Lower Prices
The prices of your goods or services are lower than those of your competitors in your market. Businesses that can capitalize on economies of scale can benefit from this strategy. Lower price points can be utilized as a component of a loss leader strategy. Businesses that are entering a market for the first time often implement it. A loss leader strategy is a technique in which goods or services are priced at a lower point that is not profitable. it attracts new customers or allows a business to sell more profitable goods or services to those customers.
Equal Prices
It is necessary for your goods or services prices to match those of your competitors in your market or the current market price. Businesses that choose price points that are equal to their competitors typically try to differentiate themselves by creating unique shopping experiences or offering more attractive product alternatives. Using sustainable materials or manufacturing processes to attract eco-conscious audiences, for instance.
Cost-Plus Pricing
Cost-plus pricing is based on how much it costs a company to bring a product or service to market, plus an additional markup. That markup can be either a fixed dollar amount or a percentage of costs. Organizations that utilize cost-plus pricing should possess a comprehensive understanding of their numerous direct and indirect costs, including COGS, service development, labor, marketing, packaging, shipping, and post-sales support. A company that engages in cost-plus pricing could end up operating at a loss or set its profit margin too low if it doesn’t have an accurate cost basis.
Demand-Based Pricing
Businesses rely on demand-based pricing to maximize their profits in the face of fluctuating customer demand, including seasonal fluctuations and geographic differences. Demand-based pricing is often used to help with yield management, which aims to maximize revenue from a fixed supply of inventory. When a hotel or theme park raises their rates during peak seasons and lowers them during slower times of the year, demand-based pricing is a commonly used approach. Like value-based pricing, demand-based pricing requires significant analytical support to be accurate. Including analysis of historical business trends and industry data on seasonal, geographical, and other trends that impact customer demand.
Highly Competitive Markets
In highly competitive markets like retail and telecommunications, companies use competitor benchmarks to match their pricing to what customers already expect. Differentiating yourself from your competitors may involve price-matching and highlighting product value in areas like quality or customer experience. If the business can cut other costs to maintain a healthy profit margin, it could also result in slightly undercutting competitors. To differentiate themselves from others, some companies may opt to set prices higher than their competitors’.
New Market Entry
Whether it is a startup or an established brand, a business with a new product or service can speed up its time to market and customer acquisition by using competitor-based pricing. The time spent on research required for value-based or demand-based pricing is reduced by doing so. Moreover, it assists newcomers in overcoming the lack of historical data for determining pricing. To establish a new customer base, companies use competitor pricing as a benchmark and charge less at the outset to attract interest.
Fast-moving consumer goods (FMCG)
Competitor-based pricing is the primary pricing strategy for fast-moving consumer goods (FMCG) products, regardless of whether it’s for eye shadow and lipstick or soda and chips. which often must compete for position in a crowded market while vying for the dollars of highly price-sensitive customers. FMCG companies can maintain a healthy market share by maintaining a ‘Goldilocks’ price that is neither too high nor too low by using competitor-based pricing to stay in line with consumer expectations.
Lack of Differentiation
In highly competitive markets, where customers view various offerings as interchangeable, competitor-based pricing can be both a blessing and a curse for companies. Companies may decide to match or beat their competitors’ prices to stay in line with their customers’ expectations. It can be hard to stand out from the crowd when prices and products are too similar. A lack of differentiation could make it difficult to build or maintain market share if there is no solid marketing or sales plan.
Entry into new markets requires agility in demand
This year, a lot of mid-market companies and enterprises are expanding into new countries or market segments. Traditionally, you would pay for a formal market research study, wait for weeks for results, and hope the data was still relevant. Even with highly experienced pricing teams, new market strategies often involve a lot of guesswork, which can be risky. Before entering a market, it’s important to track pricing trends, assortment gaps, and average prices to start with competitive prices and achieve success.
Time-consuming
The process of manually managing pricing is extremely time-consuming for pricing teams. They are unable to find opportunities to evolve the pricing strategy and grow profits while drowning in spreadsheets.
