Why pay attention to competitive pricing?
Your price at the end of the day is the make-or-break factor in any business. Setting the right price could cause or cost you a sale. Especially in markets that are highly price competitive, any buying decision of the consumer is based solely on the price. Companies taking pricing decisions without any strategic thought behind them can end up in a non-competitive and poor position in the market.
The right price can only be determined after taking into consideration numerous factors, one of which is the prices set by your competition in the market. By maintaining competitive prices, businesses can gain a larger share of the market. Offering competitive prices can create a positive reputation for your brand in the business. It is a critical factor in determining the success of your brand.
To delve deeper into understanding the algorithm behind pricing, check out our blog on the Sciative website.
What is competitive pricing?
Competitive pricing is all about analyzing your competition and their pricing before setting your own product’s price. The crux of competitive pricing is to position your brand’s offering in comparison to other similar offerings in the market.
But building a competitive pricing model takes the following steps:
The first step is to identify key competitors within your industry. Gathering and researching market intelligence is absolutely vital. This involves delving deep into competitors’ offerings, learning who are your top competitors and gauging their areas of advantages and disadvantages.
Next is to analyze similar products and services. Understanding similarities and differences in the products being offered will give you valuable insights into the distinct features being offered by them.
The last step is to research pricing and positioning strategies. Once you have your list of competitors, learning what their pricing models are and where they stand in terms of rank positioning is crucial in this strategy.
You can competitively price your product in three ways:
Lower price: Here prices are set lower than your competitor’s price to capture the market with price-sensitive customers. Your profit margins may reduce but there is a consecutive effect of a rise in sales volume. As many as 87.6% of respondents considered the product image as the key element of the shopping experience.
Here setting a price higher than your competitors establishes their brand as a premium or luxurious brand with superior quality offerings. The profit margins are high and target a more affluent customer segment
Here you match your prices to that of your competitors and focus on highlighting unique or distinctive features of your product or service.
To know what pricing strategies premium brands are executing click here
How to implement a competitive pricing strategy?
The prices you set for your business influence almost every aspect of your business. So deciding a price point is critical for your business’s success or scalability.
Organically assessing the market with its seasonal fluctuations, economic conditions, and distribution channels isn’t feasible because of the vast amount of information to be processed and then analyzed.
In the context of India’s dynamic economy, it is essential for businesses to understand how deeply demand fluctuations impact pricing. So automating market intelligence really begins to streamline this process.
Market intelligence – AI-powered tools can gather and analyze a wealth of data at a very large scale from various sources like competitor platforms, e-commerce platforms, etc. Analyzing historical sales data & and customer sentiment, and identifying pricing trends over the years can be done in a matter of minutes.
Price optimization – AI pricing engines can ensure all market conditions such as demand, supply, and competition, are all taken into account before determining an optimal price to ensure your brand remains competitive in the market.
Price segmentation – It is possible to implement personalized pricing as AI has the ability to segment its market based on price sensitivity and behavior. This proves useful in generating individualized prices for different customer segments in the market.
Forecasting – AI can forecast future market trends by calculating the estimated demand generated by your product through data-driven insights. It also enables businesses to conduct simulations through A/B variant testing to evaluate the impact of different pricing strategies.
Implementing a competitive pricing strategy is the first step in implementing a dynamic pricing strategy. To learn more about dynamic pricing click here to know how dynamic helps brands boost their revenue.
Leveraging the power of AI in competitive pricing not only saves both time and resources but also ensures your brand’s standing in the market is successful and steady.
Competitive pricing is only 1 of the 5 critical factors to achieve brand success.
To know what the others are click here to know how customer’s voice is critical for brand success and why the brand needs to optimize its listing quality.
To know more about our AI-powered dynamic pricing tool BRIO, reach out to us.