competitive. Here, we examine instances of competitor-based pricing in B2B to illustrate its application.

CRM software providers: Pricing wars in action

The Customer Relationship Management (CRM) software market, particularly between leading providers Salesforce and Microsoft Dynamics, serves as a prime example of a competition-based pricing method in action. In an attempt to maintain market dominance, these tech giants continuously monitor each other's pricing structures. The result is a frequent reshuffling of prices, often leading to aggressive discounting and enticing promotional offers for their customers. This clear, ongoing rivalry serves as a striking display of the competition of pricing definition in practice.

Collaboration tools market: Adjusting to the rivals

As businesses, you might have experienced first-hand the competition in the collaboration tools market. Slack, once the undisputed leader, found itself needing to reevaluate its pricing strategy in the face of fierce competition from Microsoft Teams. Teams not only offered similar functionality but also provided its services at lower prices or as part of bundles with other Microsoft products. This is a clear example of how competition-based pricing can prompt necessary adjustments to remain relevant and competitive.

Web design companies: Balancing value and affordability

For businesses seeking to enhance their online presence with a B2B website design, a variety of options exist. Web design companies often perform a competition-based pricing analysis by gathering a range of quotes and comparing the additional features and benefits of each service offering. In doing so, they are able to set their rates in alignment with market trends. This process showcases the strategic advantage of the competition-based pricing method. It encourages product improvement, fosters customer differentiation, and motivates companies to strive for success.

The Unparalleled Advantages of Competitive Pricing

Here are the key advantages of adopting a competition-based pricing strategy :

Easy to implement

One of the most significant benefits of competition-based pricing is its simplicity. In numerous sectors, product, and marketing managers require minimal research to determine a competitive price. The method involves observing competitors and making necessary adjustments based on their pricing changes.

Low-risk, high reward

Another compelling advantage of this method is its low-risk nature. As long as you have a firm understanding of your product's quality, target audience, and production cost, using a competition-based pricing strategy is unlikely to lead to financial distress. The same approach should keep you afloat if it keeps your competitors afloat.

Offers accurate pricing insights

Competitive pricing can be surprisingly accurate, especially in saturated sectors like retail. For a majority of consumer products, there's a wealth of data available, allowing companies to set prices that accurately reflect market trends and consumer expectations. This approach moves pricing closer to a methodology based on market price and market share, maximizing its effectiveness.

Keeps pace with market changes

A competition-based pricing method inherently evolves with the market. With this strategy, adjusting your pricing doesn't involve guesswork—you simply align with the market trends. If a number of competitors suddenly opt for certain price changes, whether higher or lower, you can swiftly follow suit. This adaptability ensures your pricing strategy remains relevant and competitive, irrespective of market changes.

Also Read: Competitive Pricing Strategy- All You Need to Know

Disadvantages of Competitive Pricing: Understanding the Pitfalls

As you contemplate employing a competition-based pricing strategy or competition-based pricing method, understanding these potential pitfalls is crucial: Missed opportunities in profit maximization

The first disadvantage of competitive pricing is that it can lead to missed opportunities. Traditional business growth strategies usually focus on increasing sales, decreasing production costs, or lowering overheads. Yet, pricing, a key factor influencing a customer's purchasing decision, often remains overlooked. By relying too heavily competitive based pricing, you may neglect the potential to leverage pricing for better profit margins.

Risk of becoming one among the herd

Competitive pricing can risk your brand's uniqueness and differentiation in the marketplace. When you implement a strategy based solely on your competitor's pricing, you might blend in with the crowd, becoming "one among the herd." This approach offers little room for standing out, potentially stunting your brand's growth and recognition.

Promotes short-term thinking

Another potential downside of a competition-based pricing strategy is its propensity for promoting short-term thinking. The assumption that maintaining lower prices than competitors will attract more consumers is simplistic and potentially damaging. Lowering prices too aggressively can lead to doubts about your product or service quality, and shrink your profit margins, even when more customers won't mind paying a little more. This may inadvertently encourage businesses to undersell their offerings, thereby impacting their bottom line.

Lack of access to competitors' pricing rationale

Finally, when implementing a competition-based pricing method, you lack access to the detailed rationale behind your competitors' pricing decisions. Consequently, if they err in their strategy, you risk making the same mistakes. Depending too heavily on another company's strategy could potentially harm your future profits and revenues.

Is Competitive Pricing Analysis Right for SaaS?

Competitor-based pricing can serve as a powerful tool to understand market dynamics and consumer price expectations. However, it doesn't always provide a comprehensive view, especially in the context of B2B SaaS.

In contrast to certain B2C industries, such as E-Commerce, where competitive pricing may be a cornerstone, relying solely on competition-based pricing method in SaaS could be limiting. Why? Because the value and extensive functionality of your SaaS product are critical elements that go beyond mere price comparison.

For instance, let's say a competitor offers a similar product at a lower price. Should you immediately lower your prices? Not necessarily. Your product may include additional features or superior customer support that justifies a higher price. In this scenario, dropping your price to match a competitor might undervalue your product and undercut your revenue.

So, what is competitive based pricing's role in the SaaS world? It's not about blindly mimicking competitor prices. Instead, it's about understanding the competitive landscape and using that information to plan your pricing strategy. A competition-based pricing strategy can help you stay competitive in the short term, ensuring your prices aren't drastically higher or lower than the market average.

However, for a long-term, sustainable pricing strategy, competition-based pricing should be used in conjunction with other pricing models. For example, value-based pricing considers the perceived value of your product to your customers and can complement a competitive pricing approach.

In conclusion, competition-based pricing analysis has its place in the SaaS world. It's not the be-all and end-all, but when used correctly, it can contribute to a more robust and effective pricing strategy. By offering insights into market trends and competitor actions, the competition pricing definition becomes clearer and more practical, especially when paired with other pricing methods. And, with the right strategy, you can implement any pricing model 10 times faster with Togai’s pricing implementation platform , turning a year-long effort into less than a day's work. Try Togai for free today!

Frequently Asked Questions

How does togai help businesses analyze competitor pricing to determine their pricing strategies.

Togai provides advanced analytics tools that track and analyze competitor pricing data. These tools help businesses learn market dynamics and trends, identify pricing structures, and modify their pricing and pricing approach to stay atop the competition without compromising profit.

When do companies resort to Competitor-Influenced Pricing?

Competitive pricing works best with:

• Start-ups looking for a quick route to market acceptability bait on their price effect. In many cases, it takes time for a start-up to communicate its perceived value (Value-Based Pricing) effectively. Therefore, start-ups have to get their prices right to manage that initial risk.
• Companies looking to accelerate their market capture
• Companies struggling in a seller's market
• Mature markets having consumers with specific and anchored expectations
• Companies having multiple products where competitive pricing of a few can be advantageous to the overall returns of the company

Can Togai tools simulate the effect of pricing strategies ahead of time?

Very much, yes! Togai’s simulation tools help businesses model and forecast pricing outcomes. The simulations inform decision-makers of the potential impacts of price adjustment and pricing strategies on revenue generation and market share status.

How can Togai help a business assess whether competition-based pricing is the best for them?

Togai helps businesses by providing market analytic tools that evaluate competition-based pricing for their impact within identified segments. The tools can analyze customer sensitivity to price changes, competitor responses, and overall market dynamics. Businesses can thus ensure that the right competitive edge aligns with their goals and customers’ expectations.

How well will Togai tools integrate with other marketing and sales tools to provide a comprehensive understanding of the impacts of price changes?

Togai’s platform integrates well with various marketing and sales tools. It helps to provide a holistic view of price change effects on multiple business domains: sale volumes, customer acquisition costs, marketing, and ROI. This integration helps companies understand the holistic impact of their pricing decisions.

What kind of support does Togai offer businesses new to competition-based pricing strategies?

Scalable & reliable billing infrastructure for usage based pricing

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Competitive Pricing Strategy: Benefits, Examples, Strategies

Setting the right wholesale vs. retail price for your products or services can make all the difference. It's not just about randomly assigning a number - it's about strategically positioning your offerings to attract customers, outshine competitors, and ultimately, drive profitability.

Key Takeaway: Competitive pricing is a dynamic pricing strategy that empowers business owners to establish the selling price of their products or services by closely examining the prices set by their competitors. This approach serves as a valuable compass, particularly for newcomers in the market, enabling them to gauge the pricing sweet spot for their offerings.

Imagine you're launching a brand-new ice cream business , 'Frosty Delights,' in a bustling neighborhood known for its different types of ice cream enthusiasts. Studying what established wholesale ice cream parlors charge for similar products becomes essential in the competitive food and beverage industry . 

For instance, if a popular local competitor sells a single scoop of premium ice cream for $3.50, adopting a competitive pricing strategy might lead you to initially price your equivalent scoop at a similar or slightly lower price point, say $3.25. This approach helps you align with customer expectations while offering a competitive edge to attract those looking for value without compromising on quality.

So, what is a competitive pricing strategy and how can you implement it? Let’s find out!

What is Competitive Pricing Strategy?

Competitive pricing strategy is a fundamental approach adopted by businesses to set the prices of their products or services based on the prevailing market rates offered by competitors. Unlike cost-based pricing , tiered pricing , or value-based pricing, competitor pricing is based on what your competitors set their price at. 

Imagine a bustling marketplace online where multiple wholesale food distributors specialize in offering a similar wholesale product —let's take wholesale cheese as our example. In this dynamic environment, each wholesale cheese distributor is engaged in a constant battle for the attention of potential buyers. 

Their primary goal is to provide the best value for the assortment of specialty cheeses they offer. Within this competitive landscape, a strategic approach known as competitive pricing strategy comes into play. 

Wholesale distribution companies employing this strategy carefully scrutinize the prices set by their competitors for their cheese products. This scrutiny involves a meticulous consideration of various factors, including production costs, the preferences of their target customers, the perceived value of their cheese varieties, and their financial objectives.

Equipped with this in-depth understanding of the market dynamics, these wholesale distributors strategically calibrate their cheese pricing . They make calculated decisions to either align their prices closely with competitors, offer slightly lower prices to entice budget-conscious customers while maintaining quality or differentiate themselves by pricing higher to emphasize premium features and exceptional customer service .

For instance, if we consider Company A, a well-established cheese manufacturer, unveiling a new cheese product priced at $800, it sets a benchmark. In response, Company B, an emerging competitor, conducts a meticulous pricing analysis of this pricing. 

Subsequently, Company B might opt to introduce a comparable cheese product at a slightly reduced price, say $750. This maneuver is designed to attract price-sensitive consumers who seek affordability without compromising on cheese quality. 

On the other hand, Company C may choose a different path, positioning itself as a premium brand by pricing their cheese at $850. In doing so, they emphasize superior cheese features and top-tier customer service as part of their value proposition ( USP ).

Competitive pricing is a dynamic and responsive approach that requires a balance between staying competitive in the market and ensuring profitability. It's a constant evaluation and adjustment of prices based on competitor actions, market shifts, and consumer demands - a crucial tool for businesses striving to succeed in the fast-paced world of eCommerce .

7 Advantages of Competitive Pricing

Here are some key benefits and advantages of competitive pricing:

• Market Relevance and Positioning: By aligning your prices with or staying competitive relative to other market players, you ensure your products or services remain relevant and attractive to customers. This can help establish your brand in the market and position it effectively against competitors.
• Customer Attraction and Customer Retention : Competitive prices attract price-sensitive consumers who are always on the lookout for the best deal. Attracting these customers can lead to increased eCommerce sales and a broader customer base. Additionally, offering competitive prices can enhance customer loyalty, encouraging repeat business and fostering long-term relationships.
• Increased Sales and Market Share: Pricing products competitively can stimulate demand and drive higher sales volumes. When customers perceive that they are getting value for their money, they are more likely to make a purchase. Increased sales contribute to a larger market share, aiding in business growth and expansion.
• Cost Efficiency and Profitability: Competitive pricing often requires businesses to streamline their operations, reduce wastage, and optimize production processes to maintain competitiveness. This can lead to cost efficiencies and improved profitability, especially when coupled with a strategy that carefully balances costs and prices.
• Market Insights and Adaptability: Constantly monitoring and analyzing competitor prices provides valuable insights into market trends, consumer behavior, and the strategies of your rivals. This data can inform your business decisions and allow for quick adjustments in pricing strategies to adapt to market shifts and stay competitive.
• Promotes Innovation and Differentiation: Competition often drives businesses to innovate and differentiate their products or services. To justify their pricing strategy, companies may enhance the quality, features, or customer experience associated with their offerings. This innovation benefits both the company and its customers.
• Negotiation Leverage: Being aware of competitor prices gives you negotiation leverage, especially in B2B scenarios. If your prices are competitive, you can negotiate favorable terms with suppliers, retailers, or distributors, enhancing your overall business relationships.

9 Disadvantages of Competitive Pricing

Here are some disadvantages of competitive pricing:

• Reduced Profit Margins: Engaging in price wars to match or beat competitors can lead to a downward spiral of prices. Lowering prices to remain competitive may erode profit margins, making it challenging for the business to cover costs and invest in growth.
• Brand Perceptions: Constantly lowering prices to stay competitive may give the impression that your products or services are of lower quality. Customers may associate low prices with inferior goods, potentially harming the brand image and long-term brand value.
• Dependency on Competitor Actions: Relying heavily on competitor pricing can make your business reactive rather than proactive. Your pricing decisions become dependent on what competitors do, and this may limit your ability to set a strategic and sustainable pricing policy.
• Difficulty in Value Communication: If your pricing is solely based on what competitors are doing, it can be challenging to communicate the unique value proposition of your products or services to customers. Customers may perceive your offerings as interchangeable with those of competitors.
• Price Wars and Instability: Competitive pricing can sometimes lead to price wars, where competitors continually undercut each other, driving prices to unsustainably low levels. These price wars can destabilize the market and harm the industry as a whole.
• Profit-Sacrificing Strategies: To maintain competitiveness, businesses might adopt strategies like offering heavy discounts, buy-one-get-one-free deals, or loss-leading products. While these tactics attract customers, they often sacrifice short-term profits.
• Focus on Short-Term Gains: The emphasis on matching or beating competitors may divert attention from long-term strategic planning. Businesses may prioritize short-term gains over sustainable growth and profitability.
• Limited Innovation and Investment: Constantly monitoring and adjusting prices to match competitors may leave fewer resources and attention for product innovation, improving service quality, or investing in other critical aspects of business development.
• Vulnerability to Competitor Changes: Depending on competitor prices can make your business vulnerable to sudden changes in their pricing strategies. If a competitor significantly reduces their prices, it may force your business to respond and potentially impact your profitability.

Competitive Pricing Strategy

There are several ways to implement a competitive pricing strategy:

• Price Matching: Setting prices at the same level as competitors to remain on par with the market and not lose customers solely based on pricing differences.
• Penetration Pricing: Offering products or services at a lower price than competitors to gain a foothold in the market, attract customers, and potentially capture market share.
• Skimming Pricing ( High-Low Pricing ): Setting an initially high price for a new product to capitalize on early adopters and recoup research and development costs, then gradually reducing the price to attract a broader customer base.
• Premium Pricing: Setting prices higher than competitors to convey a perception of superior quality, luxury, or exclusivity, often appealing to a specific segment of the market willing to pay more.
• Discount Pricing: Offering products or services at lower prices temporarily or through discounts to stimulate sales and create a sense of urgency among customers.
• Bundle Pricing: Offering packages or bundles of products at a reduced price compared to purchasing the items individually, encouraging customers to buy more.
• Value-based Pricing: Setting prices based on the perceived value of the product or service to the customer, often associated with premium products that offer unique benefits.

Frequently Asked Questions About Competitive Pricing Strategy

A successful competitive pricing strategy requires a deep understanding of the market, the competition, and your costs, coupled with the ability to adapt and respond to changing market conditions swiftly. It is important that you strike a balance that maximizes profitability while meeting the demands and expectations of your target market.

Let’s answer a few questions about competitive pricing strategies:

What are the Three Types of Competitive Pricing Strategy?

The three types of competitive pricing strategy are:

• Cost-Based Pricing
• Market-Oriented Pricing
• Competition-Based Pricing

What is an Example of Competitive Pricing?

An example of competitive pricing is McDonald's and Burger King engaging in price wars, offering competitive deals on similar menu items to attract price-sensitive customers.

What are the Benefits of Competitive Pricing?

The benefits of competitive pricing include:

• Increased sales and market share
• Improved customer loyalty and retention
• Enhanced brand positioning and image
• Efficient resource allocation and cost management
• Better understanding of market dynamics and consumer behavior

Competitive Pricing: A Complete Guide

• September 8, 2021

Last updated: 30 April 2024

Competitive pricing is a common strategy that helps maximize your margins and prevent market share losses. Many organizations also use the business insights they receive and the dynamic competitor data to make strategic long-term decisions that drive sustainable growth. 

Competitor insights are fundamental for competitive pricing strategies but there is more to it than simply matching price tags. Customers evaluate price when deciding on purchases, but they also weigh real and perceived value when choosing between you and a competitor. 

In this article we go over how to build and execute a complete competitive pricing strategy that gives you an edge in the market:

Article Contents

Download the full guide, what is competitive pricing, why competitive pricing, advantages of competitive pricing .

A competitive pricing strategy is an easy-to-understand tool used by many large and small businesses offering a wide range of goods and services. The strategy fosters better understanding of your competitor landscape and allows for faster price changes, ensuring you match customer willingness to pay.

Almost every company implements competitive pricing to some degree; here are some reasons why you should as well:

Simple Framework

The framework for setting up competitive pricing is straightforward. Steps you can take to set up your competitive pricing strategy are:

• Identify your key competition
• Determine their price position and strategy
• Find the values they offer across key customer segments
• Price your offerings compared to competition based on the values you offer

Finding competitive data may be challenging, but it will help you better understand your customer base and who customers view as your competitors when making a purchase.

