There has arguably never been a better time to start building an online business than today, but it has also never been more difficult to stand out as a company and make a name for yourself.
The fact is that consumers have access to more information than ever before. With constant internet access, they are just a few clicks away from finding out what comparable products your competitors are selling – and whether they can get a better deal elsewhere.
In Germany, 62% of online shoppers cite a meaningful product description as the most important purchase argument , followed by positive product reviews (28%). So it is not necessarily the cheapest offer that makes the difference for a purchase.
Competitive pricing involves comparing your product with a similar product from a competitor. You examine whether you are scaring away customers by charging too high prices or whether you are losing profits by discounting too much.
In this guide, we’ll cover some of the most important competitive pricing options and explore where each one might (or might not) make sense for your business.
Become a price professional
What is competitive pricing?
Competitive pricing is the process of benchmarking the price at which competitors sell comparable products and is ultimately helpful in gaining market share.
Looking at your competitors’ prices will help you understand the options in the market. From there, you can evaluate how your product spain email list is positioned within those options. This will help you determine the positioning,Value proposition and price are aligned to drive customer awareness. This way, you are able to tell consumers the full story of your product.
Without competitor pricing, it’s difficult to determine how your customers really perceive you in the market. Is your product a bargain worth the money? Or an expense that potential customers will later regret? The answer to both questions could mean missing out on sales and profits.
If the price is too high, you’re missing 7 productivity tips for small business owners out on potential customers. If the price is too low, you’re selling products for less than they’re worth. So which pricing method is right for you? Let’s take a look.
What are the three types of competitive pricing?
There are three types of competitive pricing: penetration pricing, promotional pricing, and tied pricing. Here’s a breakdown of all switzerland leads three models, with tips on when to use them depending on your goals and specific situation.
penetration pricing
Penetration pricing is appropriate when you are competing with competitors for the lowest price. Penetration pricing is often about quickly grabbing consumers’ attention and gaining market share.
This high discount to stay competitive means you have to sacrifice profitability – unless you have economies of scale. Department stores like Costco, for example, can only offer items at the cheapest price because they have millions of customers who make (small) profits.
The penetration pricing model is successful when you build a relationship with buyers after their first purchase. Continue to cross-sell and upsell them with more profitable product offers once you’ve convinced them with the price.