Brand positioning through pricing is a strategy where a company uses the price of its products to influence the perception of its brand in the market. As an example, Apple uses premium pricing to create an image of exclusivity, while Walmart offers products at lower prices than many competitors to create a perception of affordability and value for money.
We also tend to remind businesses of McKinsey & Company’s research statement:
“On average, a 1 percent price increase translates into an 8.7 percent increase in operating profits.“
Hence, it becomes imperative for businesses to improve brand positioning through pricing.
Whether you manufacture white-label or private-label products, you must understand how your prices stack up against competitors. That means, comparing your products against those of other brands and determining an optimal pricing strategy.
Price positioning and branding go hand-in-hand to eventually optimise your revenue and profitability. If your competition sells a product at a certain price, you can either decide to sell the product at a slightly lower or higher point depending on your sales or profit goal.
Let’s break this down in this blog.
Why Should Your Brand Be Positioned Higher or Lower?
Generally, setting prices higher than other brands selling the same products can make a brand seem more luxurious. This can attract customers who are willing to pay more for an exclusive experience. Pricing a little lower can make a brand seem more affordable and accessible. This attracts budget-conscious customers and increases market share.
But, how to determine whether you should position your brand higher or lower than your competition depends on several factors. Your brand's value proposition, market perception, and competitive landscape all play a role. By analyzing these elements, you can decide the most advantageous pricing position for your products.
1. Value Proposition:
This refers to the unique value your product offers to customers. If your product has superior features, higher quality, or offers additional benefits compared to competitors, you might justify a higher price. For instance, if your digital doorbell has better video quality and enhanced security features, positioning it higher in price might reflect its added value.
2. Market Perception:
How do customers perceive your brand? If your brand is known for quality and reliability, customers might be willing to pay more. Conversely, if your brand is relatively unknown or perceived as budget-friendly, a lower price might attract more buyers.
3. Competitive Landscape:
Analyze your competitors’ pricing strategies. If most competitors offer similar products at a certain price, you need to decide if you want to compete directly or differentiate by positioning yourself higher or lower. For example, positioning higher can create a perception of premium quality, while positioning lower can attract price-sensitive customers.
Establishing Desired Price Distance
One of the critical aspects of competitive pricing is setting your desired maximum distance percentage from Brand A and private labels. This metric helps ensure your brand remains competitively priced while maintaining its perceived value.
1. Define the Price Index:
Create a price index that compares your prices with those of competitors. For example, if Brand A sells a similar product for $100, and your price is $99, your price index is 99 compared to Brand A’s 100.
2. Set Distance Percentages:
Decide the maximum percentage difference you want between your prices and those of key competitors. For instance, you might set a goal to always price your products within 5% higher or lower than Brand A.
3. Comparison Metrics:
Use these metrics to regularly compare your prices with competitors. For example, if your price index for a product is 99, and your desired maximum distance from a competitor is 4%, you ensure your price remains competitive without significantly undercutting or overshooting.
How Are You Performing Now?
Understanding your current market position is essential for identifying opportunities for improvement. Here’s how to assess your performance:
1. Compare Prices:
Regularly compare your prices against those of competitors. This helps you see where you stand in the market and identify if your pricing strategy needs adjustment.
2. Identify Gaps:
Look for gaps where your pricing might be too high or too low compared to competitors. If your product is priced higher without offering additional value, you might lose customers. Conversely, if it’s priced too low, you might be leaving money on the table.
Also Read: How to Monitor and Set Optimal Prices for Alternative Products
3. Adjust Strategies:
Based on your comparisons, adjust your pricing strategies. For example, if you notice that your price index is consistently higher than desired, consider offering promotions or adjusting the base price to remain competitive.
How to Get the Competitor Data and Make Comparison?
To gather accurate pricing data and perform effective comparisons, you can use several methods:
Option 1: Use an AI Price Match Tool
SYMSON’s competitive pricing tool can generate a list of possible competitors and provide an overview for selection. It leverages AI to identify relevant competitors, saving you time and providing precise matches.
Also Read: Upgrading your Pricing Strategy: Should you Invest in Pricing Software?
Option 2: Manual Selection and Scraping
Obtain the URLs of the brands and products you want to compare. Use web scraping tools to gather daily pricing data, enabling real-time comparison and adjustment.
Option 3: Use EAN Numbers
Collect the EAN numbers of your competitors' products. Activate web scraping tools to gather daily pricing data based on these identifiers, ensuring a comprehensive and accurate comparison.
By employing these methods, you can ensure that your brand remains competitively priced and aligned with market expectations.
Download Now: Top 10 Smart Pricing Solutions: A Comprehensive Guide
Optimizing your brand's market position involves strategic analysis and consistent monitoring. By comparing your prices with other brands and adjusting based on desired outcomes, you can enhance your competitive edge and maximize profitability. Whether through AI tools, manual scraping, or EAN-based comparisons, the right approach will provide you with the insights needed to stay ahead in the market.
Do you want a free demo to try how SYMSON can help your business with margin improvement or pricing management? Do you want to learn more? Schedule a call with a consultant and book a 20 minute brainstorm session!