Low Risk and High Success Rate of Competitive Pricing

With a competitive pricing strategy, you identify the prices that customers are willing to pay given that these are already being charged in the market. You don’t have to worry that you’re leaving money on the table by undercutting your prices. Neither do you have to fear creating unrealistic offers above what the market will accept.

Pricing Strategies Synergy

By incorporating competitive pricing analysis with other  pricing strategies  like cost-plus and value-based, you can gain insights from multiple perspectives.

By using competitive pricing alongside other strategies, we can judge:

• The value we offer our customer segment vs the competition
• The price that translates to the value being offered
• The price that optimizes our margins

Dynamic Pricing

One of the biggest competitive pricing advantages is the ability to adjust your pricing immediately in a dynamic fashion, which makes it versatile and responsive to competitor changes. 

Dynamic pricing can be especially helpful for online sellers. On storefronts like Amazon, competitive prices can change in a matter of minutes.

Disadvantages of Competitive Pricing

Competitive pricing strategies can improve your profit margins and your bottom line. But a poorly designed strategy can cost your business significant revenue and leave you chasing after the wrong customers.

Competitive pricing usually falls short when it comes to the quality of the information you have on your competitors. For heavily regulated industries or commodities, most organizations have little trouble acquiring competitor insights. But with more unique products or services, identifying the competition and relative prices can be challenging. Here are some issues to watch out for:

Unsustainable Price Point in the Long Term

Incomparable products or services.

A Ferrari dealer will soon go broke if they try competing with a Honda dealer on price. Identifying your competitors and comparable items will help you understand what your customer needs are and what they are willing to pay. Selling diamonds for the price of coal is unsustainable and will inevitably lead to bankruptcy or reorganization.

Indistinguishable Products and Services

Lack of quality data on competitors.

Industries like consumer packaged goods have readily accessible market data that makes competitive pricing analysis easier. In other industries, especially B2B, data can be harder to find. In those cases, a solid source of data often emerges through conversations with customers and sales reps who help determine your key competitors, their purchase journey, and relative price position.

Competitive Pricing Strategies

• Premium pricing : charging more than your competitors
• Equal/Line Pricing : charging the same price as your competitors
• Discount Pricing : charging less than your competitors
• Your target customer segment
• The value attributes they find important when making a purchasing decision.
• The other competitors they consider when deciding on a purchase
• Your ranking against your competition across those key value attributes
• Your price value (advantaged or disadvantaged) vs your competition

• Competitor A
• Competitor B
• Competitor C
• Competitor D
• Fair Value Line

Premium Pricing

When it works.

A  premium pricing strategy  works if consumers see your offering or product as more valuable than the competition. For products or offerings that are commoditized, your value options are limited, and you will have to primarily compete on price.

Case Study: Competitive-based Pricing Strategy for an RV Parts Manufacturer

In 2019 Revenue Management Labs built a competitive-based pricing strategy for an RV parts manufacturer who wanted to price their RV parts in accordance with the market.

After studying industry data and competitive price intelligence, we determined that our client offered more value than their competition due to their superior reliability, fit, variety, and customer service.

Revenue Management Labs uncovered that our client’s product justified higher prices, and the market agreed. Our client received a hefty 350% ROI, using our services.

Increasing Profitability through Adjusting Volume Mix

Client Story Increasing Profitability through Adjusting Volume Mix for a Premier Recreational Vehicle Parts Manufacturer Identifying the factors eroding margins and gaining alignment with the

When It Doesn’t Work

Premium pricing doesn’t work when there are no added value attributes to differentiate your offering from the competition. An example of this would be commodities or basic necessities like milk. But beware, even commodities create value through brand, features (2%, homo, filtered, etc.), and customer service.

Case Study: Competitor Price Analysis for a Large Consumer Packaged Goods Company

In 2022 a large company in a mature sector of the CPG industry hired Revenue Management Labs for a competitor price analysis.

We encouraged our client to use a Price Match strategy on wider portion of the portfolio to ensure there was no price gap with competition. We recommended this because there is very little differentiation amongst them and their main competitor.

Since our client and their competitor owned roughly 95% of the market, there was little room to compete on price. As a result, our client’s portfolio of products has seen a stable growth in demand, consistent with overall market trends, without taking on any additional unnecessary risk by increasing their price gap as compared to their competition.

Equal Pricing

Price matching a competing product or service is your best approach in situations where you and your competitors have very similar offerings. In this example of competitive pricing, you focus on ways to communicate your added value rather than undercutting your competitor in a price war.

Luxury goods keep their product prices in line with their competitors to communicate equal value. This competitive-based pricing strategy ensures these offerings retain their perceived value with their target market.

Equal pricing also occurs in mature markets where there are few or no differentiators between products. Milk, bread, and eggs are examples of equally priced commodities.

Equal pricing doesn’t work when there are different value attributes associated with the products being purchased. You need to understand what sets your product apart from the competition and what makes customers choose your offerings.

Discount Pricing

A penetration pricing strategy works when you are able to match your competition on the price-to-value ratio. Using penetration prices on sticky products with high customer retention can generate long-term revenue and grow your customer base.

Case Study: Phone Maker Leverages Reputation for High Value-to-Price Ratio

On April 23, 2014, phone maker OnePlus introduced the OnePlus One, a smartphone with specs comparable to higher-end Samsung models at a much lower price.

OnePlus phones became popular with budget-minded computers and OnePlus established itself as a serious contender in the highly competitive smartphone market.

After making its name in the budget market, One Plus leveraged its reputation for a high value-to-price ratio to market phones catering to multiple customer segments. The brand still continues to grow.

While lowering your prices may work in the short term, it can also lead to a loss of brand value. This is especially true of premium or luxury offerings.

When you set a very low price, you may encounter pushback from customers who become attached to that price. Or you may start a price war that leads to lower margins across the entire category.

Competition by Industry

You can apply a competition-based pricing strategy in almost all industries. But competitive mapping can be more challenging in certain industries.

For example, B2B SaaS companies frequently offer unique feature bundles to customers. Without their own price intelligence, SaaS companies often have trouble determining which features to bundle and what price to set. Without this data, they wind up pricing their services blindly or making guesstimates that fail to match their company’s value.

By contrast, B2C e-commerce companies depend entirely on competitive pricing because every company directly competes with at least 15-20 others.

The key to effective competition-based pricing strategies is leveraging data to optimize profits instead of blindly following the crowd.

Competitive Pricing Analysis

A competitive pricing analysis defines who your competition is and how they’re pricing their products or services. Both direct competitors who have similar offerings and indirect competitors who offer the same functional benefits as your product or service can be considered here.

Armed with that information, you can assess the best prices relative to your competitors and the value they provide.

When to Conduct a Competitor Pricing Analysis

Depending on your industry’s business cycle, you should be rethinking your competitor pricing strategies every 3 to 12 months. Competitive pricing should be a continuous process where your team always has updated examples of competitive pricing strategies based on real-time events and changes.

Competitor Analysis Walkthrough

Identify Competitors

Identify Customer Segments

Identify Key Competition by Customer Segment

Gather Competitor Intelligence

Identify Gaps

Scenario Modelling

Price Setting

Integrate Process

Competitive price analysis can be challenging. To help, we’ve provided a clear set of instructions that will help you compile the information you need, with suggestions as to how often it should be done.

Identify Your Competitors

You can’t create competition-based pricing strategies without identifying your competitors. Who are your established competitors and what new competitors have recently arrived in the market?

Instead of creating a long list of every possible competitor, concentrate on three or four of your strongest competitors.

To extract the most insight, combine qualitative methods like conversations and interviews with a data-driven quantitative analysis.

Qualitative Approach

A qualitative approach explores customer mindsets in detail. Through focus groups, interviews, and conversations you learn more about what is important to your target market and how you can best address their needs and concerns.

Quantitative Approach

A quantitative approach weighs, measures, and crunches data to find statistical meaning amidst all the information. Through examining large data sets and survey information, a quantitative analysis lets you conduct share decomposition and measure cross-price elasticity so you can respond quickly to trends you might otherwise miss.

Identify Customer Segment & Value Attributes They Care About

Customer segmentation helps you better understand your target market. By sorting and grouping your customers, you can get a better idea of why different competitors are winning their purchasing dollars.

Main Types of Customer Segmentation

Customer segmentation separates your customers into groups based on shared traits. Two of these segments that we’ll use for our competitor analysis are:

• Behavioral:  How the user interacts with your brand.
• Demographic : The users age, gender, income, family structure, etc.

This information is crucial to understanding and predicting buying behaviors – giving you insight into how your target demographic will respond to a product and its pricing. The table below summarizes additional types of buckets to segment customers; for a more detailed breakdown, click the following link:  Customer Segmentation: The Who, Where, How, and Why (revenueml.com)

Types of Customer Segmentation

How to Identify Customer Value Attributes

Your customers may have several different motivations for buying your product or for choosing someone else’s. Here are some common motivations:

• Functional:  The customer values your offering for its function and utility.  “I buy your product because it improves my bottom line.”
• Social:  The customer was inspired to buy your offering because of social ties.  “I bought this jacket because all my friends are wearing it.”
• Conditional:  The customer has a need for your product.  “I need a new jacket for my friend’s wedding.”

Your salespeople may be able to identify 15 or 16 competitors. Most customers choose between 3-4 competing businesses when making their purchasing decisions. Through segmentation, you can determine which competitors are targeting different customer groups and can build your pricing and promotional campaigns accordingly.

To understand where you lose buyers on the path to closing the deal, you must understand the buyer’s journey and how your prospective customer narrows down the competition.

Gather Competitor Intelligence Based on Key Competition by Segment

Undertake market research and conduct a data analysis to understand what the competitive prices are for similar offerings and any discounting strategies being used.

Identify Gaps/Opportunities

Losing to the competition.

Identify how you may be losing to the competition:

• Price  – If your competitor offers a lower price, adjust your prices or offer your customers more value than the competition.
• Distribution  – If they have more successful distribution efforts, supplement your advertising with material aimed at reaching new customers.
• Promotion Strategy  – If they have a superior promotion strategy, compare their ads to your own and see where you need to aim your promotions.
• Greater Assortment of Products  – If your competitor has more to offer, make sure your smaller selection focuses on quality and value.

Winning Over the Competition

• Price  – If you offer a lower price, consider adjusting your prices to avoid underselling your product.
• Distribution  – If you have more successful distribution efforts, maintaining relationships, monitoring them regularly, and knowing your market and customers supports continued success.
• Promotion Strategy  – If you have a strong promotion strategy, keeping an eye on your customers lets you shift your focus as needed and prevent complacency.
• Greater Assortment of Products  – If you have more to offer, make sure your customers are aware of your wide variety.

Scenario Modeling: Business Case

• A price matching competitive strategy
• A price premium competitive strategy
• A price discounting competitive strategy, including loss leader pricing

After we run these different scenarios, you can select the strategy that brings you the highest benefit and has the best impact on your bottom line.

Price Setting and Offer Adjustment

Integrate process (conduct periodically).

A competitor’s price analysis should be conducted on a periodic basis (quarterly, bi-annually, annually etc.), depending on what the business cycle looks like for your industry. You should strive to make sure that your team always has the most recent and up-to-date information available on competitor portfolios and pricing strategies.

How Revenue Management Labs Can Help You Succeed

Revenue Management Labs has worked with multiple companies in many different industries to create competitor landscapes and improve their competitor pricing framework. We understand the nuances between different sectors. Instead of a one-size-fits-all solution, we create a customized competitive pricing strategy unique to your company. Contact Revenue Management Labs to help you gain an edge over your competitors and increase your market share!

Frequently Asked Questions

What is competitive based pricing.

A competitive pricing policy sets your prices based on the price your competitors charge for comparable products. Competitive-based pricing helps you set your products’ prices at the level that best reflects their value to the consumer and sell at the highest possible profit margin.

How to Get Competitive Pricing

A competition-based pricing strategy requires information about your competitors and your prospective customers. You need to know who your competitors are and what prices they charge. But you also need to determine what your customers value most about your products and what drives their choice between you and your competition.

How Does Competition Affect Prices?

Unlike a cost-plus or value-based pricing strategy, competition-based pricing focuses on the prices charged by competing services for similar offerings. By studying what current customers are willing to pay, competition-based pricing strategies let you base your prices on what the market will bear.

Is Premium Pricing Right for My Product?

A premium pricing strategy works best for products which have a higher real or perceived value than their competition. A competitive pricing analysis can help you determine your product’s value to your customers and establish the best price for the market.

ABOUT THE AUTHOR

Avy Punwasee is a Partner at Revenue Management Labs. Revenue Management Labs help companies develop and execute practical solutions to maximize long-term revenue and profitability. Connect with Avy at  [email protected]

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How to Create a Competitive Pricing Strategy – with Definitions, Examples, and Benefits

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Strong competitive pricing strategies entice new customers and give your business an edge in the market. Dan Cakora, Business Consultant at Vendavo illustrates how to build your strategy and highlights the benefits of various pricing methods.

Table of Contents

Consumers base their purchasing decisions on various factors, but the final decision often comes down to price. According to a Global Retail Study, 87% of shoppers want to know that they “got a good deal” when purchasing an item. 

So how do you balance this customer need with the business goal of maximizing your profits? After all, the pressure to competitively lower your prices is constant and intense.

But you might be surprised to learn that the answer isn’t always to lower your prices. Here’s how to create a competitive pricing strategy to boost your sales and help you stand out.

What is a Competitive Pricing Strategy?

A competitive pricing strategy is when you price your items based on your position in the market or industry niche rather than on typical product cost. 

When you use competitive pricing, you evaluate the prices of your competitors’ products and adjust your prices on an ongoing basis. This pricing model leverages competition to build customer interest and encourages innovation — especially in industries like tech .

Naturally, competitive price points can impact your own  pricing strategy  in more ways than one. More often than not, when a product has been on the market for a while, similar offerings will begin to emerge. When this happens, and the price for your product or service has reached a point of equilibrium, competitive pricing is the next go-to strategy. As the name suggests, a competitive pricing strategy involves setting prices relative to competitors in order to take the best advantage of the competitive market.

Of course, the by-product of this is a certain amount of price competition pressure and, sometimes, an all-out price war. The key to effectively navigating the pricing landscape, without devaluing your product or service, is knowing when and how to respond.

How is Competitor-Based Pricing Calculated?

A competitive pricing calculation relies on pricing data from other companies in your industry, so start by calculating the average price of similar products across your primary competitors. 

Then, you can adjust your prices based on this average price. This strategy works especially well if you sell an identical product as your competitors, but you can still calculate the average price of similar items across other companies.

Collecting and Visualizing Competitive Pricing Data 

Before you decide to implement a competitive pricing strategy, consider visualizing the data you’ll be working with to ensure a holistic view of the competitive environment. 

Here is a series of blogs I’ve written on the topic to give you clear methodology for the process of visualizing competitive pricing data. 

• How to Calculate a Competitive Sales-Weighted Price Difference
• How to Visualize Competitive Prices with a Comprehensive Market View
• How to Collect, Analyze, and Visualize Competitive Price Data 

The Importance of Competitive Pricing Strategy

Consumers are avid researchers. One retail study discovered that 53% of shoppers “always do research” before deciding to buy. And according to a Global Retail Study, 57% of shoppers research on their phones while standing in a physical store.

This data means that your customers are aware of your competition — maybe even more than you are! But a competitive pricing strategy considers your competition’s positioning, which leads to higher sales and profits by ensuring that you put relevant prices in the market.

Competitive Pricing Benefits and Disadvantages

Before you adopt a competitive pricing strategy, it’s essential to understand its strengths and weaknesses. 

The Benefits of a Competitive Pricing Strategy

The advantages of competitive pricing include:

• Simplifying your approach to pricing
• Increasing your sales volume and revenue
• Adapting to changes in the market
• Boosting traffic to your store or e-commerce platform

Additionally, implementing a competitive pricing strategy has a protective effect: Competitive prices prevent market share losses and prevent your loyal customers from taking their business elsewhere.

Disadvantages of Competitive Pricing Strategy

There are some drawbacks to a competitive pricing strategy, including:

• Lower prices may prevent you from covering costs
• Customers base purchasing decisions on more than just cost
• Match your products to competitor prices, especially if they’re not exact matches
• Your competitors may be pricing their products incorrectly

While you must carefully weigh these disadvantages, they don’t negate the benefit of offering your customers competitive prices. Most business owners will see the benefit of adopting a competitive pricing strategy for at least a portion of their products.

Types of Competitive Pricing Strategies

There are three basic approaches to competitive pricing: lowering your prices, raising your prices, or keeping your prices even with the competition.

Lower Prices

Lowering your prices can be a valid competitive pricing strategy if you’re not as established as your competitors or are entering a market for the first time.

This may mean you accept lower margins for a short period while you build credibility and demonstrate value. In the longer term, the goal is to compete on something other than price competition so you can justify charging more for your goods and/or services.

Higher Prices

Believe it or not, raising prices can also be a way of outpacing your competitors. This type of competitive pricing strategy is most helpful when you offer a novel or proprietary product or service that is critically acclaimed to be better than your competitors’ offerings. 

A higher price point can highlight the superior quality of your product line or give your business the reputation for being an “upscale” alternative to your competitors.

Equal Prices

Matching your competitors’ prices prevents you from losing business to customers looking for a better value. This competitive pricing strategy also allows you to emphasize a unique shopping experience, superior customer service, or other options that make your business the best choice. 

Additionally, a “price-match guarantee” policy may draw in customers who want to be confident that they’re paying the lowest price on the market.

Competitive Pricing: Examples

How do these competitive pricing strategies work in the business world? Here are some competitive pricing examples to illustrate their usage:

Lower Price Strategy

FantasticBeans is preparing to sell a new type of coffee maker and discovers that its major competitors are selling a similar item for $74.99. So FantasticBeans sells its coffee maker for $69.99, appealing to budget-hungry shoppers. 

