In the second part of our series on starting a business during the Covid-19 lockdown and beyond, let’s take a look at how to price your products and services – using the competition!
When you’re trying to decide how much to price your products, there’s a lot you can learn from your competitors. While ultimately, several factors will impact how much you should price your products, your competition can certainly help point you in the right direction.
Here, you’ll discover some key information that you can learn from your competition and how it can help you to determine the right pricing strategy.
How Much Are Your Competitors Charging?
The first thing you can learn from your competitors is how much they are charging for similar products. Now, it’s important to compare at least three different competitors here. This will give you the best idea of the average price your product type sells for, and therefore how much to charge.
It’s important to not just look at the overall price. You’ll also need to look at what customers get for their money. Are their products different to yours? Do they offer the same things? If not, this needs to be taken into account when you’re comparing their prices to the ones you are considering.
So, while you shouldn’t use your competitors’ pricing as the only reference for how much you should charge, it can definitely help narrow down a figure. Pay attention to any discounts they offer, alongside any tiered pricing models they might include.
You could also see whether they are offering any new pricing models. There may be a way of pricing the products you hadn’t considered.
Think Outside the Box: What Aren’t Your Competitors Offering?
You can also learn a lot by considering the products or service your competitors are not offering, as it will give you the opportunity to capitalize on the gap in their services. If you can offer what they don’t, you can charge a more premium price for your products and services.
If you’re struggling to determine gaps in their products, take a look at reviews for the company. You’ll often find that customers recommend improvements within their reviews of a business. So, take a look and see what customers aren’t getting from your competitors and use this to your advantage.
Look at Your Competitors’ Financials
OK, so you aren’t going to be able to see full financial records. However, you can get an idea of your competitors’ finances. Many provide reports on their spending, especially how much they’re spending on marketing. Have a look at your competitors’ accounts on Companies House – many will show how much profit they are making.
As well as that, you can look at any paid advertisements your competitors are running and see how effective they are. Understanding how much your competitors are spending on marketing will give you an idea of how much you should be spending if you want to see the same level of results. You can start with social media platforms such as Facebook and Instagram, but an even better place to look is on Google. Type in some keywords for your competitors’ type of business and see if they have any sponsored ads running.
You can learn a lot about the marketplace using your competitor research if carried out correctly. While you shouldn’t focus on simply offering a lower price than them, you can use their pricing structure to influence your own.
Take your time when doing this research – and make sure you write it all down, so you can get a good snapshot of the financials. When done correctly, competitive pricing can really drive sales and push your business ahead of the competition.