Analyze Your Competitor’s Prices Regardless of which pricing strategy is right for you, you should evaluate and monitor your competitors’ prices. Depending on your company size, product/service and market, your best sources of competitor pricing could be your sales reps, your sales manager, upper management, or internet research. Look at a wide variety of direct and indirect competitors to gauge where your price falls. If your value proposition is operational efficiency, evaluate your competitors on a regular basis to ensure that you’re continually competitive.
Summary EXERCISE SUMMARY
When to Address
Who Should Participate
Where to Use the Results
After you’ve determined your pricing strategy, COGs and price floor If you’re planning a campaign and need financial measurement for ROI calculations or special pricing offers Business leaders: company founders, owners, presidents and vice presidents Marketing and sales leaders Financial leaders Product managers Channel managers Your competitors’ prices will help you determine your final price.
Why it’s Important
Your market will typically review your competitors’ offerings and prices before making their final purchase decision.
What Builds Upon it
Your pricing should reflect your value proposition.
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Timeframe to Completion Potential Business Impact
If you’ve completed Exercise 4 – Competitive Positioning: Evaluate Your Competition, this exercise is straightforward and should take roughly 1 to 2 hours. Medium
Deliverable
You’ll review your competitors’ prices and establish your price.
Next Steps
Understand how to respond to competitor price changes.
Target Completion Date
PARTICIPANTS TASKS
PERSON RESPONSIBLE
DUE DATE
Notes
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Analyze Your Competitor’s Prices
What to Complete
1. REVIEW COMPETITORS’ PRICES 2. DETERMINE PRICE
Where it Fits in Pricing Match Pricing Strategy to Value Proposition Define Pricing Strategy Determine Cost of Goods Sold Set Price Floor Review Competitors’ Prices Determine Price Analyze Competitor Price Changes Determine Competitor Price Change Response Gather Price Sensitivity Data Determine Price Elasticity Find Optimal Price Calculate Profitability on a Single Deal
1. REVIEW COMPETITORS’ PRICES Product or service
List your competitors and/or enter them in 66-‐E. If you’ve already completed Competitive Positioning, pull these results from Exercise 4. [
COMPETITOR
1
TYPE Direct
Indirect
Potential Future
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2 3 4 5 6 7 8 9 10
Direct
Indirect
Potential Future
Direct
Indirect
Potential Future
Direct
Indirect
Potential Future
Direct
Indirect
Potential Future
Direct
Indirect
Potential Future
Direct
Indirect
Potential Future
Direct
Indirect
Potential Future
Direct
Indirect
Potential Future
Direct
Indirect
Potential Future
From the list above, rate each of your competitors (and your own company) on each of these value propositions. Use a scale from 1-‐5, and be truthful. 5 = the company offers extremely high value in this category Ratings 3 = the company offers average value in this category 1 = the company offers little or no value in this category YOUR COMPETITORS (FROM ABOVE) VALUE PROPOSITION 1 2 3 4 5 6 7 8 YOUR COMPANY Product Leadership/Innovation Cost Efficiency/Price
Customer Intimacy/Solutions
You’ll also need to estimate the price that each competitor charges for the product or service you’re competing with. While you may be comparing apples to oranges, use your best judgment – you have to start somewhere. Price for comparable Competitor Notes product/service
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Enter the results from both of these grids in 66-‐E. This will give you a picture of how you stand against your competitors when matching your price to your value proposition. What’s your general result? What does this tell you? If you’re having trouble obtaining your competitor’s pricing, you could try to: Call them and ask for a quote. Have a friend call and ask about pricing. Review their website. Request info and have it sent to your home or a friend’s company. Ask current customers/clients you trust. Then complete 66-‐F to compare pricing variances in the market. Do these results change your opinion from before?
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2. DETERMINE PRICE Product or service
Distribution Channel
[Distribution Channels can help] Now, open 66-‐G and review the results to recommend the price range for your product: HIGH LOW AVERAGE Recommended price Margin at this price Minimum profit margin goal Price at this goal Now review your previous pricing strategy. What kind of pricing strategy did you previously recommend? Looking at these numbers, what conclusions can you draw? For example, can you meet your profit goal if your price falls within the recommended range? At this point, you’ll need to look hard at your competitors. How are you positioning your product against theirs, and what does that mean for your pricing strategy?
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Look at the competitors who offer the same value proposition as you. Is it more important for you to price against one or two of those competitors versus the group as a whole? If so, what does that mean for your pricing strategy? Conclusion: Based on your overall analysis, what narrow price range do you recommend? What are the next steps for implementing this pricing strategy? STEP
DUE DATE
STATUS Complete Complete Complete
Use 66-‐E, 66-‐F & 66-‐G as your reports for this exercise.
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