But once customers are in the store, FantasticBeans enrolls them into a loyalty program and captures their contact details for future sales, using the lower price as leverage for a lasting relationship with long-term benefits.

It’s important to remember, though, that you’re likely to be cutting your margin as part of this competitive pricing strategy, so you’ll want to understand how to conduct a margin impact analysis beforehand. 

Higher Price Strategy

Razor Elite makes and distributes shaving kits but is uncertain how to price its latest offering. Research reveals an average price of $39.99 for a comparable kit, but Razor Elite deliberately sets its price at $49.99. 

This price point allows the marketing team to accent their product’s eco-friendly packaging and quality ingredients, especially compared to the “bargain” retailers on the market.

Equal Price Strategy

Best Buds Accessories operates an e-commerce platform that sells Bluetooth earbuds and other cell phone accessories. The company discovers that other online retailers sell their earbuds for $99 and decides to match that price. 

However, the sales team emphasizes add-on products to incentivize customers to return and purchase additional accessories.

How to Respond to Competitors’ Prices: The Competitive Price Reaction Matrix

A competitive price reaction matrix calculates the proper competitive response to price pressure. The principles of competitive advantage and pricing power define the dimensions. To win, the firm must merely earn more profits than its competitors. Second place goes to the survivors who will live to compete again in the next round. Losers are the firms that go under. Given these ground rules and objectives, we can identify the optimal moves dependent on the firm’s position.

The Positions

If the firm’s offer is more attractive to customers than its competitor’s, then the firm has competitive  pricing power . That is, the firm may be able to maintain or increase a positive price differential between its offer and its competitors without losing market share due to the customers perceiving that the firm’s offer delivers more benefits than its competitor’s.

If the firm’s profitability for the impacted customers is higher than the profitability which the competitor could achieve with those customers, then the firm has a  competitive advantage . That is, the firm can use that competitive advantage to either attack a competitor’s customer base or defend its own customer base with a price reduction more profitably than one’s competitors during a price pressure war.

There are four stances a firm should take in response to a competitive price threat depending on its situation: Ignore, Defend, Mitigate, or Accommodate.

If the firm both earns stronger profits in serving the impacted customers (possesses a competitive pricing advantage) and customers perceive the offer as more attractive (possesses competitive pricing power), then the firm should  ignore  direct price competition and carry on its strategy as it sees fit.

If the firm earns stronger profits in serving the impacted customers (possesses a competitive advantage) but customers do not perceive its offering as more attractive (lacks pricing power), then  defending  its market position with a measured price reduction may be merited. The margin reduction may be less costly than the potential loss of market share.

If the firm does not earn stronger profits in serving the impacted customers (lacks a competitive advantage) but customers do perceive the offer as more attractive (possesses pricing power), then the firm should  mitigate  price competition through reiterating and re-communicating its benefits.

Finally, if the firm both does not earn stronger profits in serving the impacted customers (lacks a competitive advantage) and customers do not perceive its offering as more attractive (lacks pricing power), then the firm will have to  accommodate  share and margin losses in the short term in the hopes of improving its value offering for the next cycle of competitive engagement.

Not all of the positions are equally attractive. But in real life, firms don’t always have pricing power and / or a competitive advantage, and they can’t win every customer profitably every time. But, they should be able to live to fight another day.

Key Takeaways

So what is competitive pricing, and what should business leaders know about it?

• A competitive pricing strategy adapts your prices to the market
• Shoppers carefully research pricing before making a buying decision
• Competitive pricing can be lower, higher, or equal to your competitors 

Many businesses pair their competitive pricing strategy with a broader marketing approach, drawing in new customers with introductory prices and then selling additional products or services.

Market Data at Your Fingertips

The best decisions rely on data. Vendavo’s Profit Analyzer tool can give you a better picture of your competitors’ prices, allowing you to align your prices with your business strategy. 

Contact us to learn more about competitive pricing strategies and discover how the right tools can give your business a competitive edge.

About The Author

Dan Cakora is a Business Consultant at Vendavo, and has worked in various aspects of Pricing for over 15 years. Dan started his career as a Field Economist responsible for helping to measure inflation for the federal government. Before joining the Vendavo team, Dan was a customer at a large, international B2B distributor. He has led Pricing teams, developed Pricing and Sales Enablement products, and has a passion for data visualization. Dan has an MBA from DePaul University and a BS in Economics from Purdue University.

View All Articles by Dan Cakora

Case study: Turning pricing complexity into a price advantage that boosts return on sales

Pricing has become a Big Data question without an easy answer. The vast complexity around pricing today presents many B2B companies with a dilemma: how to increase returns by making better pricing decisions without investing prohibitively high amounts of time, effort, or resources.

The technology exists to make better pricing decisions. What is often lacking, however, is a complete program that integrates the technology with the people on the front lines who will be using it and a system to sustain pricing excellence over time.

That challenge bedeviled one multinational chemicals company. The majority of its pricing decisions tended to be based on across-the-board “mass pricing,” resulting in significant losses. Unwarranted high prices were driving “good customers” away, while opportunities were squandered with customers who were willing to pay more. Pricing complexity—thousands of products for tens of thousands of customers—made it difficult to develop a manageable fact base for sales reps and get to a level of detail that would unlock pricing opportunities.

Here are the stages that were successful for this multinational chemicals company:

1. Build an analytics engine

Before analyzing the data, the team had to create a useful data set. Pulling in and cleaning data from several different sources, they created a huge data warehouse containing all the transaction history on price, products, and customers for the previous year. For the first time, the company had full transparency into the real cost of deploying pricing and sales force discount strategies.

Making sense (and use) of the data, however, required a sophisticated tool. The company developed one based on statistical algorithms that allowed the team to get a much more granular view of prices and customers. For example, it clustered segments by product and recommended target prices for each one. The tool also incorporated advanced visualization techniques so that pricing and sales reps on the front lines could easily understand and manipulate the data.

2. Involve the front line

The tool determined pricing guidelines, but they had to be tested. The pricing-analytics team incorporated active input from the front-line pricing and sales managers, who had good experience with individual customers and the marketplace. The managers and reps reviewed each price recommendation and adjusted it for the risk of losing customers.

This risk-adjustment phase incorporated quantitative and qualitative factors (such as average profitability per client or recency of the pitch) covering market, customer, and product specifics. To help with the assessment, the team developed a simple sales-force risk survey that only took fifteen seconds to answer for each customer.

3. Keep the implementation simple

Many good pricing solutions get bogged down in cumbersome validation procedures. To eliminate that problem, the team developed an online work-flow management system that used advanced visualization techniques so that sales managers and reps could quickly review and validate the size and timing of every price increase. It also provided standardized validation analyses, such as benchmarks vis-à-vis other sales reps, to help sales managers challenge the sales force to perform better.

This referral and approval process was simplified by incorporating it within a single system, while the output of validated prices was tailored so as to be uploaded to the client’s existing software systems. Critical to the success of the approach was having the client influence how it was developed (such as choosing how to quantify the risk variables) as well as tailoring the output to be easily integrated into existing Enterprise Resource Planning (ERP) systems.

4. Build for the long term

The most difficult part of a pricing program is getting beyond the initial short-term burst of energy. The company committed to a program grounded on training a set of trainers, who were made responsible for replicating the initial program throughout the organization. The training focused on helping pricing managers better segment customers, design the right risk assessment for a specific business unit, and build support across the organization.

To build confidence in the front-line sales force to negotiate and implement pricing changes, the team developed experiential learning programs that required reps to take part in tailoring the pricing approach, practice customer negotiations in specifically designed role plays, and engage in brainstorming sessions to generate price-increase arguments/counterarguments.

This effort resulted in a return on sales between 3 percent and 7 percent across seven different countries in which the company rolled out the program.

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6 Competitive Pricing Examples & What You Can Learn From Them

As a business professional tasked with making key decisions about pricing strategy, you face a complex set of challenges. Pricing strategy is crucial . It invariably affects a host of key metrics, from long-term customer loyalty to overall sales revenue. 

Yet there are dozens of pricing strategies to pick from. And implementing the best possible mix demands careful consideration of market dynamics, customer sentiment and competitor activity. 

In this article, we will look at 6 of the most effective competitive pricing strategies. Aside from looking at these competitive pricing examples, we’ll also look at how to implement these strategies for maximum impact.

Understanding Competitive Pricing: The Key Points 

Before we look at the key competitive pricing examples, let’s first take a top-down perspective of competitive pricing.

Studies have repeatedly shown that competitive pricing strategies are linked to positive outcomes. But why might this be the case? We believe there are 3 reasons why competitive pricing strategy should be a central and ongoing consideration for your business.

1) Provides a competitive edge

Competitive pricing is essential for gaining a stable, ongoing market advantage. By strategically setting prices in contrast to competitors, your business attracts price-sensitive customers and better defines its value proposition. The balance between attractive pricing and sustainable profit margins is vital for long-term viability. 

2) Positions your brand

Your pricing strategy significantly influences your brand image. Speaking somewhat simplistically, premium pricing will position your brand as desirable to affluent customers. On the other hand, economy pricing positions your brand as affordable and accessible, appealing to a broader, price-conscious market.

Appropriate pricing is arguably the most logistically important factor for reaching your intended audience. You may have the most exciting, most sophisticated value proposition on the market, but if the pricing presents an insurmountable barrier to customers, it becomes largely redundant.

3) Influences customers’ behaviour & loyalty

Competitive pricing impacts customers’ long-term purchasing decisions. Prices perceived as fair or advantageous typically encourage customer loyalty and repeat business. In contrast, prices out of step with market expectations or competitor alternatives will likely deter potential customers and incentivise existing customers to drop away.

By leveraging data analytics and market research , it’s possible to fine-tune your pricing strategies to maximise retention while attracting new customers. This iterative process requires continuous monitoring and adjustment, ensuring pricing remains competitive and aligned with evolving market conditions.

6 Important Competitive Pricing Examples

Here are six of the most important competitive pricing examples for businesses to be aware of. A thorough understanding of the various strategies is the first step in knowing which to implement in the context of your unique market conditions and competitor activity. 

1) Price matching

Price matching is a strategy where a business agrees to match a competitor’s price for the same product or service. This approach is particularly prevalent in retail environments for non-branded products, where sellers aim to retain customers who might otherwise shop elsewhere for better deals. 

With 86% of customers prioritising price comparison between different merchants, matching assures people they are receiving the best available option, fostering loyalty and trust.

In implementing price matching, businesses must employ advanced data analytics and competitive intelligence tools to continuously monitor the market and competitors’ pricing structures. This strategy requires something of a delicate balance to remain profitable while also offering competitive prices. 

Additionally, it’s crucial for companies to communicate their price matching policies effectively to consumers, typically through an omnichannel approach, to build and maintain market awareness. 

2) Penetration pricing

Penetration pricing is a technique where businesses initially set prices lower than their competitors to attract customers. 

This strategy is often employed when launching a new product or entering a new market. The goal is to rapidly gain market share by enticing customers with lower prices, which are then raised once a firm customer base is established.

The application of penetration pricing is based on a detailed understanding of competitor cost structures. You must forecast the volume increase needed to offset lower margins and achieve profitability. 

The success of this strategy hinges on the ability to scale operations efficiently and potentially sustain short-term losses for long-term gains. Companies must also be adept at analysing customer behaviour to determine the optimal time for raising prices without alienating new customers.

3) Premium pricing

Premium pricing involves setting prices higher than those of competitors. This strategy is based on the perception that a higher price signals superior quality or exclusivity.  

It targets consumers who are willing to pay more for what they perceive as a scarce and niche product or service. Luxury brands often use this approach to reinforce their market positioning. Similarly, when adopting this strategy, you must create a strong brand identity and value proposition that justifies the higher price. 

Premium pricing typically involves investing in high-quality materials, superior product design, and exceptional customer service. Additionally, companies employing premium pricing must continuously innovate and maintain the perceived value of their products or services to sustain the higher price point over the long term.

4) Economy pricing

Economy pricing is a cost-focused strategy where prices are kept low by minimising overheads and marketing expenses. 

This strategy is common for generic or store-brand products, catering to price-sensitive consumers. It’s a no-frills approach that offers basic products or services at the most affordable prices.

Economy pricing requires that you implement rigorous cost-control processes. You must streamline your operations, supply chain management, and sourcing to reduce production costs, all while leveraging economies of scale to achieve lower unit costs.

Furthermore, you will need to maintain a delicate balance between cost reduction and maintaining acceptable quality standards to ensure customer satisfaction. Effective communication of the value proposition of economy-priced products is also essential to target the right customer segments.

5) Bundle Pricing 

Bundle pricing is a strategy where multiple products or services are offered together at a lower price than if they were purchased individually. 

This approach is effective for promoting the sale of products or services that may be less popular or moving slowly. It also encourages customers to purchase more items in one transaction, potentially allowing businesses to gain a competitive advantage without reducing overall revenues, where increased sales offset lower prices.

Bundle pricing involves strategic product pairing, understanding consumer buying habits, and offering interesting alternatives in comparison with competitors.

If you’re thinking about adopting this approach, you will need to analyse sales data to identify complementary products that can be bundled together. Often, the key is to create bundles that offer real value to customers, encouraging them to spend more than they would have on a single item. 

6) Dynamic pricing

Dynamic pricing is a flexible approach where prices are continuously adjusted in response to real-time market demand, competitor pricing, and other external factors. 

This strategy is particularly prevalent in industries like airlines and hotels, where prices can change frequently based on the time of booking, seasonality, and occupancy rates. That said, it has also proven very promising in other sectors. 

To successfully implement dynamic pricing, you will need to leverage advanced algorithms and real-time competitive data. This strategy hinges on the ability to accurately forecast demand and adjust prices quickly. You’ll have to integrate data from various sources, including market trends, competitor prices, customer behaviour, and inventory levels. 

The challenge with dynamic pricing lies in balancing optimal pricing with customer satisfaction, as frequent price changes can lead to customer distrust. In sectors like e-commerce, dynamic pricing can be a powerful tool to stay competitive, but it must be managed carefully to avoid perceived price unfairness.

How to Apply Pricing Strategies & Overcome Common Challenges

Knowing which pricing strategies to apply and when to apply them is an ongoing challenge. However, with a structured, adaptive approach it’s possible to monitor market conditions consistently and respond accordingly.

There are five core challenges that arise in relation to implementing competitive pricing:

• Knowing which mix of strategies to apply. 
• Knowing when to apply specific strategies. 
• Gaining accurate competitive intelligence . 
• Measuring the success of existing strategies.  
• Maintaining price-related positioning.

There are several processes which, when undertaken on an ongoing basis, will give you the information you need to respond to these challenges. They enable you to pick the right strategies in alignment with competitor activity, customer sentiment and market opportunities.

Here is a concise overview of each one:

A) Competitor analysis

Regularly analysing competitors’ pricing strategies and market movements gives you an overview of the competitive landscape. This analysis should include monitoring pricing changes, promotional tactics, and any new product launches. Advanced tools, third-party data providers and software can aid in tracking these factors.

B) Qualitative customer feedback

Gathering and analysing qualitative feedback from customers provides insights into their perceptions and reactions to pricing strategies. This feedback can be sourced through surveys, focus groups, or social media interactions. It helps in understanding the price sensitivity, expectations and responses to new and existing strategies of your customer base.

C) Measurement of dynamic pricing

Employing analytical tools to monitor and measure the impact of dynamic pricing strategies is crucial. This involves tracking metrics such as sales volume, profit margins, and market share in response to price changes. It enables timely adjustments to pricing in response to fast-changing market conditions.

D) Preliminary testing

Before fully implementing a pricing strategy, conducting preliminary tests such as A/B and multivariate testing on a small scale can forecast potential impact. This testing can help identify the most effective pricing approach and mitigate the risk of large-scale pricing errors.

E) Business goal alignment

Ensuring that pricing strategies align with overall business goals and objectives is fundamental. This alignment should be reviewed periodically to ascertain that pricing tactics are conducive to long-term business growth and sustainability, rather than just short-term gains.

Pricing Strategies: Your Path to Long-Term Business Success

Implementing the right competitive pricing strategies at the right time can significantly impact your most important KPIs, including market share, customer loyalty, overall revenue and growth. Understanding the 6 competitive pricing examples mentioned in this article will serve as an important first step towards implementation.

Next is choosing the right software that will give you the ability to analyse market conditions and respond with appropriate, competitive pricing. There are currently many options on the market, but there are core factors to take into consideration before proceeding with an investment.

Finally it’s worth considering third-party data providers to supplement your in-house intelligence will help ensure that your pricing remains resilient, dynamic and attractive over the long term.

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The Competitive Pricing Strategy Guide (Covers B2B and B2C Businesses)

Lower pricing is a winning strategy to raise sales and this is true for both B2C and B2B companies. Customers always prefer products or services that come at the best price.

As a seller, you definitely want your prices to be lower than your competitors. But how do you do that and still turn a profit?

This guide will explain in detail about competitive pricing, its advantages and how to implement a competitive pricing strategy that is hard to beat.

What Is Competitive Pricing?

When you set the prices of your products or services based on the prices set by your closest competitors, this is known as competitive pricing. It applies when the product is homogenous and the market is highly competitive. Competitive pricing is also known as market-oriented pricing because companies consider the market prices instead of analyzing their own costs.

When the market is competitive, especially for common products like groceries, marketers follow the strategy of competitive pricing where the final prices are based on what the competitors are charging, as shown in the below figure:

A competitive pricing strategy is adopted by companies to set the prices of their products or services after carefully evaluating the pricing strategy of their competitors.

