Pricing Strategies
A GUIDE FOR PRICING STRATEGIES
Competitive Pricing
What is it?
A competitive pricing strategy is a price-setting that is based on your competitors’ prices. This pricing method focuses solely on the prices of your competitors that are public, but it does not take into account how much customers value the product or production costs.
A strong competitive pricing model is based on thorough market research. When you know how the prices of your top competitors in your market and how those prices might meet customer expectations, you have a basis for determining the rates of the prices of your own products or services. Competitive pricing strategies can come in many forms, a business can choose to always be the cheapest of their competitors or always offer the average price of the highest and lowest priced competitors - they all count as competitive pricing strategies.
To know more, you can head over to our pricing strategy guide where we took an in-depth explanation approach.
How to use it?
You can use competitive pricing in several ways. This really depends on your use case. Let's give you some examples of how you could use competitive pricing.
Gain Marketshare and increase revenue
Position your products compared to competitors
Analyse the pricing of competitors and learn
THE GAINS
Benefits of Competitive Pricing Strategy
Score new customers by implementing better prices
Positioning your products more aggressively than competitors can allow you to gain market share with popular items and become an absolute leader in the field.
Have more control using market research
Research the most popular products in the market to add to your inventory by checking the saturation of the market. Automatically define and adjust your prices by following competitors in order to maintain market share.
Make your pricing more efficient by automating your process
Checking the prices of competitors and adjusting your prices using outdated tools such as spreadsheets can be time-intensive and error-prone. Using an automated pricing tool such as SYMSON makes the process much more efficient and reduces manual labour.
INDUSTRY TRENDS
Who is using it?
Designer brands
Brands in that category want to be perceived as high-value and status products. To reach this goal, they will always want to be priced exceptionally high in comparison to similar items. Although the quality is often better than cheaper fashion brands, the increase in price is not persé equal to the increase in quality.
Amazon Essentials
These clothing products are made as part of the Amazon brand. This brand wants to be among the cheapest by offering as low as possible prices to its customers. In contrast to the designer brands, Amazon essentials use competitive pricing to be the cheapest on the market.
MediaMarkt
This is a classic example of a company that offers a “best price guarantee”. They claim to check all the prices of their products daily to make sure that they remain the cheapest on the market. Therefore, they will always match the lowest price of their competitors, to give customers the best deal possible.
HOW TO HANDLE THE CHALLENGES OF COMPETITIVE PRICING
The most common challenges pricing managers face today
- Are you dealing with a saturated market with lots of competitors? Are you responding slowly to changes in the market, thus losing revenue? With a competitive pricing tool such as SYMSON, you can keep track of all the competitors in your field and adjust your prices automatically.
- Is your current pricing process consisting of spreadsheets and manual work? Are you still defining your prices using gut feeling and losing revenue in the process? With an automated competitor-based pricing platform such as SYMSON, you can automate the process and respond automatically to changes in the market.
- Are you struggling with retaining your price position because of constantly updating prices? Do you have lacking insights into your competitors and how they are approaching their pricing? With competitive price monitoring tools like SYMSON, you can gain insights into the prices of your competitors and position your product more accurately in the market.
THE DISADVANTAGES
Disadvantages and how to handle them
Difficult in a crowded marketplace
When there are many competitors, it may be hard to always be the cheapest or most expensive, because other businesses can change their prices as well. To handle this, you should automate this process as much as possible.
Data-driven and complicated process
This pricing strategy requires a lot of data, especially if you have thousands of products and many competitors. To manage all the data and changes it is best to automatically scrape data and changes from the internet - with software specifically developed to do this.
Too much focus on competition and not including other factors
While it may seem smart to copy your competition you can lose margin or revenue by not including more factors, such as customer behaviour, seasonality and price elasticity. SYMSON can take into account all your relevant price drivers in your pricing.
HOW TO SET IT UP
How to implement a competitive pricing strategy?
Watch our webinar for a comprehensive look at how competitive pricing strategy can help your organisation.
In your organization
Positioning your prices in your competitive landscape is challenging, because of the constantly changing market, conditions, and prices. Using tools like SYMSON really helps you to get insights into this pricing landscape. But the question remains for you as a company, how you should implement such a strategy. In order to do so, we recommend following these steps
Create a Pricing Plan
Get Stakeholders involved
Configure your pricing algorithm & define business rules.
Test with small groups
Analyse & Learn
Re-run this process
In SYMSON
Define the logic in the SYMSON platform to get the prices of your competitors. You could decide to configure a list of your top 10 key- competitors. SYMSON can get all the pricing data from Google Shopping or specific imports or website scrapers can be used to get the prices of your competitors. We recommend taking the following steps to implement a competitor-based pricing strategy in SYMSON.
Make a secure data connection with your chosen systems to continuously update prices
Choose your price positioning compared to competitors
Modify the parameters of the strategy and select business rules
Configure notifications so you know when significant changes in the market occur
Let the SYMSON API collect competitor data or import your own
Run the strategy and analyse the results
Modify according to the new learnings
THE KEY IS A COMBINATION OF STRATEGIES
How to combine with other pricing strategies?
Competitive pricing strategies perform best when they are automated and become part of a dynamic pricing strategy, that changes prices when certain factors such as competitors' prices change. In addition to this, businesses should also take a closer look at the price elasticity of each of the products, this indicates the demand per product for a certain price. Competitive pricing is also a good first step in developing a key-value item strategy or in combination with business rules, as determined by the pricing managers.
GET A DEMO
How to use Competitor Pricing in SYMSON
How it works
How to combine different pricing strategies
How to get recommendations for the perfect pricing
How to track competitors
Summary
- A competitive pricing strategy is a price-setting that is based on your competitors’ prices.
- Competitive pricing strategies are easy and efficient to start your pricing processes with, while it is also a great pricing strategy to maintain market share with.
- Competitive pricing performs best when it is used as part of a dynamic pricing strategy and when it is combined with e.g. price elasticity, key-value item pricing strategy or business rules.
The SYMSON Solution
Smart Algorithms
Use smart algorithms and intelligent pricing AI to predict optimal price points for your products automatically.
Every business case is unique and each pricing strategy is based upon different factors, which can be influenced by high inflation rates. Smart algorithms and AI are able to predict the most optimal price points for different products automatically, by using multiple data sources such as costs, weather, competitor prices, price elasticity, and more.
Every business case is unique and each pricing strategy is based upon different factors, which can be influenced by high inflation rates. Smart algorithms and AI are able to predict the most optimal price points for different products automatically, by using multiple data sources such as costs, weather, competitor prices, price elasticity, and more.
SYMSON
SYMSON uses its in-house developed dynamic pricing software to optimise margins and to automate mundane tasks for pricing professionals. Get insights in your pricing management – from price elasticity per product to margin improvement advice and price automation with the Pricing Strategy Builder. For most companies, it would be advisable to look into cost-based pricing and price elasticity, to combat high inflation rates. However, every business case is different, and at SYMSON we provide custom solutions for all of our clients.
