What strategy do you currently have in place to price your products or services? Do you implement different strategies to test and see which one performs better?
In business, if you price your products and services too high, you could be missing out on sales. If you set prices too low, you could be losing out on revenue. That balancing act is crucial to the success and longevity of your company. But if you don’t know where to start, it can be overwhelming.
Generic pricing formulas can be useful, but there are competitive pricing tools that can help you streamline the process. This more inclusive, comprehensive pricing system for each of the products or services you have available can give you a more efficient process.
If you want to learn how to set the right competitive prices for your business, learn how to analyze your competitors’ pricing, and increase your revenue, this article is a must-read!
What is Competitive Pricing?
Choosing the right price point that takes advantage of your specific products or services in your industry based on your direct competition is competitive pricing. You no doubt have competition in your industry. As more companies move online, marketplaces are becoming saturated with the increased number of options every time they try to locate their desired items.
Take a moment to search for other businesses offering the same or very similar products and services as you, and compare their prices to yours by performing your competitive pricing analysis. Take all shipping and processing fees into consideration, and see how you stack up against them.
If you were to view this as a customer, what factors do you think might sway them to choose your company over theirs? If your competitors’ pricing is significantly lower, do you know why and how to reduce costs to be more appealing to a potential customer?
What are Competitive Pricing Tools?
Software designed to provide competitive pricing can equip you with the tools you need to create an automated pricing system for every new product or service you introduce. Automating this calculation process will help you reduce the risk of error and save you and your team time when you add new items to your offerings.
Successful competitive pricing tools will:
- Utilize proven strategies
- Understand your customers’ behavior
- Be dynamic and adjustable
- Take your competition into consideration
- Obtain fresh market research
- Know your position in the market
Competitive Pricing for Products
There are many factors to consider when pricing your products, but you must consider certain factors. The more you understand these factors, the easier it will be to create a pricing strategy that works!
- Understand Your Customer: Implement market research like surveys, email promotions, or hire a third-party consulting firm to conduct a research project. This process can help you identify which customers to target with different strategies and how to price your products accordingly.
- Know Your Costs: During the pricing process, you need to have a comprehensive understanding of all the costs associated with getting your products into your possession and then to your buyers. This pricing includes raw materials, labor, rent, shipping, etc.
- Identify Your Revenue Goal: How much profit do you want your business to make? Factor in your costs for producing, marketing, and selling the product and make sure to update this for each product you offer.
- Research Your Competition: Your customers are most likely shopping around and looking at your competition, so you should too! Compare your products and pricing to make sure you can keep up with whatever they’re doing.
- Monitor Your Market: Every market is constantly shifting to keep up with changes in technology and human behavior. The more closely you track these changes, the easier it will be to update when needed.
The top three competitive pricing tools to help you effectively price your products:
- Skuuudle: Allows you to price right by directly and regularly tracking your competition.
- Prisync: Boasts competitor price tracking and monitoring software.
- Pricefy: Allows you to monitor your competitor’s prices on autopilot!
Pricing for Services
Unlike products, services are much more difficult to price because they are unique to the company and are harder to compare to similar companies. Whether you’re a sole proprietorship or a mid-to-large-size business with hundreds of employees, you need to understand the best way to price your services.
- The “Cost-Plus” Method: As with all pricing strategies, you have to first identify all your costs associated with the service, including direct, indirect, and fixed costs, and then add your desired profit amount.
- Competitor Research: What other companies in your region offer the same or similar services, and what do they charge? Visit their websites, call as a customer, or review any published data.
- Perceived Value: You no doubt care about your business and the service you provide to your customers. Make it clear to your customers what you will do for them, implement creative marketing copy, and clarify how much value your service will provide!
The top three competitive pricing tools to help you effectively price your services:
- Price Manager: Track daily prices, assortment, and implement marketplace or shopping engine scans.
- Pros: Drive revenue and margin growth through this price optimization and management software.
- Price FX: Dynamic pricing software that will grow your profitability.
Why Do You Need a Pricing Strategy?
Learning how to price your products or services effectively has a lot to do with your companies competitive intelligence and the competitive pricing tools you use to understand your target audience. Each group of people, or demographic, has a specific marketing language that works for them, but if you don’t know who they are, it will be almost impossible to speak to them!
Data is essential in businesses, and with more customers online now than ever, it’s easy to pull data and customer lists and utilize information to create marketing strategies that work!
Do you want to learn more about competitive research and analysis using SEMrush? [Sign-up] for Jimmy Newson’s webinar called “The Complete Competitive Research for Your Business “Workshop!”
Are you interested in learning more about business consulting and advertising services and stay up to date with industry trends? Check out these other insightful articles on Jimmy Newson’s Blog!