Moreover, competitive pricing allows companies to identify the best prices without the need to invest in a price-setting strategy. They can easily analyze the price of their competitors and set a price that is closest to the competition , as illustrated in the below figure:

A company adopting a competitive pricing strategy has three options:

• Low Price:  The prices of the products or services are lower than those offered by the competitors. You can adopt this pricing strategy if you are able to produce products in bulk which lowers the production cost.
• High Price: The prices of the products or services are higher than those offered by the competitors. You can adopt this pricing strategy if you offer added features and benefits in the products and services that your competitors are missing.
• Matched Price: The prices of the products or services match the prices offered by the competitors. The product features remains more or less the same, but the focus shifts towards the product quality. If you are able to offer a better-quality product at the same price, then customers will automatically choose you.

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Examples of Competition-Based Pricing

Here are some examples of a competition-oriented pricing strategy:

• Store A sells running shoes at $99 a pair. Their closest competitor, Store B, sells running shoes at $95 a pair in order to win the comparison on price.
• Brand A dominates the toothpaste market. Brand B wants to launch a new toothpaste, so it studies the market price and finds out that Brand A sells its toothpaste at $9 per tube. Brand B launches its product at $8.99 in order to give a psychological advantage to its pricing over its main competitor Brand A.
• Product C and D are the highest-selling phones in the smartphone market. A new brand with Product E wants to launch a new smartphone. It studies the market and finds that Product C sells at $490 with limited features, Product D sells at $550 with slightly better features than Product C. Manufacturers of Product E plan to launch their smartphone with top-quality features priced at $570. The price is slightly higher than their closest competitor but the features provided are a lot more than offered by Product D.
• A classic example of a competitor-based pricing strategy is between Pepsi and Coca Cola . Both brands compete against each other over pricing, quality and features, and their prices remain similar, although Pepsi is slightly cheaper than Coke on average.

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Why You Should Understand the Pricing of Your Competitors

Competition is a rivalry between two or more entities for recognition. As per Collins dictionary:

“ Competition is an activity   involving  two or more firms , in which each firm tries to get people to buy  its own goods in preference  to the other firms’ goods. ”

Almost every industry has competition and one of the best ways to analyze the progress of your competitors’ marketing strategy is by keeping a track of its product prices.

High product prices often indicate that the firm is growing at a steady rate and is reaping profits. Prices on the lower side that keep declining indicates that the firm is struggling to generate revenue. (Please note that this might not be the case in all circumstances, but in most cases, this scenario holds true.)

No matter what you are selling and whether you belong to the B2B or B2C group, tracking the prices of your competitors is absolutely important. In a highly competitive market , customers have plenty of options to choose from, particularly now that most products are available online. Several similarly styled products are available in the price bracket that are closer to each variant, which means that if you keep the prices of your products or services too high, then people can easily dump your brand because a lower-priced alternative is easily available.

Mostly, bigger brands adjust the prices of their products or services and the smaller firms are bound to follow that because smaller companies do not have the budget or resources to carry out a price audit right from the scratch.

An easier way is to keep an eye on the bigger businesses and adjust your prices in accordance with the prices set by top brands. This is the reason why some smaller companies fail to grow and go out of business because they aren’t able to match the low prices offered by their bigger counterparts.

Hence, it is important to carefully analyze the prices offered by your competitors in order to stay in business. Also, you must not blindly adjust the prices of your products just because your competitors do, as that can push you out of business.

First you need to identify the total cost of ownership of the product or service and determine the explicit and implicit costs (explained later in this article). Thereafter, you must match the prices and identify whether it is feasible for you to reduce your prices in order to compete with your competitors. Failing to do so might result in heavy losses that will make your competitors stronger than before.

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What Are the Advantages and Disadvantages of Competitive Pricing?

A competitive pricing strategy is not the only pricing strategy that businesses need to consider. There are other pricing strategies like premium pricing, economy pricing, price skimming, bundle pricing, psychology pricing, etc. The choice of pricing strategy must suit the exact needs of your business.

If you are doing business in a competitive niche then a competitive pricing strategy might be the best option for you. Now, let’s have a look at some of the advantages and disadvantages that this type of pricing strategy offers.

Advantages of Competitive Pricing Strategy

A competitive pricing strategy should be used when the product has reached the level of equilibrium, meaning that the product is popular in the market and a lot of companies are manufacturing it. Here are the top advantages of adopting a competitive pricing strategy:

• Pricing Strategy Is More Efficient – You can easily combine a competition-based pricing strategy with other pricing strategies and this makes the final prices of the products or services much more efficient.
• Stable Customer Base – Competitive pricing lets you have a stable customer base because people often compare the prices of products before they purchase and keeping a price similar to your competitors helps in maintaining a regular flow of customers.
• Price Competition Is Avoided – Companies who follow the strategy of competition-based pricing have to keep prices similar to their closest competitors, meaning that they can’t charge as much as they want to. A price cap is automatically set on the final selling price and this helps keep the price wars stable.

Disadvantages of Competitive Pricing Strategy

If you are a small business owner looking to compete with bigger brands then you must think twice before implementing the competitive pricing strategy because you can risk losing your entire business. In such cases, choosing a price that is based on the actual manufacturing cost of the product should be adopted. Here are some of the disadvantages of a competitive pricing strategy:

• Difficult to Implement for Smaller Businesses – Smaller companies may find it difficult to enforce a competitive pricing strategy because the prices of their competitors keep changing. It becomes difficult to keep track of the prices and by the time the company launches the product in the market, the prices offered by the competitors will have changed. This leads to a massive loss that most small businesses can’t afford.
• More Prone to Failure – The entire idea of setting the best prices of your products rests on the prices already set by your competitors. This means that if the competition hasn’t set their prices correctly, then the chances of failure increases.
• Can’t Attract the Customers Through Price – If you are adopting a competitive pricing strategy then it becomes difficult to attract customers using price, since the customers won’t find the prices attractive enough to make the purchase. Prices offered by you remain closer to your competitors so customers look for additional advantages offered by companies other than price.

How to Do Competitive Pricing Analysis

Follow the below steps in order to perform a comprehensive competitive pricing analysis:

Step 1: Answer Some Vital Questions

First, you must find out the answers to these questions that will help you gather the required data to be used in the steps that will follow.

• Who are your top 3 competitors?
• What is the geographical area of your competitors?
• What are the niches they deal with?
• What sort of pricing strategy do they follow?
• How many times do they change their prices in a year?
• Are the competitors profitable?
• What is their profit percentage?
• What are their positive and negative attributes?
• What are the features of their products and how are they different from yours?
• How long have they been in business?
• What is their growth rate?

Step 2: Identify the Total Cost of Ownership

Competitive pricing lets you identify the total cost of ownership which is a combination of explicit costs and implicit costs. Hence, in order to start your competitive pricing analysis, you first need to find out the explicit and implicit costs associated with the production.

Explicit costs are easily identified expenditures that can be measured in monetary terms. Set-up costs, advertisements, wages, rent, taxes and service fees are examples of explicit costs.

Implicit costs are expenditures that are difficult to measure directly under monetary terms. Implicit costs are not shown as a separate expense. Costs like rent of the building if the premises are owned by the company or the number of hours that the business owner works for the development and promotion of the products are examples of implicit costs.

You need to figure out the total cost of ownership of the product or service and use it for the computation of the final price. If you are able to identify that the prices offered by your competitors are not close to the ownership costs then you need to reduce your explicit costs to keep it closer to your competitor’s price.

Step 3: Compare Competitor Prices and Keep the Data Fresh

The quality of the data plays an important role in this regard. Product and pricing data should be calculated and compared every two hours. This keeps the pricing structure at par with the competitors.

Competitor price tracking software can be a good option to use, especially in the case of e-commerce retailers. The software can automatically fetch the prices of the tracked products from a number of popular websites and generate a smart price for your product.

This smart price is automatically calculated using a sophisticated algorithm that considers the competitors’ prices before calculating the smart price. Have a look at the below screenshot from Prisync which is an automatic price tracking software :

Another tool that you can use for price analysis is Data CROps . This software is used by several retail businesses for price monitoring and price comparison. Here is a screenshot of Data CROps that lists the different manufacturers and the total number of products offered by them for an effective price comparison of your product against the competition.

Moreover, a deeper visual analysis lets you easily identify which product prices are higher or lower:

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How B2B Businesses Can Identify the Best Prices

What we learned about the competitive pricing strategy and how to perform an analysis to find the best price holds true for both B2B and B2C businesses, but there are a few essentials that B2B businesses need to keep in mind because they are dealing with other businesses. As per a study conducted by TNS intelligence , the following factors come in to play when deciding the optimum pricing structure for B2B companies:

• How price sensitive is your brand? Meaning, if your competitors reduce or raise their prices, will you lose or maintain your market share?
• How price elastic is your brand? Meaning, there would no impact after a certain percentage increase in the prices of your products. For example, your products become price elastic no matter whether you keep the prices of your product at $500 or $600. Hence, it is profitable to keep the price at $600 (or another higher equivalent) once your product becomes price elastic.
• What is the optimum prices of your products or services? Meaning, you need to set the prices depending on the objective you wish to achieve. If you want to raise profits, price should be kept higher, but if the objective is to raise revenue then price can be kept low.

Pricing is an important element of your entire marketing strategy, so you need to choose the best price for your product or service. Keeping the prices closest to your competitors’ price minimizes the risks but reduces the profits.

Do not hesitate to raise the prices of your products if you feel that your product is much higher quality than what your competitor is offering. A competitive pricing strategy is one of the best ways to determine the best prices for your products and services. Follow it to your business advantage!

If you need help, contact us for a B2B marketing strategy session.

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How to Do a Competitive Analysis | Case Study Included

In order to be a leader in your industry, you need to know how to perform a competitive analysis.  A competitor analysis is more than a simple SWOT analysis where you find the strength and weaknesses of your market segment. Evaluating your competitors is highly important and must be done through complete market research using an analysis template like the one that we're going to present in this article.

Finding out where your competition excels doesn't have to be a burden if you have the right strategy and necessary tools.

What Is a Competitor Analysis?

Why perform a competitor analysis, how to conduct your competitive analysis, step 1. find your top competitors, step 2. analyze your competitors popularity, step 3. identify the public perception of competitors, step 4. analyze your competitors' social media strategy, step 5. perform an seo competitor analysis.

Competitor analysis in digital marketing is the process of finding strengths and weaknesses of your competitors, relative to those of your own product or service.

There is no exact competitive analysis definition. Yet, you need to know that the strengths within a competitive analysis are the things that make you unique, your key selling point, the ideas around your whole business - which can be about the product or the team. On the opposite side, the weaknesses point out some deficiencies, and things you could improve, when it comes to your brand, or take advantage from, when it comes to the weaknesses of your competitors.

The competitive analysis has the role to make a valid and accurate market positioning and a report on what you are doing best, and where your competitors excel, and learn from that to win more potential customers. A competitive analysis also means picking the right competitors and looking at analytics that include business metrics, digital marketing analysis, social media metrics.

By doing an accurate competitor analysis you'll be able to receive a lot of data and insights for making better business decisions. Similar to an internal research, by evaluating quantitative and qualitative data, if you research your competitors, you will uncover effective strategies and new ideas for increasing your business' performance, be it on social media, on online, or in the physical store.

A well-performed competitor analysis will allow you to:

• Build your unique selling proposition (the statement that describes the benefit of your offer and how you solve your clients' needs).
• Bring business improvements regarding products and services, team management, customer care, delivery and many more.
• Discover new market segments.
• Prioritize goals and future development.
• Create products that are actually required and respond to customer's needs.

For a better understanding of how your competitor analysis framework should look like, we've performed a competitive market research on the cosmetic niche. We've analyzed several metrics on this market segment to conduct a competitive analysis as in-depth as possible, with most of the data being pulled out from brand mention monitoring.

Brand monitoring, when done with the right tools, is more versatile than you'd think. Running an in-depth brand mentions competitive analysis could help you make sure that you are not overlooking any efficient strategies that might be working wonders for your competitors.

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Even though you might be aware of some of your market leaders, there might be a few you're missing.

For our case study example, we searched for top leading beauty brands. As social media is a highly important segment within this industry, one of the analyses we've performed was to find the top-performing brands on social media, by the number of followers.

You can also search on Google for the relevant keywords in your business and see the top brands that are ranking for those keywords. And use a spying tool to find out important analytics on every website you want, such as the Mozbar browser extension.

Also, check out Social Media to figure out the businesses that pop out in results in your market. The research we performed helped us understand the niche a little better. Therefore, based on this research performed, we've chosen to continue our competitive analysis on the following brands:

• MAC cosmetics
• Kylie cosmetics
• Anastasia Beverly Hills
• Urban Decay

It’s too complicated and actually impossible to manually track all your competitors’ records and activity, as much manual web scraping you'd be doing.

So, even if you know your competition , the question remains: how do you find who is the most popular brand in your niche?

Most popular = most mentioned

Tools like BrandMentions can make things easier.

Therefore, to answer to our main question, "how to perform a competitive analysis", you need to start performing an in-depth research of your competition. Brand Mentions allows you to track keywords, brands, product names or whatever you need.

Going back to the beauty niche we are analyzing, let's figure out the most popular brands here. We took BrandMentions for a spin, to find out the most popular beauty brand into a very competitive niche by analyzing and monitoring social media metrics. We analyzed the mentions for these beauty brands for a short period of time, October 14 - November 15 , Worldwide for all languages.

After analyzing the results, we saw that Sephora has some interesting discoveries. Compared to the rest of the beauty sites, Sephora has the highest number of mentions on web and social. In the printscreen below, we can see all mentions for each brand categorized by source (web and social).

By far, Sephora outranks the rest of beauty brands on the total amount of mentions on web and social.

The number of mentions could be explained by the fact that Sephora has more influencers that talk about it on Twitter. Results showed that the brand is mentioned by influencers with over 50k followers on Twitter compared to other beauty brands.

BrandMentions has a filter that allows you to filter mentions to see the Twitter posts from people that have a specific number of followers. The Twitter account for each brand was excluded.

Just by taking a look at your competitors and monitoring their brands, you can get a bunch of data:

• compare how often your competitors versus you post on social media
• what outlets mention them more than you
• how many mentions they have had in the last 24 hours
• how many shares their mentions have
• what languages are their mentions written in
• do they have mostly web or social mentions

And yes,  all mentions matter, but some matter more than others.

When looking into your competitor’s yard, look at their best practices and try to figure out what worked best for them.

You must have heard at least once people saying that all publicity is good publicity, as long as they spell your name right. Or that the only thing worse than being talked about is not being talked about. But is it really so? How much does the public perception influence a brand's popularity? Let's find out!

The  Sentiment Analysis feature  allowed us to have a better understanding on the public perception of the analyzed brands. If we first identified the competitors and looked for the most popular ones, now we can have a look at how they are perceived in the online world.

How did we do that exactly?

We monitored all brands with BrandMentions as we said before, and from all mentions we started to filter them out. Filters are a blessing in this situation, giving you full control over the segment of mentions that you want to analyze.

Trying to manually find all the negative brand mentions that interest you is like trying to find a needle in a haystack.

After analyzing the sentiment analysis for each individual beauty brand ,we came to realize that most of them share a higher positive experience with the users.

By looking at the data, for all brands or just some of them, we can draw lots of conclusions. For instance, comparing to other brands, Benefit has the highest number of web and social mentions that have a positive sentiment analysis. If we look at the next graph, we can easily see that Benefits stands out:

Another thing we can observe is the fact that Benefit has the highest number of web mentions with a positive sentiment, as well. But the brand that is leading the positive social mentions is Sephora.

Even though Sephora has the highest number of positive social mentions, overall, compared to the rest of the beauty brands, it has the highest number of negative sentiment. Which might be a downsize for the brand.

Below you can see a comparison with the other cosmetics brand on positive and negative sentiment analysis.

We can see that most of the mentions are from social media and more specifically, from Twitter. The connection with the previous results might be stronger. Often time it has happened that people are more driven to write online about a negative experience, rather than a positive one.

We saw that the negative sentiment had the lowest value compared with the positive and neutral sentiment, with a single exception. Morphe had a higher neutral sentiment than the negative one. Check out the graphic below:

Urban Decay has the most naturally ordered distribution of the sentiment analysis for the mentions analyzed on web and social.

We are not saying that bad publicity couldn't be good publicity for some businesses or individuals. But for most businesses and niches, bad publicity and negative brand mentions are never a reason for joy but an occasion for a crisis communication meeting.

Another interesting thing to observe in the graph above is that Morphe has the highest negative sentiment analysis on social media.

People love it the most, but they also hate is the most, compared to the rest of the brands. If we look particularly at the brand to evaluate the total number of positive vs. negative sentiments, we can see that in the end, a positive experience overcomes the negative one, in terms of absolute numbers.

We've previously talked about Morphe saying that it has a higher number of neutral sentiments, the only brand with this particularity. We can understand that people have mixed feelings when it comes to this brand: You either love it or hate it.

Both positive and negative mentions have a big impact on the purchase decision of a client.

Although it might sound bad to   spy on your competition , this marketing technique is a fully transparent, popular, and white-hat one. How else would we all improve ourselves and our brands if we were to not compare our endeavors with the others? And this is where a brand monitoring tool comes to rescue us.

When doing competitor spying, we are actually building PR relationships.

Both directly and indirectly.

Directly by getting to know your common audience better (the one your competition shares with you) through your competitors’ eyes, win ties with important outlets in the industry, etc.

In addition, while keeping “your enemies” closer, you indirectly relate to and establish a relationship with them. By constantly trying to keep up the pace with or outrun the brightest ones in the niche, and struggling not to ever fall in the pitfalls of black-hat marketing techniques other companies deploy in their strategies, you simply get better and better. In other words, you widen your professional circle.

Competitor spying is the more polite version of eavesdropping. There's no harm in doing it as long as you're using the tools to improve yourself and not disrupt the other.

You can easily gain insights on your competitors' performance and   dig into their success strategies   and use the lessons to your own benefit.

Tracking mentions for your competitor can lead you into discovering social media campaigns, new content ideas, top-performing social channel alongside types of content shared on each platform, plus trending hashtags used and top influencers for each competitor.

