In a world full of online retailers, you have to be competitive. Whether it be with uniquely designed products, unique shipping model or a lower price than the ones your competitors are offering. It doesn’t matter, you should always try and be better than the other fish in the sea.
Usually when you look up “competitive pricing strategies” the results will be showing only three main strategies, which are “setting the same price as your competitors”, “setting the price below the one of your competitors” and “setting the price above the one of your competitors”.
In this piece, we will add two additional pricing strategies that you can implement in your business. They are “setting the price by adding the cost it took to procure” and “setting the price according to what the market is willing to pay”.
Here are each of these five options. We’ll let you in on how they work along with our opinion on the matter.
1. Setting the same price as your competitors
This is usually a good strategy but only if you’re planning to add additional value to your product. When somebody wonders between two identical prices, the chances he goes to your competitor are 50-50.
So, a winning strategy would be to add more value to a product and offer it for the same price as your competitors’ are offering their product without the value you have added.
2. Setting the price below the one of your competitors
This technique should be very well-thought-out. You should consider whether it’s worth losing profit and how much of your profit you’re willing to lose. If your product is as good as your competitor’s, why should you offer a lower price? Haven’t you put the same resources and efforts into making it?
Yes, absolutely. But consider that most people are buying from big brands because they have built trust with them over the years. If you’re not a brand, you could allow yourself to have a price below your competitors’ price.
A winning strategy here is something based on a very psychological level – always sell a percentage or a cent less than your biggest competitor or the most trusted seller.
So, for example, if we have Urban Outfitters selling a summer dress for 30$, H&M for 25$ and Hollister Co. for 35$, your best bet would be to sell your dress for 24,99$. This is a cent below the most common and massive brand out of the above and by implementing this competitive pricing strategy you won’t be losing a great deal of profit.
3. Setting the price above the one your competitors offer
This strategy is a bit tricky. If you’re setting the price above the one your competitors already offer, you should be sure of the reasons why your price is higher. And most of all, you should be sure that your product will meet the expectations of your customers. If someone decides to buy for a higher price, they should know why.
So, sell your product the best way you can in your product descriptions and give your shoppers the value they’re looking for.
And remember – if your price is higher, it should be based on something that is better or different than the offers out there.
I’ve been in a lot of arguments about pricing lately and I always say that if someone is trying to sell me shoes for 700$, they better offer me something more than the name behind the brand because the seller on Amazon will offer me the exact same quality for 200$. Why shouldn’t I choose him?
What would you choose? Answer this question for yourself before choosing your competitive price strategy.
4. Setting the price by adding the cost it took to procure
You can always be mindful of your spends and decide on your price by adding what it cost you to develop your product without caring what your competitors have to offer. If you’re choosing this way, then it must mean you’re sure about the quality of your product and you don’t care how your competitors are selling. A dress is a dress and it has to cost 20$ plus the 5$ you spent for the fabric.
You don’t lose any profit this way. But if your sales start going down, consider one of the techniques above.
5. Setting the price according to what the market is willing to pay
In my opinion, this is the best strategy out there. Research what the market is willing to pay, try out different prices and decide which best suits your shoppers. This way, you almost never lose a profit and you always have your shoppers’ trust that the next offer you make them will be one of a kind.
Pricing Intelligence Tools
Whichever of these techniques you choose, especially if you focus on your competitors (the first three strategies), you could use a pricing intelligence tool. We’ve gathered a few here. Each is different and two out of three are offering a trial period for you.
Upstream Commerce is an advanced pricing intelligence tool. They offer solutions based on the number of products’ prices you want to track. Upstream Commerce is the top most recommended tool for price intelligence on the Internet.
Prisync offers you a free trial and a price that is cheaper than most of the tools out there, starting from 59$.
Competera is also offering a free trial of 14 days. They have a good portfolio of customers but the user-friendliness of their product is what made us recommend this tool.
Make your pick on a competitive pricing technique and whatever you choose, don’t settle. Try out different things that work for you and make sure you always offer your customers what they came for in the first place.
For those of you who want to dive in for more information, there is an ocean of sources out there. CXLcreated an article that holds 13 other articles about pricing inside. They vary from pricing experts to pricing principles and mistakes.
Check it out – Pricing Strategies: 13 Articles You Need to Read