Competition has always been one of the most important factors in business. Competition-based pricing allows companies to get the most out of pricing while gaining a competitive advantage. Further is the story of how it can happen.
Knowing how to use the pricing for the benefit of business can mean a situation between life and death in the context of business. In such a case, competition-based or market-based pricing offers a range of approaches to turn pricing into a promising business strategy. Here, we’d explore the process in detail and see how it benefits retail.
Competitive-based strategy in a nutshell
The definition of a competitive-based pricing strategy correlates to the approach directed at boosting sales and gaining a competitive advantage. Often smart pricing can achieve such objectives, a strategy that emphasizes doing everything to differentiate oneself from competitors. Considering the rapid market changes, competitive-based pricing can be a key tool to deal with turbulence.
To make the most of market-driven pricing, companies often determine the type of prices that will meet the demand of the market, appeal to consumers, and compete with rivals. The main part of competitive-based pricing is about direct work with competitors’ prices and the factors that make them appeal to customers.
The key role of competitive-based pricing
The primary role of competitive-based pricing is to distinguish a company from competitors and reach pricing that creates a win-win situation with everyone involved. Considering the growing level of competition in retail, market-based pricing gains even more traction. The approach relies on analyzing competitors’ prices and doing everything to preserve the customers’ flow.
The evidence points out that only 30 percent of competitors with similar products and prices have a distinct impact on your company. It means that competition is a factor that one cannot afford to avoid. Yet, working with competition-based pricing can be tough. To get something out of it, firms need to work with massive data and SKUs. Most importantly, working with correct data is vital, and the contrasting can lead to massive failures.
What competitive-based strategy can bring to retail?
Competitive-based pricing can result in various benefits. However, such advantages are possible when the method is applied properly and in the right conditions. Yet, one can speak about the following benefits:
- Taking advantage of competitors.
- Flexible price points.
- Meeting the demand of consumers.
- Boost in sales.
- Revenue growth.
To ensure greater advantages, companies can use additional tools serving as catalyzers. For example, there is advanced software making pricing strategies much more effective. Consider such an instrument as product matching software and the benefits it can bring to any given business.
Adopting competitive-based pricing
When it comes to implementing market-based pricing in a real setting, there are particular moments to consider. In terms of how the strategy is often used with prices, deals, and other key features that can be used to benchmark production rates. In terms of why competitive-based pricing works with relevant market position and properly aligned business objectives.
The other part of the strategy’s implementation is about working with data. As mentioned before, market-based pricing coupled with advanced software works with massive volumes of data. However, it is crucial to get proper access to certain data and ensure that the information is properly processed and analyzed. Along with different approaches linked to pricing, these best pricing strategies can help in various situations.
What proper application of competitive-based can result in?
Nothing speaks about pricing strategy best as practical examples of how competitive pricing was used. The behemoths of industries like Pepsi and Coca-Cola have been using the method for decades. To illustrate, when the market has several key players, often, the price is something that distinguishes them. Pepsi and Coca-Cola offer similar products, of similar quality and other features. Respectively, in such situations, lowering prices is the primary approach that boosts sales and gets customers from competitors.
Speaking in practical terms, Coca-Cola proves the point mentioned above because it managed to increase its revenue through the high volumes of production and yet with a lower price. Yet, setting higher prices can be as effective as lowering them. If a company wants to show the value of its product, lowering prices won’t bring too much competitive advantage. The evidence shows that consumers are often willing to spend more on products with a unique value.
Why consider competitive-based pricing at all?
Competitive-based pricing is a type of strategy companies cannot avoid. Why? Because modern means of retail boost both competition and demand. It is no secret that more and more people shop online. It means they can check more stores, products, and prices. In addition, experts indicate that about 80 percent of customers shopping online always double-check prices across competitors. As a result, a company needs to meet the demand and consider the rising competition.
Another key factor correlating to market-based pricing directly depends on the several kinds of customers. First, some loyal clients have had an experience of shopping at your store. Second, some new customers can potentially shop at your store. In such a context, competitive-based works attract both. Attractive prices can help you distinguish your product from the ones of competitors. Besides, lower prices can help keep the loyalty of customers who know your brand.
The final reason for using a competitive-based pricing strategy is a necessity. Imagine your company entering a market where all the firms use competitive pricing. The rivals can use market-based pricing to drive down the prices, thus pushing you from the market. If you won’t do the same and lower prices effectively, you won’t stand a chance and will fail.
Further recommendations to follow
There are several things to remember about competitive-based pricing. First, it works with data and competition. Second, it is challenging and shouldn’t be underestimated. Third, you cannot avoid it in highly competitive markets. Fourth, lowering and rising prices can work both. Respectively, competitive-based pricing is there, and it can be used to boost revenue, attract customers, and increase sales volumes.