For instance, in our case, in the beauty niche, the results might surprise you. If you thought Instagram would be the most used Social Media platform for beauty products, you might be wrong.

According to the analysis performed in BrandMentions, it turned out that Twitter has the highest number of mentions for every beauty brand compared to the other social media marketing platforms.

If you thought that Instagram was the king of the beauty industry, you are wrong.

Of course, Instagram is a powerful Social Media channel, but maybe there's more in that direction. There are some insights related to this social platform, nonetheless. We know that Facebook became stricter about sharing data with third parties, so we can't see private posts. Instagram has shifted the strategy in this direction as well. Instagram started to hide likes in select countries earlier this year, and it will soon do the same in the United States.

This method affects the way we see data, on top of the fact that there are lots of users with private user accounts where even if you have an account you can't see their posts, likes, and stories.

After analyzing all the social mentions for all the beauty brands on all social platforms, here's what we discovered:

• Twitter is the Social Media Platform with the highest number of mentions.
• Twitter is the Social Media Platform with the highest number of mentions with positive sentiment analysis.

It seems that Twitter is a great way to start an influencer marketing strategy; it is also the most popular social media site. Finding all the information will help all marketers, brand managers, and community managers to build the best social media strategies for beauty brands.

When we looked at the distribution of web and social mentions for the beauty brands, we discovered 2 categories:

• more web mentions: MAC and Benefit
• more social mentions: Kylie cosmetics, Anastasia Beverly Hills, Sephora, NYX, Too Faced, Urban Decay, Morphe and Tarte.

It's obvious that social is the king here. We won't bother you with tons of charts and data on all the analysed brands, yet, you need to know that within Brand Mentions you can perform any type of analysis you want when it comes to social mention analysis.

If we analyze one of the competitors, Morphe, we can see that it is more popular on Instagram by the number of mentions. It is seconded by a small number by Anastasia Beverly Hills.

Morphe has lots of mentions on Instagram, but it is on the 8th place when it comes to Instagram followers with 10.3m.

When it comes to answering the question on how to do a competitive analysis  we know that what matter most are the insights you get to find out. And here are some great insights we've extracted for the most popular social media beauty sites scrutinized within our competitive analysis:

1.  For the MAC Brand: 

• MAC has the highest number of influencers on Instagram.
• MAC doesn't have influencers of people with more than 50k followers that mention the brand on Twitter.
• MAC is the least popular on the web and social media judging by the number of mentions. 

2.   For the Sephora Brand: 

• Sephora is one of the most popular beauty brands on social media and the whole web compared to the rest of the brands by the number of mentions.
• Sephora is mentioned by influencers and people with more than 50k followers on Twitter.

3.  For the Morhphe Brand: 

• Morphe shares a positive experience on social media compared to the rest of the beauty brand. It has the highest number of social mentions with a positive sentiment.
• But it also shares the highest value of negative emotions on social.
• Morphe is the top beauty brand on Instagram by the number of mentions compared to the rest of the brands.

4.  For the Benefit Brand: 

• Benefit is on the 10th place by the number of followers on Instagram with 9.8m (see printscreen below), the last place compared to the rest of the brands.
• Benefit offers a higher positive experience by analyzing sentiment analysis for the whole web and social mentions.

After analyzing all the mentions for all the beauty brands, there are lots of insights to help you create social media marketing strategies and find out the top competitors in your niche.

Knowing how to analyze your SEO competition is an important step in determining your overall keyword and SEO strategy. There are many factors involved in the process, and without the correct framework, it can get complicated. Here you can find the steps for the SEO competitor analysis explained, as clear and simple as possible. Within the screenshot below you can see the main steps that you need to take to make sure you perform an SEO competitive analysis at the highest level.

What Tools We Used to Do The Competitive Analysis

We used BrandMentions to analyze the beauty content and all the mentions for each beauty brand : MAC cosmetics, Kylie cosmetics, Anastasia Beverly Hills, Sephora, NYX, Too Faced, Urban Decay, Morphe, Tarte, Benefit.

Each created project had the name of the brand, and we added the keywords, domain URL, Facebook and Twitter account for higher accuracy in finding relevant mentions. We let the tool do its magic and analyze the beauty content on social media and the web.

For the metrics and discoveries made, we used filters and features available in BrandMentions, such as Sentiment Analysis analyzer, web and social sources, mentions from Twitter accounts with a specific number of followers and more. Check out the data for designing your winning social media strategy.

Also, the trigger was when we found a research on Statista with most followed cosmetics brands on Instagram; so we thought of performing a deeper analysis on the topic, and finding the most popular beauty site on Social Media, not only on Instagram. We wanted to see if there more we needed to know. And yes, there was so much more.

For an effective competitive research, there are multiple things that need to be taken into consideration, beside web and social listening. Things like  brand awareness , customer experience, target audience, the search engines you are interested in, target market,  the service or product features, the competitors sales, etc. This is not a  complete guide to obtain competitive advantages  that applies for all. But a competitor analysis template that helps you best identify your competitors and your main competitor strengths and weaknesses.

The best time to start finding out information about your competitors is now. So even if you are a content marketer, a small online store owner or a big ecommerce business , an online marketing specialist or you're in the sales teams, you need to start digging into competitive intelligence.

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Case Study | Developing Pricing Strategy for Consumer Products

Consumer Products Company

Consumer Products

CONSULTANT ROLE

Pricing Strategy Consultant

DACH Region

The Challenge

Pricing Complexity in a Competitive Market

The client, a B2C Consumer Products company, faced two key challenges within the fiercely competitive market. The company’s current pricing set-up was unable to effectively attract and retain customers , and emerging market trends indicated that consumers were becoming more sensitive to price fluctuations .

“Our pricing approach needed a fresh perspective for us to stay competitive and maintain our growth trajectory.” — Head of Pricing of Consumer Products Company

The client recognized the need for a seasoned pricing consultant with in-depth understanding of advanced pricing methodologies and tools, consumer behavior and market trends.

Role of Consultport

Consultport proposed 3 strong candidates within 72 hours. The client interviewed 2 candidates and selected a former senior consultant at Oliver Wyman. The consultant started working with the client team 1 week after the initial request.

Comprehensive Pricing Analysis

The consultant conducted in-depth analysis of the current pricing set-up. Competitive benchmarking, conjoint analysis, and value-based pricing frameworks were utilized to help identify optimal price points, understand customer preferences, and determine the perceived value of the company’s products.

“A thorough examination of current pricing practices is essential before introducing novel strategies.” — Pricing Strategy Consultant

Evaluate & Prioritize Pricing Initiatives

After the analysis phase, the consultant identified and evaluated potential pricing initiatives, including promotional bundles, loyalty pricing and competitive price matching. 

After thorough discussions with the client, the consultant proceeded with a pricing strategy focused on customer loyalty and retention to maximize returns on pricing investments. The initiative was selected due to its potential to increase customer retention and alignment with the company’s customer-centric values.

Clear Roadmap for Implementation

In collaboration with the client, the consultant devised a detailed roadmap with actionable steps to execute the loyalty pricing initiative, from data infrastructure upgrades to customer segmentation and pilot program launch . 

Additionally, the consultant outlined best practices for the client to differentiate between products in the same category and reacting to the cost price of their products. 

After full implementation of the pricing initiative, the consultant expected a 12% increase in customer retention and a 10% growth in overall revenue .

Optimized Pricing Initiative

Clear Implementation Roadmap

The consultant’s insights and strategies really drove our pricing strategy forward. We’re happy with the collaboration.

Head of Pricing of Consumer Products Company

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A pricing case study can either stand alone or be part of a broader case like ‘entering a new market’.

Pricing plays a crucial role in a company's profitability as it directly contributes to it. For this reason, establishing optimal prices for products or services is of great importance. Business consultants therefore assist their clients in developing pricing strategies.  

A case study on pricing is an analysis focusing on the pricing of a product or service. It can stand alone or be part of a broader case, such as entering a new market .

In a case interview , you can approach this case type in three steps:

1. Investigate The Company

At the outset of your case, you should gain a solid understanding of your client's business model .

• What products does the company sell and where does the company stand in the market? For instance, is the company a market leader? In terms of volume or quality or both?
• What is the company’s key objective? Profits? Market share? Growth ? Brand positioning? Make sure to clarify the objective before starting the analysis.

2. Investigate The Product

After familiarizing yourself with the company's business model, it's time to learn more about the product . When examining the product, it's important to pay attention to the following aspects:

• Product differentiation: Analyze how the client's product differs from those of competitors. Explore not only the product's features but also its production processes and methods.
• Unique Selling Proposition (USP): Identify the unique selling point of the product. What makes it unique and attractive to potential customers?
• Alternatives and substitutes: Consider alternative or substitute products in the market as well. How do they compare to the client's product?
• Product lifecycle: Determine the stage of the product lifecycle . This can influence the pricing and marketing strategy.
• Predictability of supply and demand: Examine whether supply and demand for the product are predictable. This can help assess risks in pricing and take appropriate measures.

Once you've thoroughly assessed these aspects, you'll have a clearer understanding of the product and its positioning in the market, which will inform your pricing strategy recommendations.

3. Choose a Pricing Strategy 

The choice of strategy depends on the information gathered in the first two steps. There are three important pricing strategies:

(1) Competitor-based pricing ( Benchmarking ): With this strategy, the price is determined based on the prices set by our competitors. So, you want to find out:

• Are there comparable products/services?
• If yes, how do they compare to the client's product?
• What are their prices? Important: Keep in mind that competitors are likely to adjust their prices once the client introduces their product.

(2) Cost-based pricing:

With cost-based pricing, the price of a product or service is set based on the accumulated item costs ( break-even ) plus a reasonable profit margin. This strategy varies by industry due to different cost structures and margins. Therefore, it's important to understand the specific customer costs before setting a price (taking into account fixed and variable costs ). 

Although cost-based pricing offers a simple and transparent method, it does not consider the perceived value of the product or service to customers and may be less effective in certain markets. To determine customer willingness to pay, it's important to consider this and possibly break down the price into different components, such as a separate price for the product and delivery costs.

(3) Value-based pricing:

Value-based pricing is a strategic approach based on assessing the customer's perception of the product or the amount customers are willing to pay. Different customer segments may have different willingness to pay . This means that companies can set different prices for different customer segments by adjusting the perceived value to justify price changes.

A good example of this is the iPhone, a highly differentiated product for which customers are often willing to pay significantly more than the pure costs plus a "typical" margin. This illustrates how customers are inclined to accept a higher price for products they perceive as particularly valuable or differentiated .

Key Takeaways

From what we've learned previously, we can now extract the following insights as key takeaways:

• There are three key pricing strategies: Competitor-based pricing, cost-based pricing, and value-based pricing . Cost-based pricing alone is sometimes considered insufficient.
• Understand the primary objective of the company (profit, market share, growth, brand positioning) as the basis for the pricing strategy.
• Know the business model, products/services, and market position of the company and consider it in your strategic approach. 

Understand the customers' willingness to pay and needs, and adjust the pricing strategy to customer preferences and market conditions.

You Are Looking for More Pricing Cases to Practice with? 

Check out our recommended resources or browse the Case Library for all cases on this topic. 

👉 Company Case by INVERTO: VacuLuxe Innovations' Supply Chain Makeover

👉 Expert Case by Hagen : Retail Banking Profitability

👉 PrepLounge Case: Deep Water Rescue

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Pricing at Netflix

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Developing a Pricing Strategy that Grows Profits and Guest Count

Case study: restaurant and quick-service pricing strategies.

Annual Revenue Recovered

Increase in Margin

The Challenge

In a crowded market, the company’s pricing was veering out of control. Pricing had become reactive. The concern grew around wide-spread discounting. The restaurant chain had experimented with price cuts in an effort to boost customer traffic. While discounting proved addictive, margins were declining. It was difficult to consistently execute any strategy. Like many others in the industry, it lacked the right customer insights to make informed pricing decisions.

Restaurant Industry

Competition is fierce in the multi-billion dollar Restaurant and Quick-Service industry. With many new entrants to the category, it’s essential that organizations understand their value proposition and customer willingness-to-pay. With pricing so closely tied to the bottom line, it plays a key role in any restaurant’s success.

One chain partnered with Pricing Solutions to re-gain control of its pricing. Pricing had grown to include deep discounting and large featured-item menus but it was not clear what impact they had on long-term success and profitability. A focused, concentrated effort on pricing was needed to reset the pricing strategy so that it was complementing rather than undermining the brand’s price/value image.

Building a Solution that Fits

The company needed to manage prices across hundreds of menu items and restaurant locations. Pricing Solutions executed a three-phased project to help the company regain control of pricing and reinvigorate growth.

Beginning with Pricing Research:  The challenges companies face with pricing strategy often stem from a lack of understanding of the 5Cs of pricing . Customer Research provided insight into the client’s customers including key value drivers and the role pricing played in the purchase decision.

The importance consumers placed on food quality, restaurant atmosphere and service compared to pricing, was used to build a Price-Value Map (PVM). The PVM was an indicator of the company’s value positioning versus key competitors. Based on this assessment, Pricing Solutions would determine if the client was in a value advantaged or disadvantaged position, and why.

Leveraging Analytics:  Pricing Solutions’ analyzed the client’s past 2 years of POS data to compute price elasticity and build a Price Simulator. The custom simulator was capable of playing out possible scenarios in the market. For example the model could forecast the impact of price changes on unit sales, revenue, margin and guest count.

Building Strategy & Management Capabilities:  In the final project phase, Pricing Solutions utilized the analytics and its pricing strategy framework to develop a robust and sustainable pricing strategy that would get the client’s business back on track. It also involved making changes to the client’s pricing infrastructure, including developing its internal pricing staff.

The Result?

The project was designed to stop the ‘pricing slide’, that is to say, to recover the approximate 5% in annual revenue and margin that was being lost under the client’s initial discounting strategy. It was clear now that discounting was hurting the business. Reducing discounts on inelastic products, deploying terms and conditions and executing price increases surgically were the actions needed to turnaround to improve annual revenue and margin by an estimated 2-3%.

The Pricing Solutions Difference

Our firm believes in a comprehensive approach to your pricing challenges. We specialize in leveraging research and analytics to develop a robust pricing strategy that will succeed in the market place. Our approach in the restaurant and quick-service industry includes an assessment of non-price factors and other key value drivers. The impact they have on the bottom-line cannot be overlooked when pricing strategy must align with corporate strategy.

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Travel & Hospitality Competitive Pricing Analysis

To help small and medium-size travel organizations learn more about their competition so they can offer their customers the best rates for any city or destination.

Customer Description

The travel and tourism industry is highly competitive and is subject to constant price fluctuations. Each travel destination offers several accommodation options and seasonal deals, with thousands of hotel and room variations. Whether you are an airline or car rental agency, competitive pricing and product availability is critical. Having continuous knowledge of their competitors’ price and product offerings, recognizing changes to the marketplace, and acting quickly but strategically are instrumental to the success of our customers.

Customer Need

A large travel agency approached us to provide competitive insights of other travel agencies and match prices with online travel agencies – to “scrape” travel prices from the Internet and compare. This was a first time experience for them. Their business challenge was to improve their competitive standing and increase market share by coming up with various pricing strategies. They needed to know about frequency and pricing scenarios – rooms, versus locations, versus peak travel period. In order to track the constant changes in hotel, room availability, prices, and seasonality, real time feeds were required.

Liberty Metrics Solution

The complexity of making fast and accurate decisions in such a price and schedule-sensitive environment calls for real time search and management of large amounts of data. Using our industry-leading data extractor and analyzer we created a fully customizable report to display the top hotels in every major North American city. The report is updated hourly to present future and current room availability and prices.

Working closely with their data expert, the customer received a fully customized, real-time report that transformed the data to exactly what they wanted. We exceeded the customer expectations by providing the data in real-time which was seamlessly integrated and constantly running. We delivered on time and they now have an edge on their competition.

Measureable Results

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Top Pricing Strategies and Their Implementations

• August 20, 2024

Pricing, often overlooked as a strategic lever, is essential to business success. It is more than just slapping a number on a product or service, it is a delicate balance of art and science that influences revenue, profitability, and customer perception.

In this article, I will cover pricing strategies in detail and teach you how they can be used by businesses to optimise their pricing decisions. We will explore various pricing models, the implementation of these pricing strategies and real-world pricing strategy examples.

Also, we will touch upon the psychological aspects of pricing and offer practical guidance on pricing for different business models with the help of case studies. 

The Critical Role of Pricing in Business Success

Pricing is a potent tool that can significantly impact a business's bottom line. A well-crafted pricing strategy can differentiate a product or service, increase revenue, and improve profitability. Conversely, suboptimal pricing can erode margins, hinder growth, and damage brand reputation. The challenge lies in finding the optimal price point that maximises revenue while considering costs, competition, and customer value.

Defining Pricing Strategy

A pricing strategy is a comprehensive plan that outlines how a business will determine the prices of its products or services. It involves a systematic analysis of various factors, including costs, target market, competition, and value proposition. The goal is to set prices that align with the business objectives, generate revenue, and create value for customers. A robust pricing strategy is essential for achieving long-term success.

Understanding Your Product or Service

Before delving into the complexities of pricing, a profound understanding of your product or service is paramount. This knowledge serves as the bedrock for crafting effective pricing strategies.

Conducting a Comprehensive Product Analysis

A meticulous examination of your product or service is essential. This involves dissecting its features, benefits, costs, and target market. By understanding the intrinsic value and production intricacies, businesses can make informed decisions about pricing. Identifying the core functionalities and supplementary features helps in determining the product's positioning and potential price points.

Furthermore, a detailed cost analysis is crucial. This involves breaking down fixed and variable costs to ascertain the minimum price required to cover expenses. By understanding the cost structure, businesses can avoid pricing products below the break-even point.

