Competitive pricing refers to the practice of adjusting the price of a product based on what the competition is charging. It is not the same as overpricing or under-pricing your products. In fact, setting a competitive price has a lot to do with the specific product you’re trying to sell, the costs associated with its production and the number of money consumers who are willing to pay in order to get it. The difference between these two is referred to as ”profit margin”. That said, here are five tips to using competitive pricing as a means to increase your profit margin.
1. Increase the perception of value
“Value prism” is an old copywriting technique where a metaphorical light is used to shit through the product in question in order to astonish people with all the little details that were used in the manufacturing process. The technique only works if you can make the consumers “see” the previously unseen and unknown value in your product in order to make your pricing options seem more reasonable to the average consumer. A similar technique is used by smartphone manufacturers to justify the over-the-top prices by offering a “feat of engineering genius” and providing you with “a piece of future” you can hold in your hand.
2. Pay close attention to your competitors
Being competitive means knowing your competition. Make sure to study their every move and focus on the things they do that actually work. Find out what are their manufacturing and delivery routes, advertising options and pay close attention to the way your competitors set their price points. Finding out why and how they set their prices will allow you to develop new strategies to make your brand and products really stand out from the rest of the competition.
3. Consider the availability of your product
Product availability refers to the ease with which products can be acquired by you, your competitors and the customers. Try to find out how easy it is for the competitors to get that specific product and how often is it available in their stores. Have in mind that the average consumer is willing to pay more money for the product they want, but know is in low supply. Every time your competitors are failing to supply a demand is an opportunity to step up and fill that demand. Alternatively, you can always invest your time and resources into improving the availability of your products.
4. Switching to smart freighting
You might think that freighting only refers to transferring goods and products from point A to point B. This was the case until a couple of years ago when fleet tracking and fright management software become readily available. These days, there’s a number of different high-tech freighting companies that compete over who is going to provide the best freight cost solutions. Saving money on transport will allow you to reduce the prices of your products by just the right amount in order to make their prices a bit more competitive.
5. Distinguish your business from the competition
Differentiation is a popular technique often used in marketing and sales. Basically, you’re telling the world that you are offering something your competition is lacking. Just make sure to perform the adequate research into your competition until you identify the right differentiating factor and find the best way to use it to your advantage.
Setting and maintaining a competitive price requires a significant amount of research. Once the research has provided enough information, you can use that information to further improve your business strategies and set the prices yourself, instead of constantly relying on your competitors.