A competitor price refers to the amount a customer pays when they choose to purchase a product or service from a competing business rather than from your company. Analyzing competitor pricing is key for setting your own optimal rates.
We break down the key elements that make up competitor prices below. So, keep reading to learn more about the significance of competitor prices through different scenarios such as Instagram marketing, digital marketing, etc.
The Fundamentals
At its core, a competitor price represents what customers pay when they select a competing firm’s offering rather than yours. Competitor pricing intelligence is gathered through price monitoring of sales reports, customer interviews, and public listings.
This provides the most basic benchmark or guardrail for your own pricing. It lets you know if your prices are broadly aligned with, above, or below-prevailing market rates for substitute offerings that buyers have. Getting this vital market context prevents your own prices from being wildly incongruent.
The Key Ingredients That Make Up Competitor Prices
A competitor’s final price tag offered to customers consists of a wide variety of potential component pieces, adjustments, variations, and customizations layered on top of a base price:
- Base List Price – The standard headline rate publicly listed on websites or catalogs that serves as the starting point anchor price upon which everything else gets added. Represents the default entry-level option.
- Short-Term Discounts – Temporary percentage or dollar reductions made to list pricing as part of tactical promotions like holiday sales, first-time customer coupons, buying group rebates, and loyalty reward programs for existing customers.
- Segmented Pricing – Variations in price for specific customer subgroups like students, military, senior citizens, nonprofit entities, and enterprise accounts based on pre-set eligibility criteria and durations.
- Geographical Pricing – Differences in pricing across countries, regions, states, metro areas, and even local delivery zones or stores. Significant in both B2C and B2B sales.
- Multi-Unit Bundling Discounts – Stepped volume discounts are automatically applied when customers purchase multiple units or multiples of a base offering, incentivizing higher order values.
- Customizable Add-Ons – A wide variety of supplementary products, premium features, associated services, extended warranties, training packages, etc that enhance or modify the core solution allowing customers to tailor it. Each addon has its own related cost.
- Channel Pricing – Distinct pricing for the same items across different sales channels like direct websites, physical retail stores, resellers, and distribution partners reflecting channel margins.
Tracking how each complex element stacks up across channels reveals clues into the underlying competitor pricing playbooks, objectives, and vulnerabilities. This multidimensional analysis helps shape savvy counter-strategies.
Evaluating Competitor Prices from Multiple Lenses
When dissecting competitor pricing for intelligence, it is important to analyze the figures from various data perspectives. You should also calculate metrics that answer specific strategic questions:
- Average Selling Price (ASP) – What is the mean net price per unit actually paid by customers after all temporary discounts, coupons, and promotions are applied to list prices? ASP reveals actual selling realization after customer negotiation.
- Price Range – What is the lowest entry-level pricing offered contrasted against the highest premium pricing tier? Examining this entire spectrum bound by floor and ceiling prices provides a broader understanding.
- Price Per Utilization Unit – For usage-based pricing models as commonly seen with cloud software for example, what is the effective per-seat, per-transaction, or per-compute-cycle pricing after normalizing for bundles? This allows apples-to-apples comparison.
- Year-on-Year Changes – How have competitor prices for the same offerings trended over previous years? Growing, stagnant, or decreasing? Pricing history context helps forecast future direction.
- Percentage Margin – What is the rough markup margin between competitor pricing and their underlying costs? Higher margins suggest potential excessive profitability whereas lower margins indicate disruptor positioning.
Evaluating Qualitative Context
Alongside dissecting figures, evaluating qualitative context is equally important:
- Pricing Objectives – What is the competitor optimizing for with their pricing model? Maximizing profitability per unit, emphasizing market share growth, or penetrating untapped segments? Reveals strategy rationale.
- Target Customer Profile Alignment – Does competitor pricing, discounts, and bundling align tightly with the needs, demand elasticity, and willingness-to-pay of their target customer and buyer personas? Misalignments provide opportunities.
- Brand Positioning – Is pricing engineered to support and reinforce a premium, exclusive positioning, or a mass market discounted value positioning? Indicates flexibility.
- Total Value Proposition – What is the holistic quantifiable and unquantifiable value beyond just pricing that the competitor delivers to customers? Surfacing these leverageable advantages and disadvantages is key.
Together, well-rounded pricing intelligence along multiple parameters, metrics, segments, history, and value dimensions better informs strategic decisions.
This bigger-picture perspective allows accurately interpret meaning from the figures, predict future moves, and model your counter-strategy.
Conclusion: Pulling Together a Complete Picture of Competitor Pricing
In summary, a competitor’s prices consist of both quantitatively measurable monetary attributes as well as additional strategic situational contexts and motivations that guide how they architect pricing for customers.
Purely focusing on the numerical price points and rates is important for understanding market benchmarks. Also, assessing the qualitative reasoning behind why competitors adopt certain pricing structures and tactics is equally crucial. Effective analysis requires examining figures alongside the environmental landscape.
Some examples of vital pricing contexts that complete the full picture include competitors’ broader business objectives, their perception of customer demand elasticity and price sensitivity, willingness-to-pay thresholds, targeted customer personas and use cases, brand positioning aspirations, as well as the overall engagement levels and loyalty of their existing customer base.
Evaluating how all these competitive dimensions interplay provides much more robust and accurate intelligence for developing your own counterpricing strategy. The bare numbers alone lack the texture and analytical depth needed to engineer optimal differentiated pricing. Relying solely on standalone figures risks developing pricing that falls short of strategic alignment.
Incorporating both the measurables around competitor rates along with the market situational analysis of the factors influencing their pricing decisions allows companies to stress test, forecast scenarios more accurately, surface opportune gaps, and craft impactful go-to-market offers.
The synthesis of quantitative metrics with qualitative perspectives minimizes risk and uncertainty related to competitive blindspots. With both views, teams can confidently assess strategic trade-offs. They can also engineer pricing optimized for both revenue performance and longer-term competitive advantage. Just analyzing the numbers provides rear-view data whereas factoring in contexts allows future-looking strategy. In pricing, the complete picture precipitates winning game plans.