Identifying Unique Value Propositions

Every product or service possesses distinct qualities that set it apart. These unique selling points, or value propositions, are the core reasons customers choose a particular offering. Identifying these differentiating factors is vital for effective pricing. By understanding what makes your product or service unique, you can justify premium pricing and build a strong brand identity.

Moreover, understanding the problem your product or service solves for customers is equally important. Clearly articulating the benefits and outcomes customers can expect helps in positioning your offering and determining its perceived value.

Assessing Customer Perception of Value

Pricing is subjective and influenced by customer perception. Understanding how customers perceive the value of your product or service is crucial for setting appropriate prices. Market research and customer feedback can provide valuable insights into customer expectations and willingness to pay.

By analysing customer preferences, behaviours, and buying patterns, businesses can identify price sensitivity and adjust pricing strategies accordingly. Additionally, understanding customer segments with different value perceptions can help in implementing tiered pricing models.

Cost-Based Pricing Strategies

Cost-based pricing is a foundational approach where prices are determined by adding a markup to the product's or service's cost. While straightforward, it requires a deep understanding of cost components and their impact on profitability.

Detailed Breakdown of Cost-Plus Pricing

Cost-plus pricing is a classic method where a predetermined percentage or fixed amount is added to the product's total cost to arrive at the selling price. This approach ensures covering production expenses and generating a profit margin. However, it's crucial to accurately calculate costs, including direct materials, labour, overhead, and desired profit.

Markup vs. Margin

Markup and margin are often confused but represent different aspects of profitability. Markup is the percentage increase over the product's cost, while margin is the percentage of the selling price that constitutes profit. It's essential to understand the distinction to accurately calculate prices and assess profitability.

Advanced Cost-Based Pricing Models

Beyond simple cost-plus pricing, more sophisticated models exist. Activity-based costing (ABC) is a method that assigns costs to products or services based on the specific activities involved in their production or delivery. This approach provides a more accurate cost picture, especially for complex products with multiple cost drivers.

When to Use Cost-Based Pricing and Its Limitations

Cost-based pricing is suitable for businesses with a clear understanding of costs and operating in markets with limited price competition. It provides a baseline for pricing and ensures profitability. However, it has limitations as it doesn't consider customer value or competitor pricing. Overreliance on cost-based pricing can lead to missed opportunities and pricing products above market levels.

Value-Based Pricing Strategies

Value-based pricing is a strategic approach that centres on the customer's perceived worth of a product or service. Unlike cost-based pricing, this method prioritises customer needs and desires to determine optimal pricing.

The Concept of Perceived Value

Perceived value is the subjective assessment customers make about a product or service's worth relative to its cost. It's influenced by factors such as brand reputation, product features, customer benefits, and competitive offerings. Understanding and quantifying perceived value is crucial for effective pricing.

Customer Segmentation and Value Tiers

To optimise value-based pricing, businesses often segment customers based on factors like demographics, needs, and willingness to pay. This segmentation allows for tailored pricing strategies. Value tiers can be created within each segment, offering different product bundles or features at varying price points to match customer preferences and budgets.

Implementing Value-Based Pricing

The "good-better-best" approach is a common implementation of value-based pricing. It involves offering three tiers of products or services with varying features and price points. The "good" option caters to budget-conscious customers, the "better" option offers enhanced features, and the "best" option provides premium value and experiences.

Case Studies of Successful Value-Based Pricing

Numerous companies have successfully implemented value-based pricing strategies. For instance, Apple has excelled in creating a premium brand image and charging premium prices for its products. Subscription-based services like Netflix and Spotify have tiered pricing plans to cater to different customer segments. Analysing these case studies can provide valuable insights into the practical application of value-based pricing.

Competition-Based Pricing Strategies

Competition-based pricing involves setting prices in relation to competitors' offerings. This strategy requires a deep understanding of the competitive landscape and careful consideration of various factors.

Analysing the Competitive Landscape

A comprehensive analysis of competitors is essential. This involves identifying direct and indirect competitors and understanding their product offerings, target markets, and pricing strategies. By benchmarking against competitors, businesses can gain insights into market dynamics and consumer preferences.

Price Leadership vs. Price Followership

Price leadership involves setting prices for an industry and influencing competitors to follow suit. This position requires a strong market share and a differentiated product. Conversely, price followership involves aligning prices with industry leaders to avoid competitive disadvantages. The choice between these strategies depends on a company's market position, competitive advantage, and overall business objectives.

Competitive Parity and Its Implications

Competitive parity involves setting prices at the same level as competitors. This strategy aims to avoid price wars and maintain market share. However, it's essential to consider other factors beyond price, such as product differentiation, customer value, and brand image. Relying solely on competitive parity might hinder a company's ability to stand out in the market.

When to Use Competition-Based Pricing

Competition-based pricing is suitable for businesses operating in highly competitive markets with similar products or services. It can be effective in maintaining market share and preventing price erosion. However, it's important to avoid becoming overly reliant on competitors' pricing and to consider other factors that influence customer purchasing decisions.

While competition-based pricing is a valuable tool, it should be used in conjunction with other pricing strategies to achieve optimal results.

Dynamic Pricing Strategies

Dynamic pricing or demand-based pricing is a strategy where prices are adjusted in real-time based on various factors. Dynamic pricing is also referred to as surge pricing and this strategy allows businesses to optimise revenue and respond to market changes effectively.

Understanding Price Elasticity of Demand

The price elasticity of demand measures how sensitive customers are to price changes. Understanding this concept is crucial for dynamic pricing. Products with high elasticity have a significant price sensitivity, while those with low elasticity are less affected by price fluctuations. By analysing price elasticity, businesses can determine the optimal price adjustments for different products or services.

Yield Management and Its Applications

Yield management is a sophisticated form of dynamic pricing often used in industries with limited capacity, such as airlines, hotels, and rental cars. It involves allocating different price points to inventory to maximise revenue. By carefully managing inventory and pricing, businesses can balance supply and demand to optimise profitability.

Real-Time Pricing Adjustments

Surge pricing is a well-known example of dynamic pricing, commonly used by ride-sharing services during peak demand periods. Personalised pricing involves tailoring prices to individual customers based on their preferences, purchasing history, and other relevant data. These real-time adjustments allow businesses to capture additional revenue and optimise pricing strategies.

Ethical Considerations in Dynamic Pricing

While dynamic pricing offers significant benefits, it also raises ethical concerns. Transparency is crucial to build trust with customers. Clearly communicating pricing changes and the reasons behind them can help mitigate negative perceptions. Additionally, businesses must avoid exploiting vulnerable customers or engaging in unfair pricing practices.

Psychological Pricing Strategies

Psychological pricing leverages consumer psychology to influence purchasing decisions. By understanding how customers perceive prices, businesses can strategically manipulate these perceptions to drive sales.

The Psychology Behind Pricing Decisions

Consumer behaviour is significantly influenced by psychological factors. Price perception is subjective and influenced by various elements, including reference points, loss aversion, and the perception of value. By understanding these psychological underpinnings, businesses can craft pricing strategies that resonate with consumers.

Odd-Even Pricing and Its Effectiveness

Odd-even pricing involves setting prices just below a round number, such as $9.99 instead of $10. This tactic creates the illusion of a discount, making the product appear more affordable. While its effectiveness can vary, odd-even pricing remains a widely used technique to influence purchase decisions.

Premium Pricing and Luxury Branding

Premium pricing involves setting high prices to create a perception of exclusivity and superior quality. This strategy is often employed for luxury brands. By associating high prices with exceptional value, businesses can build a strong brand image and command premium margins.

Price Anchoring and Its Impact on Consumer Behavior

Price anchoring occurs when consumers compare a product's price to a reference point. This reference point can be a previously seen price, a competitor's price, or an internally generated price. By strategically introducing higher-priced items, businesses can influence consumers' perception of value and make lower-priced options appear more attractive.

Implementing and Monitoring Pricing Strategies

Effectively implementing and monitoring pricing strategies is crucial for maximising revenue and profitability. This requires a structured approach and ongoing analysis. Let us learn how to implement pricing strategies and monitor them.

Developing a Pricing Strategy Roadmap

A comprehensive pricing strategy roadmap outlines the steps involved in implementing and managing pricing decisions. It includes defining pricing objectives, identifying target markets, conducting market research, selecting appropriate pricing models, and establishing key performance indicators (KPIs). This roadmap serves as a blueprint for aligning pricing efforts with overall business goals.

Conducting Price Testing and Analysis

Price testing involves experimenting with different price points to assess customer response and revenue impact. This data-driven approach helps identify optimal pricing levels and optimise profitability. By analysing sales data, customer feedback, and competitor pricing, businesses can make informed pricing adjustments.

Using Pricing Software and Tools

Pricing software and tools can streamline the pricing process and provide valuable insights. These tools automate tasks, such as calculating costs, analysing market data, and conducting price simulations. They also facilitate price optimisation and help identify pricing opportunities.

Continuous Price Monitoring and Optimisation

The pricing landscape is dynamic, requiring constant monitoring and adjustments. Tracking competitor prices, market trends, and customer behaviour is essential for staying competitive. Regularly reviewing pricing performance and making data-driven optimisations ensures that prices remain aligned with business objectives and market conditions.

Pricing for Different Business Models

Now that we have learnt how to implement pricing strategies, let us find out how to change our pricing approach based on the business models we are working with. The choice of pricing strategy is significantly influenced by the underlying business model. Different models necessitate distinct approaches to maximise revenue and customer satisfaction.

Pricing Strategies for Subscription-Based Businesses

Subscription-based businesses rely on recurring revenue from customers. Key pricing strategies include tiered pricing, offering different subscription levels with varying features and costs. Freemium models, where a basic version is free and premium features are paid, can also be effective. Additionally, bundling complementary products or services into subscription packages can increase customer value and revenue.

Pricing for Freemium Models

Freemium models offer a basic product or service for free to attract users and convert them into paying customers. The challenge lies in striking the right balance between free and paid offerings. Tiered pricing structures with incremental value propositions can encourage upgrades. Understanding customer behaviour and identifying key conversion points is essential for maximising revenue from freemium models.

Pricing for E-commerce and Digital Products

E-commerce and digital products offer unique pricing opportunities. Dynamic pricing, adjusting prices based on demand and other factors, can be effective. Psychological pricing techniques, such as odd-even pricing and price anchoring, can influence purchasing decisions. Additionally, bundling products or offering discounts can increase average order value.

Pricing for B2B vs. B2C Markets

B2B and B2C markets have distinct characteristics that require different pricing approaches. B2B pricing often involves longer sales cycles, volume discounts, and negotiated pricing. Building strong customer relationships and understanding specific needs is crucial. B2C pricing focuses on consumer psychology, perceived value, and competitive pressures. Leveraging branding and creating a strong value proposition is essential for B2C success.

Tailoring pricing strategies to the specific business model is key to optimising revenue and customer satisfaction.

Pricing and Customer Lifetime Value

Customer Lifetime Value (CLTV) is a metric that quantifies the total revenue a business can reasonably expect from a single customer account. It's a pivotal metric that underscores the interconnectedness of pricing and customer retention.

The Link Between Pricing and Customer Retention

Pricing directly influences customer retention. Competitive and fair pricing enhances customer satisfaction and loyalty, reducing churn. Conversely, overpriced products or services can erode customer trust and lead to attrition. A delicate balance must be struck between profitability and customer retention.

Price Optimisation for Customer Loyalty

Optimising prices for customer loyalty involves considering factors beyond immediate revenue. By offering tiered pricing plans or loyalty programs, businesses can reward long-term customers and encourage repeat purchases. Analysing customer segmentation and identifying high-value customers allows for tailored pricing strategies to maximise CLTV.

Pricing Strategies for Upselling and Cross-Selling

Upselling and cross-selling are effective tactics to increase customer lifetime value. Strategic pricing plays a crucial role in these endeavours. By offering complementary products or upgraded versions at attractive price points, businesses can encourage additional purchases. Understanding customer needs and preferences is essential for successful upselling and cross-selling initiatives.

A holistic approach that considers the interplay between pricing and customer lifetime value is essential for long-term business success.

Pricing in Emerging Markets

Emerging markets present a complex landscape for pricing strategies. The dynamic nature of these economies, coupled with diverse consumer segments, requires a nuanced approach.

Challenges of Pricing in Developing Economies

Emerging markets are characterised by fluctuating currencies, high inflation rates, and underdeveloped infrastructure. These factors create significant pricing challenges. Additionally, political instability and economic volatility can disrupt supply chains and impact pricing decisions. Understanding these complexities is crucial for successful market entry.

Pricing for Different Income Levels

Income inequality is prevalent in emerging markets. To cater to diverse consumer segments, businesses often employ tiered pricing strategies. Offering basic versions of products at affordable prices can capture a broader customer base. Simultaneously, premium offerings can target higher-income segments. Balancing affordability with profitability is essential.

Adapting Pricing Strategies to Cultural Factors

Cultural nuances significantly influence consumer behaviour and pricing perceptions. Understanding local customs, preferences, and beliefs is vital. For instance, certain price points or pricing practices may hold symbolic meaning in specific cultures. Adapting pricing strategies to align with cultural expectations can enhance product acceptance and sales.

Case Studies and Best Practices

Real-world pricing strategy examples and in-depth analyses are invaluable for understanding the nuances of pricing strategies. By studying successful implementations and learning from past mistakes, businesses can refine their pricing approaches and achieve better results. 

In-depth Analysis of Successful Pricing Strategies

Examining successful pricing initiatives provides insights into what works and why. Analysing case studies from various industries reveals common patterns and best practices. Understanding the factors that contributed to pricing success, such as market analysis, customer segmentation, and price elasticity, can inform future strategies.

Lessons Learned from Pricing Failures

Pricing failures offer equally valuable learning opportunities. Identifying the root causes of pricing mistakes helps businesses avoid repeating errors. Analysing unsuccessful pricing strategies can uncover hidden challenges and refine decision-making processes. By understanding what not to do, businesses can mitigate risks and improve their pricing performance.

Real-world Pricing Strategy Examples from Various Industries

Exploring real-world pricing strategy examples from different industries broadens perspectives and showcases the versatility of pricing strategies. Analysing how companies in diverse sectors have approached pricing challenges provides valuable insights into adapting strategies to specific market conditions. Identifying common themes and industry-specific best practices can inform a comprehensive pricing approach.

Future Trends in Pricing

The pricing landscape is constantly evolving. Emerging technologies, changing consumer behaviours, and economic shifts will shape future pricing trends. Artificial intelligence and machine learning will play a crucial role in optimising pricing decisions, enabling real-time adjustments based on vast amounts of data.

Personalised pricing and dynamic pricing models will become increasingly prevalent. Additionally, sustainability and ethical considerations will influence pricing strategies as consumers become more conscious of environmental and social impacts. By embracing a holistic approach and staying informed about emerging trends, businesses can navigate the complexities of pricing and achieve long-term success.

Wrapping Up

Pricing is a multifaceted discipline that requires a holistic approach. By considering various factors such as costs, customer value, competition, and market dynamics, businesses can develop effective pricing strategies that drive revenue and profitability.

The best way to approach pricing is a holistic approach. A holistic pricing approach involves integrating different pricing strategies and considering their interdependencies. By combining elements of cost-based, value-based, competition-based, and psychological pricing, businesses can create a comprehensive framework that maximises pricing effectiveness. This approach ensures that pricing decisions are aligned with overall business objectives and customer expectations.

If you wish to learn about more management concepts such as pricing, a comprehensive leadership program can definitely help. IIM Lucknow’s Senior Management Programme offered in collaboration with Imarticus Learning can help you become a successful senior management professional.

Frequently Asked Questions

How do I determine the right pricing strategy for my business?

The optimal pricing strategy depends on various factors like your product/service, target market, competition, and business goals. Conduct thorough market research, analyse your costs, and understand customer value perception. Consider a combination of cost-based, value-based, and competition-based strategies.

What is the role of psychology in pricing?

Psychology plays a significant role in pricing. Techniques like odd-even pricing, premium pricing, and price anchoring can influence consumer perception. Understanding how customers perceive value and make purchasing decisions is crucial for effective pricing.

How can I measure the success of my pricing strategy?

Key performance indicators (KPIs) like revenue, profit margin, customer acquisition cost, and customer lifetime value can help measure pricing success. Monitor sales data, customer feedback, and competitor pricing to assess the effectiveness of your strategy. Make data-driven adjustments as needed.

How often should I review and adjust my prices?

Regular price reviews are essential. Monitor market conditions, competitor actions, and customer behaviour. Adjust prices as needed to optimise revenue and profitability. Consider seasonal fluctuations, economic trends, and product lifecycle stages when determining review frequency.

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Amazon Pricing Strategy: How to Price a Product in 2024

Brian Connolly

May 12, 2024

Table of Contents

1. understand your profit margin, 2. price competitively , 3. differentiate your product, 4. a/b test different prices, 5. price products above amazon’s free shipping minimum , 6. use “charm pricing”, 7. set a business price, 8. provide discounts using coupons.

Every seller’s goal on Amazon is to make as many sales as possible. That’s why an Amazon pricing strategy is so key.

There are so many factors that influence a customer to purchase your product:

• Where your products rank among keyword search results
• Your review count and rating
• Whether your listing features quality images and informational copy
• Shipping speed
• Your product’s price 

Having the proper Amazon pricing strategy for your private label brand is crucial. With the private label method, you’re not competing for the Buy Box as you would using retail arbitrage or wholesale methods, but you are competing with the other products within the search results. 

• Priced too high, your product may not entice customers—they’ll opt for your competitors’ relative affordability.
• Price your product too low, and you may start a pricing war with your competitors—sending both the value of your product niche and your own profitability on a downward spiral. 

So, how do you choose the perfect price for your product?

