How can businesses outsmart stiff competition with pricing strategies?

In a competitive market, setting the right price for your products or services can make or break your business. You want to attract customers, cover your costs, and earn a profit, but you also have to deal with rivals who may offer lower prices, better quality, or more value. How can you outsmart them with pricing strategies? Here are some tips to help you find the optimal price point for your business.

1 Know your value proposition

Before you decide on a pricing strategy, you need to know what makes your offer unique and valuable to your customers. What problem are you solving, what benefits are you providing, and what differentiates you from your competitors? Your value proposition is the core of your marketing message and the basis of your pricing strategy. It helps you communicate why customers should choose you over others and how much they are willing to pay for your solution.

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2 Choose a pricing objective

Your pricing objective is the goal you want to achieve with your pricing strategy. It can be based on different criteria, such as maximizing revenue, increasing market share, enhancing customer loyalty, or creating a premium image. Your pricing objective should align with your overall business strategy and reflect your value proposition. For example, if you want to position yourself as a high-end brand, you may opt for a skimming strategy, where you charge a high price initially and lower it over time as demand decreases. On the other hand, if you want to penetrate a new market, you may choose a penetration strategy, where you charge a low price initially and increase it over time as you gain customers.

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Dan Bacarin, CFA

EVP Finance, Accounting & Transformation
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To add, thinking about temporary price reductions can also be useful. Traditional promotions. This should be done in a concious and price way: attract new customers, gain market share to your value proposition, and wherever possible, drive ecosystem and cross-sell. Thinking here of Pampers Diapers and Pampers Wipes, or Gillette Blades (no discount) with Gillette Razor (sometimes given for free), or when a Supermarket gives a promotion on an sku to drive traffic in store, and gain from other skus. All in all, there has to be a medium to long term strategy approach, and be disruptive. Ah yes.. with clear KPIs behind!

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3 Analyze your costs and competitors

Your pricing strategy should also take into account your costs and your competitors' prices. You need to know how much it costs you to produce, distribute, and sell your products or services, and how much profit margin you want to earn. This will help you set a minimum price that covers your expenses and ensures profitability. You also need to know how much your competitors are charging for similar or substitute products or services, and how they are perceived by customers. This will help you set a maximum price that customers are willing to pay and that gives you a competitive edge.

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Sagar Agrawal

Founder at Qubit Capital | Investment Banker | Helping Startups Raise Funds Globally
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Outsmarting stiff competition with pricing strategies starts with a deep dive into your costs and understanding your competitors. From my experience, first, thoroughly analyze your cost structure. This means knowing exactly what it costs to produce and deliver your product or service. Then, conduct a detailed competitor analysis. Understand not just their pricing, but also their value proposition. Are they offering more for the same price? Can you afford to lower your price without compromising quality? This dual focus on cost-efficiency and competitive positioning allows you to price smartly, offering value that attracts customers while still maintaining a healthy profit margin.

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4 Experiment with different pricing methods

There are many pricing methods that you can use to set your prices, such as cost-plus, value-based, dynamic, or psychological pricing. Each method has its advantages and disadvantages, depending on your industry, market, and customer segments. You can experiment with different pricing methods to see which one works best for your business and your target audience. For example, you can use cost-plus pricing to ensure that you cover your costs and earn a stable profit, but you can also use value-based pricing to capture the perceived value of your offer and charge a premium price. You can also use dynamic pricing to adjust your prices according to demand, supply, and other factors, or psychological pricing to influence customer behavior and perception.

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Sagar Agrawal

Founder at Qubit Capital | Investment Banker | Helping Startups Raise Funds Globally
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To outsmart stiff competition with pricing strategies, experimenting with different pricing methods can be a game-changer. Based on my experience, don’t stick to just one approach. Try methods like penetration pricing, where you initially set lower prices to gain market share, then gradually increase. Alternatively, consider value-based pricing, which focuses on the perceived value to the customer rather than just costs. Dynamic pricing, adjusting prices based on demand, seasonality, or customer profiles, can also be effective. Regularly testing and refining these methods, while closely monitoring market response and competitor actions, helps in finding the sweet spot that attracts customers and maximizes profits.

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5 Monitor and evaluate your pricing performance

Finally, you need to monitor and evaluate your pricing performance regularly and make adjustments as needed. You can use various metrics and indicators, such as sales volume, revenue, profit, customer satisfaction, retention, and loyalty, to measure the effectiveness of your pricing strategy. You can also use feedback, surveys, and market research to understand how your customers respond to your prices and what factors influence their purchase decisions. By tracking and analyzing your pricing performance, you can identify what works and what doesn't, and optimize your prices accordingly.

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6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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Chito Rios Fallarme, MBA

DM for Consultation - Portfolio Management and Advisor in Global, Multi-Currency, Tax-Efficient Securities. Advisor to Business Owners.
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Track your competitors pricing. Review your own pricing. Compare your quality of service and other service offerings you have against your competitors. Test and validate feedback from different slices of your target market in their own experience and expectations for quality of services and a comprehensive array of products and services. Quantify if possible, net new business potential, from that analysis.

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How can businesses outsmart stiff competition with pricing strategies?

1

2

3

4

5

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1 Know your value proposition

2 Choose a pricing objective

3 Analyze your costs and competitors

4 Experiment with different pricing methods

5 Monitor and evaluate your pricing performance

6 Here’s what else to consider

Economics

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How can businesses outsmart stiff competition with pricing strategies?

1

2

3

4

5

6

1 Know your value proposition

2 Choose a pricing objective

3 Analyze your costs and competitors

4 Experiment with different pricing methods

5 Monitor and evaluate your pricing performance

6 Here’s what else to consider

Economics

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