There’s no one-size-fits-all strategy—the right price largely comes down to your product’s quality, your production costs, and what customers are looking for, all of which can vary from your competitors. That said, there are a few data-driven techniques that will help you arrive at the best price for your product.

Creating an Amazon pricing strategy in 2024

When researching the right price for your product, it helps to understand the Amazon marketplace, in terms of both what consumers want and how other sellers (your competition) meet those demands. 

Ecommerce is surging , and more people are shopping online than ever before. In the past year, more U.S. consumers have shopped on Amazon than any other retail outlet—whether online or in-store. And while Amazon shoppers care about finding products listed at the lowest price, more than three-quarters of consumers are willing to spend up to $100 on a single product from Amazon. 

That said, consumers aren’t splurging on $100 items each time they shop on Amazon, a fact which is reflected in Amazon sellers’ average prices.

In 2023, 58% of Amazon sellers priced their products between $16 and $50.

Furthermore, 57% of highly successful sellers (those who have achieved lifetime profits of $500,000 or more) price their products below $30. You don’t need to sell luxury products to make a fortune as an Amazon seller—you just have to optimize your product pricing strategy. 

Here are Jungle Scout’s top methods for pricing Amazon products. 

Watching revenue roll in is great—but only when it covers the cost of sourcing, listing, and shipping your products by a healthy gap. That’s why it’s so important to calculate your profit margin early in the product research phase. Otherwise, you could eventually lose time and money on each sale. 

Profit margin is the percentage of income you keep after all expenses, which include cost of goods sold (COGS), Amazon referral fees, FBA fees , PPC costs, and other expenses. In general, profit margin is calculated with the following formula: 

Profit Margin = ((Sales – Total Expenses) ÷ Revenue) x 100  

We can roughly estimate our profit margin by considering the “Rule of Three.” Assume that the money from each product’s sale will be broken up in the following way:

• 1⁄3 goes toward fees
• 1⁄3 are eaten up by landed costs before it’s even sold (landed costs are what you spend to ship and pay duties, taxes, and fees on your inventory)
• 1⁄3 goes to you as profit. Dividing our profit by the product’s price gives us our profit margin. 

For example, let’s say you price your product at $30. According to the Rule of Three, you can expect to shell out at least $10 in landed costs ($30 divided by 3), plus another $10 in fees, and you’ll profit at least $10.

To determine your profit margin, divide your $10 profit by the sale price of $30. 

$10 ÷ $30 = .33

Finally, multiply by 100 to get a percentage, and you’ve ended up with a profit margin of 33%. Spoiler alert: that’s a great profit margin!

What’s a good profit margin?

Amazon sellers should aim for a profit margin between 25% and 30% for their private label products. For context, 58% of Amazon sellers operate on profit margins above 15%; over one third have profit margins over 20%. The higher, the better: nearly half of those highly successful sellers mentioned above maintain profit margins between 21-50%. 

Achieving a comfortable margin isn’t just great for profitability—it also gives you some built-in wiggle room for your initial advertising spend. Once you’ve optimized your campaigns , these costs should go down—and profits up.

Before sourcing a product from your supplier, you should already have an idea of what you’ll charge for it on Amazon. You need to calculate your landed cost, Amazon fees , inbound shipping fees, storage fees, as well as advertising costs .

Analyze potential products for profitability, demand, and competition , and take all product-related costs into consideration.

Identify your minimum and maximum price

Use your sourcing costs as a reference to calculate your minimum and maximum sales prices. These boundaries will keep your product in competition with similar items. 

Remember: if your prices are too high, customers will buy from your competitors. Price your product too low, and you’ll eat your own profits. 

To avoid the latter, set your minimum price to your breakeven price—that is, the same amount of money it costs to produce it. Let me show you an example. 

Let’s say I’d like to sell steering wheel knobs for boats. I’ll use the one pictured above for product research. It sells for $16.99. Hypothetically, I can source a similar model from my supplier in China for a total of $4.56 per unit in landed costs. 

Calculating fees

Next, I’ll determine potential fees. Using Amazon’s FBA Revenue Calculator , I’ll plug in the exact ASIN of my example steering wheel knob to get accurate weight and size measurements , which can affect Amazon fees. 

I’ll type in the current price of $16.99 under “Amazon Fulfillment,” since I’m an FBA seller . Then I’ll add in $3.56 for product cost. 

At that price point, our projected profit through FBA would be $5.61 per sale, with a profit margin of 33%. Now let’s figure out what our break even price will be, again using the FBA Revenue Calculator. 

In the “Revenue” box in the calculator, play around with different prices until “Net profitability” is about $0.00. That’s the breakeven price—the cheapest we could price our product and still cover production costs (which exclude PPC and other advertising costs.) 

 After a little trial and error, I determined that our breakeven price is around $10.40. Note that you’d never want to actually sell your product at your breakeven price—you won’t make a profit that way! But knowing your minimum will help you from going too low. 

Jungle Scout Extension

Use the Jungle Scout Extension to view a product’s average sale price. This will give you an idea of what your maximum price should be. If you do want to set your price higher than average, you’ll need to justify the hike—which we’ll discuss in technique #3.  

This kind of product has an average price of $26.47. If we look closer, we can see that most are priced below $20, and that the average is skewed high because a couple of these products sells for over $30. 

If we keep our price around $16, we’ll have a healthy profit margin and we’ll stay competitive with most of our competitors.

Build data-backed Amazon pricing strategies.

Leverage Jungle Scout’s industry-leading Amazon intelligence to grow your business.

As a private label brand on Amazon, your goal should be to provide a great value to the customer. Value comes in the form of high product quality at a reasonable price. 

Your goal should be to build a legitimate, unique brand on Amazon versus selling generic products. This creates more perceived value for your product and sets them apart from the competition. It’s a key pillar of your Amazon pricing strategy.

Price new products with no reviews lower at first

If your product is brand new with no reviews , it may be wise to keep your price a dollar or so lower than your lowest-priced competitor. Use this as a short-term strategy until your product begins to gain traction and reviews. 

For example, if the average price point for a similar product is $16.99 – $19.99, try pricing your product at the lower end of that range. You can try $15.99 or $16.95. Just be sure to avoid setting a price that’s significantly lower than the competition, as that could trigger a “price war.”

Here’s what I mean by that: let’s say you price your product at $11.99—well below the $16.99 average price for similar products. Your closest competitor notices your low price and decides to undercut you so they don’t lose sales. Soon, customers won’t pay more than $11 for a similar product, and your other competitors have no choice but to also lower their prices indefinitely. It’s a race to 0% profit margins, and nobody wins.

The last thing you want to do is devalue your product or niche—that harms everyone’s profitability. 

What happens if my competitors aggressively cut their prices?

Entering a price war is a major concern for private label sellers on Amazon. In fact, two thirds of sellers are concerned about increased competition driving prices down. 

Sellers who seek to drive sales through aggressive price-cutting will typically not last long as a seller. They’ll quickly realize that by driving prices down, they’re removing any possible profitability their product had, especially after factoring in PPC costs. 

My advice: Stand your ground. Don’t play along with “race to the bottom” tactics and destroy the product niche you’re selling in. Eventually, those sellers will be phased out when they lose profitability. Stay within your minimum and maximum price and focus on creating a great, optimized listing . 

Monitor your competitor’s price

That said, you’ll want to keep an eye on how your competitors price similar products. Whether you are just starting out doing product research or expanding your current product line, it is important to track your competitors’ products over time to determine the product’s viability. 

Use Product Tracker to track real-time sales, Best Seller Rank , inventory, and Buy Box price. You want to be sure that your competitors’ products are actually selling at a consistent price point, and that you’re not inadvertently entering a price war. 

What price point should I stay in?

We know that as a new seller, you’ll likely have a smaller budget to work with—and that’s ok! But this may limit you in terms of what you can sell. For instance, if you have a small startup budget of $500 to $1,000, you won’t be able to sell products with a $100 price point, as you won’t be able to meet your supplier’s minimum order quantity . 

Not to worry—most sellers list affordably-priced products and are still successful. Here are the most common product price points, according to Amazon sellers:

As you can see, as prices rise, competition decreases. That’s partly because listing expensive products requires more investment into inventory. 

If you have the budget, go for a higher-priced product to reduce the risk of a price war among lower-priced products. 

To justify setting a higher price than your competitors, you need to show customers why your product is worth more than a similar item. 

You can’t just source a competitor’s exact product on Alibaba , slap your logo on it, and expect to sell it at a higher price. You need to consider the additional features, benefits, and/or materials your product offers the customer.

Read customer reviews 

Here’s a simple place to start: Read customer reviews for your competitors’ products to find out how they’re lacking, and improve on those pain points with your own product. 

Can you use better materials in your product? Could you add a feature that improves the customer’s experience? These are the types of competitor-related questions you should ask yourself during product research .

Here’s an example of two products that purport to do the same thing, but are priced quite differently:

As you can see, the support pole on the left is priced almost two and a half times higher than the one on the right. According to Jungle Scout Extension data, it also sells more, even at that higher price. 

Why the difference? Upon further inspection, the support pole on the right is made from a thin plastic material that, according to the many angry reviews, snaps easily. On the other hand, the blue support pole on the left appears to have solved that problem—it’s made out of stronger aluminum. So while Righty is the cheaper option up front, buying it will likely cost the customer more money in the long run, when they inevitably purchase a sturdier replacement—like Lefty. 

In this case, the seller of the blue support pole can justify the higher price point with the material quality differential. Without ditching the flimsy materials, there’s no way customers would purchase their product at a higher price. 

Moral of the story: you can’t sell the same old product and expect a higher sale price. 

A great way to figure out which price your product performs better at is to run a split test, or A/B test. A/B price testing is simple: list your product at two different prices for a set amount of time, then compare its performance. In this way, running a split test allows you to make data-driven decisions on pricing instead of just guessing.

For example, let’s say you have a product priced at $24.99, but you want to know if it’ll still sell well at a higher price point. For two weeks, track your product’s sales performance at $24.99. Then for another two weeks, list it at $26.95. At the end of those four weeks, take stock of which period of time saw the highest sales. If you sold more at the higher price, keep it!  

Amazon Prime members receive free shipping on all Prime-eligible products—but what about buyers who are not Prime members? 

Non-Prime members in the US pay for shipping on all orders below $25. That shipping cost can add an additional $5-10 to the customer’s order, which could deter purchasing. If you price your products above that $25 threshold, you may experience a higher conversion rate among non-Prime customers. 

Let’s use the same product examples as before to see how this works:

Using the same example as earlier, the poles on the left are priced at $59.99 and the ones on the right are priced at $24.99, just one cent below that free shipping threshold.

Below the listed price, you’ll see that the shipping options differ. The $59.99 product is eligible for “FREE delivery Sat, Jul 8” because it is priced above Amazon’s $25 minimum. The other product will only ship for free if it’s part of an order “over $25 shipped by Amazon.” 

So if I ordered the product on the right, I’d either have to pay for shipping or tack on another item to qualify for free shipping, whereas shipping the product on the left is already free. So, the brand on the right should bump their price up by one cent (or 25.99, see the next section!)

Charm pricing, also known as psychological pricing , is the practice of purposely pricing products in a way that influences customers’ purchase behavior. This is a great way to enhance your Amazon pricing strategy.

For instance, try pricing your product at $19.99 vs. $20. At $19.99, the product seems like a better deal, even though it’s literally one cent cheaper. 

If you’re selling a product that’s more of an “impulse purchase,” like a novelty item, using this pricing strategy may help increase your conversions as the customer may feel like they’re getting some kind of deal. 

Here’s an example of what I’d call an “impulse purchase.” This waffle maker comes in a rainbow of colors, is highly rated, and is quite affordable. But it’s tiny—well outside conventional notions of waffle size—and is therefore more of a novelty than a staple kitchen gadget. 

You can use A/B testing to see if charm pricing works for your product. Try prices ending in .99, .95, or .90 and see if they perform better than a round number. 

By contrast, if you’ve listed an expensive or luxurious product, you could try going for prestige pricing. Luxury products tend to sell at prices ending in .00—think Apple gadgets and designer handbags . A round-number price may work better for your product, so try A/B testing prices ending in zeroes.

If you didn’t already know, Amazon allows businesses to register for a business buyer account . This allows commercial customers to purchase products for their business tax-free, as well as reap other benefits such as bulk discounts. 

As a seller, you can set business prices for your products that only Amazon Business-registered buyers will see. You can offer discounts and bulk prices, encouraging large orders from commercial clients.

Here’s what an Amazon Business buyer sees when you set a business price. 

To set up a business price in Seller Central, go to “Manage Inventory,” then “Preferences.

Make sure “Business Price” is checked.

Now, you should see the option to set a business price and quantity discount in your “Manage Inventory” section. 

Set your desired price and quantity, and you’re good to go. 

Adding a coupon to a new Amazon listing is a great way to get some initial sales rolling. Within keyword search results, Amazon will display a bright, eye-catching coupon offer underneath your price to entice customers. This can increase your listing’s click-through rate and conversions. 

A great way to use coupons on Amazon is to actually raise your price slightly, then add the coupon to your listing. That way, customers still feel like they’re getting a great deal without discounting your product too much. Psychologically, adding a discount via coupon can be more effective than just lowering your price without a coupon. 

It’s easy to set up a coupon through Seller Central. Go to “Advertising,” then “Coupons.” Click “Create a new coupon” and complete the steps that follow. You’ll be asked to enter the product you want to discount, choose your discount type (Money Off or Percentage Off), and a time frame to run the promotional pricing.

Optimize your Amazon pricing strategy sooner rather than later 

Are you missing out on higher profits? Put your pricing strategy to the test using the techniques listed above to find out! Amazon is an extremely competitive marketplace, and what works for your competitors may not work for you. Be thorough with price testing and you’ll eventually land on a price point that allows your product to make consistent sales. 

Do you have any other questions or tips regarding pricing strategies on Amazon? Let us know in the comments below!

Ecommerce Expert & Writer at Jungle Scout

Brian Connolly is an Amazon seller, ecommerce expert, and writer for Jungle Scout. He lives in the New Jersey Shore area with his wife and cat. When he isn’t writing advice online for aspiring and experienced Amazon sellers for Jungle Scout, he spends his free time boating, fishing, and selling boating-themed items on his Amazon business.

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Case study: School district works to give employees a supportive health care experience

With UnitedHealthcare, Minneapolis Public Schools has experienced a higher utilization of benefits, quicker resolution of issues and an improved health care experience for employees.

Building healthier workplaces together

Video transcript

[UPBEAT MUSIC PLAYING IN THE BACKGROUND]

[Text On Screen – Building healthier workplaces together]

[VIDEO OF SCENES FROM SCHOOL, STUDENTS TAKING AN EXAM, A SCHOOLBUS ARRIVING AT THE SCHOOL BUILDING, TEACHERS IN THE CLASSROOM, CHILDREN ARRIVING TO SCHOOL]

[LOGO: UNITEDHEALTHCARE]

[Text On Screen – Organization: Minneapolis Public Schools, Location: Minneapolis, MN, Industry: K-12 Education, Number of employees: 6,300]

[SOFTER MUSIC PLAYING IN THE BACKGROUND]

[VIDEO OF AN AERIAL VIEW OF MPS BUILDING WITH MINNEAPOLIS SKYLINE BEHIND IT]

[PETER RONZA SPEAKING ON SCREEN]

[Text On Screen – Peter Ronza, Director of Total Compensation Minneapolis Public Schools]

PETER RONZA: People are sometimes shocked at what goes into running this. The school district currently deploys around 6,300 benefits eligible employees. Roughly 50 percent are what we would call front serving. They're in the schools, they're providing the education. And roughly 50 percent are providing those support functions.

[VIDEO OF A TEACHER IN A CLASSROOM, TRANSITIONING TO SUPPORT STAFF TALKING IN THE OFFICE]

Our demographics are expansive. So we want to make sure that our program is second to none so that when those employees need their health care, they have it.

[VIDEO OF IBRAHIMA DIOP WORKING IN HIS OFFICE]

[IBRAHIMA DIOP SPEAKING ON SCREEN]

[Text On Screen – Ibrahima Diop, Chief of Finance and Operations, Minneapolis Public Schools]

IBRAHIMA DIOP: It's about balancing between the well-being of our staff and cost. And it's much easier to keep doing what you've always done.

[VIDEO OF IBRAHIMA DIOP TALKING TO MPS STAFF]

When we felt that we needed to make a change, what company is giving us the best value?

[VIDEO OF SCENES FROM A SCHOOL, SCHOOL BUS, STUDENTS ARRIVING, TEACHERS IN THE CLASSROOM]

I am proud to say that we were able to switch to UnitedHealthcare because we can provide what we want to provide to our staff, our community, and attract great candidates for the vacancies that we have.

PETER RONZA VOICEOVER: What has been incredibly impressive is the dedicated staff that has been given to us.

[VIDEO OF JAMES BENNETT TALKING TO A COLLEAGUE]

[JAMES BENNETT SPEAKING ON SCREEN]

[Text On Screen – James Bennett, Dedicated Service Account Manager, UnitedHealthcare]

JAMES BENNETT: My role is to work through issues with the employees, answering questions, assisting employees with anything from claims, to eligibility, to coverage. You really have to really like what you're doing and you have to really care about the individuals that you are providing services for.

[VIDEO OF PETER RONZA AND JAMES BENNETT CHATTING, TRANSITIONING TO PETER RONZA CHATTING WITH COURTNEY AYERS]

PETER RONZA: We're very grateful for James. His knowledge and accessibility to the resources of UnitedHealthcare not only help us, as administrators, when we may have an issue or a question, they help our employees greatly.

[COURTNEY AYERS SPEAKING ON SCREEN]

[Text On Screen – Courtney Ayers, Wellness Coordinator, Minneapolis Public Schools]

COURTNEY AYERS: UnitedHealthcare is super helpful when trying to send out communications because they can see the data of our claims and what our employees are going in for and using their health plan for.

[VIDEO OF COURTNEY AYERS WORKING AT HER COMPUTER, TRANSITIONING TO A PHOTOGRAPHS OF HER FAMILY AND BABY]

We recently just had our first child, and I was very grateful to have access to our UnitedHealthcare benefits. It was so helpful to be able to have a large network, being able to just use their apps, having access to our on-site account manager, to have that relationship.

[VIDEO OF COURTNEY AYERS WORKING AT HER COMPUTER]

When you have access to quality healthcare, that makes you feel like your employer cares about you. You're not just an employee. You are a mom, you have a family. It’s just awesome.

[VIDEO OF A TEACHER IN A CLASSROOM]

TEACHER SPEAKING TO HER STUDENTS: The trick I use is you put your finger on the angle, don't touch a side, wherever your finger ends up, that's your opposite side.

[VIDEO OF SCENES FROM A SCHOOL, INCLUDING A STUDENT COMPLETING A LESSON, TEACHERS IN THE CLASSROOM]

PETER RONZA: Since bringing on UnitedHealthcare, it has enabled our employees to make important healthcare decisions, without complexity, and they can concentrate on then doing their job of providing an education to our students.

TEACHER SPEAKING TO A STUDENT: Oh, Jaleya, way too kind.

[VIDEO OF AN AERIAL VIEW OF MSP BUILDING WITH MINNEAPOLIS SKYLINE BEHIND IT]

[LOGO: UNITED HEALTHCARE, THERE FOR WHAT MATTERS™]

[Text On Screen – Uhc.om/employer. This case study is true. Results will vary based on client specific demographics and plan design. All trademarks are the property of their respective owners. Administrative services provided by UnitedHealthcare Company in NJ, and UnitedHealthcare Insurance Company of New York in NY. ©2024 United HealthCare Services, Inc. All Rights Reserved. EI#########]

[END MUSIC]

Around 6,300 benefits-eligible teachers, administrators and other staff members fill the 87 Minneapolis Public Schools (MPS) buildings throughout the metro area — which has a rich history dating back to 1834 when the first school was founded.

Funded by taxpayer dollars, MPS recognized that working with a carrier capable of providing quality benefits and offering hands-on support was vital to offering a more competitive and enticing compensation package.

That’s what led MPS to switch to UnitedHealthcare, with Peter Ronza, director of total compensation for MPS, indicating that the relationship and level of service provided by UnitedHealthcare has been “flawless and unmatched” compared to other vendors he’s worked with.

Designing benefits that support all MPS employees — from teachers and custodians to administrators and food service personnel — is where the strategic guidance of UnitedHealthcare has made a difference. 

Offering employees a competitive benefits package

$33.7M in total savings generated from UnitedHealthcare programs beyond contracted discounts 1

“The collaboration with UnitedHealthcare has enabled us to do even more than we were doing before,” Ronza says. “We’ve come a very long way, not only bringing our benefits to where they should be but doing so in a fiscally responsible way.”

“You have to go through a prioritization phase by making sure that the student is at the center of the decisions that we make,” says Ibrahima Diop, chief of finance and operations for MPS.

For MPS, that meant offering employees an expansive provider network and a generous suite of benefits and programs through UnitedHealthcare, along with an on-site clinic to help make health care more accessible and affordable, especially for its lower-paid employees.

Through this clinic, employees and their covered dependents can receive primary care services, labs and medications for common conditions, while also receiving referrals to UnitedHealthcare network providers or clinical programs as needed.

“The more employees don’t have to worry about their health, the more they can concentrate at work,” Ronza says.

Engaging employees for better health plan utilization

Offering benefits is one thing, but getting employees to understand how to use them is another. “Health care is really useless unless employees know how to use it,” Ronza says.

With guidance from UnitedHealthcare, MPS has been — and continues to be — able to identify opportunities to better engage and educate its employees about the health benefits available to them.

This includes looking at claims data and utilization patterns to help inform wellness initiatives and targeted employee communications. For instance, a multi-touch email and direct mail campaign promoting preventive care led by UnitedHealthcare, in addition to the wellness activities led by MPS, likely contributed to the nearly 3-point increase in the percentage of adults who received a wellness visit in 2023. 2

Delivering a more supportive health care experience

473 the number of members assisted by UnitedHealthcare on-site service account manager 3

Understanding how much the employee experience matters to MPS, UnitedHealthcare assigned a dedicated on-site service account manager, James Bennett, to help employees and their families understand their coverage and benefits information and resolve billing or claims issues.

“James has been a huge benefit,” Ronza says. “UnitedHealthcare has allowed our employees to have somebody they can talk to, who can look at things we can’t look at and offer support.”

In one situation, an MPS employee was undergoing a transplant and received numerous bills for various appointments, tests and more. James brought clarity, helping the employee more effectively navigate their health care journey.

This level of service has also made Ronza’s job easier and strengthened the relationship between MPS and UnitedHealthcare.

“I’ve worked with a variety of health benefit vendors throughout the course of my career, but the experience with UnitedHealthcare and their service has been flawless and unmatched.”

How to Compare Competitors Pricing Smartly

• What Challenges May Occur With Competitive Pricing Analysis?

What is Competitive Pricing and Price Comparison Analysis?

Competitive pricing analysis is an evaluation of the consumers' reaction to new prices using research based on historical data or polls. Most often, price analysis examines customers' responses to a price without considering the costs and potential profits for the business. After an initial price analysis, the pricing analyst team uses the findings along with the other pricing factors to craft an optimal offering.

A competitive pricing strategy is a pricing policy based on the use of competitors’ prices as a benchmark to set prices. This type of strategy is often referred to as competition-based or competitor-based pricing. In most cases, the business comes to a competitive pricing strategy after a cost-plus approach turns out to be no longer relevant.  

What Is the Difference between Price Comparison Analysis vs. Competitive Pricing Analysis?

These terms are distinct and not interchangeable. A competitive pricing analysis focuses specifically on evaluating your competitors' pricing strategies and determining how to set your product's price to maintain competitiveness. In contrast, "price comparison analysis" is a broader term encompassing considerations beyond competitors' prices. It takes into account factors such as consumer behavior and their willingness to pay. Essentially, a competitive pricing analysis is often a component within the broader framework of a price comparison analysis.

How to Comprehend Competitor Pricing Data?

When determining the price for a product or service, businesses face three options: setting it below, at, or above the competition costs.

Opting for above-the-competition pricing entails creating an environment justifying the premium, such as offering generous payment terms or additional features. In this scenario, the business competes on quality rather than price to justify charging a premium.

A business might choose to set the price below the market, potentially incurring a loss, with the expectation that customers will purchase other products from them once exposed to additional offerings. The profitability of these other products can then offset the economic loss incurred on the below-market-priced product, a strategy commonly known as a loss leader.

Alternatively, a business can opt to charge the same price as its competitors or adhere to the prevailing market price. Despite selling an equivalent product at an equivalent price, the business may still seek to differentiate itself through strategic marketing efforts.

Why Is a Competitive Pricing Strategy Important for Price Comparison Analysis?

According to 2022 Statista research , more than 82% of buyers compare the offers of several stores in search of a better bargain. Retailers who can collect and analyze market data, map their position against competitors, and offer optimal prices are the companies that catch these buyers’ eyes first and foremost.

Competitive pricing is a strategy that helps businesses attract more customers by optimizing prices using competitor products and pricing data. A successful pricing analysis can significantly increase sales, result in better cooperation with suppliers, and boost revenue.

What Are the Benefits of Competitive Pricing Analysis?

There are several benefits of competitive pricing analysis, which include:

Increased profitability: Competitive pricing analysis can help businesses identify opportunities to increase their prices without losing market share. By understanding the prices of their competitors, businesses can compare competitive price and adjust their own policies to make it both attractive and profitable.

A better understanding of the market: Competitive pricing analysis allows businesses to gain a better understanding of their market and competitors. This understanding can help businesses develop more effective marketing and sales strategies, and identify areas where they can differentiate themselves from competitors.

Improved product positioning: Competitive pricing analysis can help businesses to compare competitive price and determine the best pricing strategy for their products and services. This can include identifying the optimal price points for different customer segments and determining the right price to position the product as a premium or value offering.

Faster response to market changes: By regularly monitoring competitor pricing and market trends, businesses can respond quickly to changes in the market. This can help them stay ahead of the competition and adapt to changing customer needs.

Better customer acquisition and retention: By offering competitive prices, businesses can attract new customers and retain existing ones. Customers are often price-sensitive, and offering competitive prices can be a critical factor in choosing one business over another.

Overall, pricing strategies based on the analysis of competitor prices can help businesses make better pricing decisions, increase profitability, and gain a competitive edge in their market. The next question is how to compare competitors pricing with accuracy and efficiency.  

1. Determine Quality of Competitor Pricing Data

Complete and accurate data is crucial to analyze competitor costs. We surveyed our clients from several different countries to determine the following criteria as crucial to high-quality data:

• Depth of comparisons. Retailers need to take everything into account regarding product information: color, technical characteristics, and other product attributes are vital for high-quality data and are also not available on product cards.
• Percentage of errors. Most data matching is done using automation and is prone to a degree of error as a result. Manual comparison enhances automatic solutions and ensures better results.
• The ratio of planned and delivered data. Data can be incomplete since the algorithm may lack information that is not available on the competitor’s website. This means that the amount of data estimated before collection may exceed the amount of usable data that is delivered.
• Constantly updated data. Retailers should use the data collected no later than two hours before repricing.
• Data delivery time. Product and pricing data should be delivered to the retailer’s internal system every 20-30 minutes to make comparison analysis more effective.

2. Define Data Parameters

Next, the company must determine price analysis techniques and parameters. Just a few competitive pricing graph examples:  

• Price Index. This competitive pricing graph displays the retailer’s position in the market for a given product or class of products over a certain time. The price index visualizes how market dynamics affect sales and delivers data on prices listed by competitors.
• Competitors’ promo activity. In the same study, Forrester Consulting indicated that at least a third of customers are trying to find discounts before buying an item. This means it is essential to continuously monitor discounts and sales of others in the industry to optimize promotional offers.
• Product availability. By monitoring competitors and their product stocks, retailers can adjust their prices based on the supply of an item or class of items on the market at a given point in time.  

Boost your pricing with 98% accurate product matchings by Competera

Polina Oleksiuk, Competera

Many retailers think competitive pricing consists only of peer group analysis. However, competitive price analysis also requires a thorough study of internal company data (i.e. historical data) in addition to data revolving around competitors. It is impossible to set optimal prices and succeed with competition-driven pricing  without having a profound knowledge of the market and your position in it as a retailer.

The abovementioned parameters are just a small part of the competitor price data that can be monitored by retailers. Depending on business goals and logic and rules used while repricing, you can add another relevant competitive pricing graph, e.g. stock level, sales volume, eCommerce traffic, promotions, etc. 

3. Categorize Competitors

Once retailers have thorough data about their competitors, they need to classify competitors according to several factors including but not limited to the target audience and product quality. There are three main categories that market competition can be divided into:

• Primary — direct competitors who pursue the same buyer category.
• Secondary — competitors who focus on upscale/downscale versions of the retailer’s assortment. Analyzing secondary-level competitors allows businesses to develop a broader idea of their place in the market and boost their strategic skills accordingly.
• Tertiary — companies selling products that are indirectly relevant to those of the retailer. Analyzing this level of competition helps retailers willing to expand their assortment.  

Categorizing competitors makes market analysis less time-consuming and allows retailers to focus their attention in the right direction in terms of competition.

A data-driven price analysis techniques could also be applied while defining and categorizing the competitors. If you are a mono-brand retailer or sell a very limited number of SKUs, you'd probably be able to categorize competitors manually. But for large sellers with thousands of products offered across different pricing zones, the smart competitors' analysis has no alternative. 

Beyond that, each product's competitive landscape is unstable as other retailers change their strategy and new players enter the market. What it means is that competitive analysis and categorization are ongoing processes that should be done more or less often depending on the product type or market segment.

To cover this need, Competera offers a so-called 'True competitors' competitive pricing graph enabling retailers to find the real impact every player has on particular SKU sales by analyzing retailers' and competitive historical data.   

4. Perform a Smart Pricing Analysis  

It could be easily done by using machine-based pricing tools . Modern retail companies are increasingly leaning towards algorithms to collect and analyze data. Machines have significant benefits over manual approaches:

• Improved accuracy
• Can process large amounts of complex data
• Scheduled delivery
• Provide precise pricing recommendations .  

Arguably, the most important aspect of implementing automation into the price analysis techniques is that it allows retail teams to switch from routine tasks to strategic tasks regarding pricing strategy and price management .

When it comes to automated price analysis techniques, most retailers are afraid of extra costs. The fact is that these solutions are instead a means of cost reduction. For example, Wiggle CRC managed not only to reduce the repricing time by 50% but also to get a full view of the market at lower costs . The latter was achieved mainly through monitoring marketplaces instead of competitors' websites. 

If you want to know not just how to compare competitors pricing, but want to get tips on reducing competitive data monitoring costs, watch the video below. 

5. Track Competitors’ Online Activity

To have a better understanding of the market, retailers should monitor their competitors and their platforms such as official websites and social media accounts. There are several aspects businesses need to examine:

• Product descriptions
• Visual presentation
• Social media activity
• If the websites and social media accounts are mobile-friendly
• Customer support and feedback options
• Response rate  

In addition, retailers can sign up for official newsletters and become a followers of their competitors on social media. Businesses need to understand what attracts clients to their competitors’ products.

These are several examples of how retailers can benefit from open-source information. The more key points they identify and analyze, the better their information will be to base important pricing decisions on.

What Challenges May Occur with Competitive Pricing Analysis?

Businesses encounter various challenges in employing competitive pricing analysis. A significant hurdle involves ensuring the accuracy of the analyzed data, which demands meticulous collection and examination from multiple sources, often a time-consuming and costly process prone to errors or inconsistencies. Limited data availability poses another obstacle, particularly for smaller businesses striving to gather ample information on competitors' pricing strategies, hampering their ability to compete with larger counterparts. 

Identifying suitable competitors for analysis, especially in saturated markets, can be daunting. Merely examining competitors' prices in isolation may mislead, necessitating a comprehensive evaluation considering factors like product quality, customer service, and marketing strategies. Moreover, the dynamic nature of market conditions presents a challenge, demanding businesses to swiftly adapt to changes in competitors' pricing strategies for sustained competitiveness. While price competition solutions offer valuable insights, businesses must be cognizant of these challenges, taking measures such as refining data processes, investing in data acquisition tools, and considering broader market contexts to enhance the accuracy and utility of the analysis.

Creating a competitive pricing strategy from scratch is no easy feat. Many factors revolving around data, such as parameters and quality, must be carefully considered. Companies must decide whether they will utilize automation within their pricing process and if so, to what extent. Lastly, they also must thoroughly study their competitors to obtain a better understanding of their place in the market to excel in it truly.

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The Use of Big Data Analytics in E-commerce Marketing: A Case Study of Morocco

• Conference paper
• First Online: 18 August 2024
• Cite this conference paper

• El Yousfi Hicham 24 ,
• Zrida Abdelilah 24 ,
• Najih Imane 24 &
• Imane Abdelghaffar 24  

Part of the book series: Information Systems Engineering and Management ((ISEM,volume 6))

Included in the following conference series:

• The International Workshop on Big Data and Business Intelligence

Big data analytics in e-commerce marketing is an evolving concept that alludes to injecting big data into e-commerce platforms’ ecosystem to gain a competitive advantage. The concept of Big data analytics is defined by the three V’s: high Variety, High Volume, and High Velocity according to Gartner Inc. that underscores the importance of leveraging data-driven insights in e-commerce marketing in Morocco, by effectively managing large volumes of data, processing information at high speeds, and handling diverse data types, Moroccan e-commerce businesses can unlock valuable insights, drive targeted marketing efforts, and achieve competitive advantages in the rapidly evolving digital marketplace.

This paper explores the utilization of big data analytics in e-commerce marketing, with a specific focus on the Moroccan market. In recent years, the e-commerce landscape in Morocco has witnessed significant growth, driven by increasing internet penetration and consumer adoption of digital technologies. As e-commerce businesses strive to remain competitive in this evolving market, the integration of big data analytics into marketing strategies has emerged as a crucial driver of success.

Understanding the motivations provides insight into this study's purpose, scope, and potential impact on both academic research and practical applications in the Moroccan e-commerce sector, despite the growing importance of e-commerce and big data analytics worldwide, there remains a scarcity of research focusing specifically on the Moroccan market. To adopt the technology of Big Data and to foster innovation and competitiveness in the sector, This study presents a case study analysis of the application of big data analytics in e-commerce marketing in Morocco, the complexity of the system increases, so too does the need for sophisticated information drawing on empirical data and theoretical frameworks. A comprehensive examination of a real-world e-commerce marketing campaign highlights the benefits, challenges, and implications of leveraging big data analytics for marketing purposes in the Moroccan context. The findings shed light on the effectiveness of big data analytics in enhancing customer segmentation, personalizing marketing communications, and optimizing marketing ROI. Furthermore, the study discusses the broader implications of these findings for e-commerce businesses in Morocco, offering insights into the future of data-driven marketing strategies in the region.

The article contributes to the academic literature by providing empirical data and theoretical insights specific to the Moroccan context, which can be a valuable resource for scholars, researchers, and students interested in e-commerce, big data analytics, and emerging markets.

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Hicham, E.Y., Abdelilah, Z., Imane, N., Abdelghaffar, I. (2024). The Use of Big Data Analytics in E-commerce Marketing: A Case Study of Morocco. In: Farhaoui, Y. (eds) Artificial Intelligence, Big Data, IOT and Block Chain in Healthcare: From Concepts to Applications. BDBI 2024. Information Systems Engineering and Management, vol 6. Springer, Cham. https://doi.org/10.1007/978-3-031-65018-5_40

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