Competitor Pricing Analysis: Benchmark Against Similar Products

Competitor Pricing Analysis: Benchmark Against Similar Products

One of the most critical yet challenging pricing decisions involves analyzing competitor product prices and positioning your own offer competitively. Simply matching competitors fails to consider value differences. Blindly ignoring them risks being priced out of contention. This comprehensive guide provides a framework for holistically evaluating competitor pricing to inform your product price strategy. Learn competitive intelligence gathering tactics, metrics to track, price optimization strategies, psychological pricing principles and more to set prices aligned with market standards while maximizing profitability.

Why Competitor Pricing Analysis Matters

Thorough competitor pricing research:

• Reveals price levels and structures buyers expect to pay
• Identifies opportunities pricing above or below competitors
• Highlights which product features and offers competitors monetize
• Allows matching or improving upon pricing packages/tiers
• Indicates optimal positioning – low-cost or premium
• Uncovers underpriced areas to capitalize on or avoid
• Provides insight into competitor discounts and sales
• Prevents pricing blindly allowing data to guide strategy
• Tracks competitor price shifts indicative of strategies
• Helps forecast sales at various planned price points

Aligning pricing with market standards while optimizing profitability hinges on continuous analysis.

When to Conduct Competitor Pricing Research

Analyze competitors pricing:

• Initially before setting prices for a new product
• If launching into a new niche or targeting a new buyer segment
• When planning seasonal sales or temporary discounts to remain competitive
• After competitors launch a pricing change, sale or new offering
• If customer feedback indicates your pricing seems out of line
• Annually as part of strategic planning to confirm pricing still aligns with market
• When product costs change significantly impacting minimum markup
• During recurring revenue analysis identifying potential to optimize pricing tiers
• When releasing substantial new features potentially warranting increased price

Regular competitor pricing checks ensure you keep pace with market movements.

How to Gather Competitor Pricing Intelligence

Collect pricing insights from:

Competitor Websites

Review pricing pages, FAQs and related content across sites. Note bundles, discounts etc.

Price Comparison Sites

Aggregators like Capterra centralize pricing from many competitors.

Customer Interviews

Ask about other solutions prospects previously used and associated pricing.

Support Conversations

Train support to listen for competitor mentions including pricing.

Sales Team Insights

Check reports for deals lost due to pricing.

Resellers/Marketplaces

See pricing of products resold elsewhere like Amazon or app stores.

Public Earnings Reports

Public SaaS companies report Average Revenue Per Account metrics.

Industry Pricing Reports

Analyst reports directly survey and publish pricing benchmarks anonymously.

Conference Attendance

Talk to competitors face-to-face asking about different packages.

Continuous awareness through diverse sources provides comprehensive perspective.

Key Competitor Pricing Metrics to Track

Record competitor:

• Entry-level pricing
• Average selling price
• Highest tier pricing
• Add-ons and extras
• Package components at each tier
• Discount bundles and bulk rates
• Frequency of sales, coupons and promotions
• Payment options – installments, prepaid etc.
• Guarantees and risk reversal policies
• Average # add-ons purchased
• Average subscription duration
• North Star Metric – pricing of most popular offering
• Churn and retention by pricing tier

Tracking hard numbers across these variables highlights opportunities.

How to Organize Competitor Pricing Data

Use spreadsheets to easily compare:

List Competitors as Columns

Add competitors across top as column headers for side-by-side data.

Add Pricing Factors as Rows

Pricing elements become rows like monthly fee, setup costs, discounts etc.

Summarize Packages in Separate Tabs

Break apart pricing by tier like basic, pro, enterprise offerings on different sheets.

Use Color Coding

Highlight highest/lowest pricings across competitors for fast visual analysis.

Include Notes

Add contextual notes and details on pricing policies and structures.

Update Regularly

Routinely collect latest competitor pricing to feed the model.

Well-structured data models surface key opportunities and differentiators.

Leveraging Competitor Price Testing in Your Strategy

Learn from competitor experiments:

• Note products and packages frequently discounted to identify elasticity
• Track which new offerings competitors launch successfully at premium prices
• Monitor failed price hike rollbacks indicating overpricing
• Pay attention to highly used price anchors like $7, $19, $47 etc that work
• If you move pricing, check if competitors match or ignore
• Consider running your own small controlled pricing tests

Savvy marketers let competitors test pricing first and reveal winning formulas.

Pricing Strategies Based on Competitor Positions

Position against competitors:

Price Lower

• Frame as discounted savings for budget-conscious buyers
• Make up margin through higher volume and cross-selling

Match Price

• Reinforce you offer similar value and quality
• Avoid pricing battles and just compete on merits

Price Higher

• Justify through product differentiation, features and premium quality
• Increased margins allow greater product investment
• Appeal to buyers seeking prestige and premium status

Certain niches support higher pricing while others require lower costs to attract thrifty buyers. Use positioning to your advantage.

Psychological Pricing Tactics Based on Competitor Intelligence

Influence perception:

Odd Pricing

Price below round numbers like $99 vs $100 if competitors use even numbers.

Undercut Marginally

Come in just below competitors pricing like $49 vs $50.

Price Anchoring

Establish reference prices in buyers’ minds through consistent pricing.

Framing

Compare package discounts/savings relative to higher standalone prices rather than absolute cost.

Bundling

Sell packages of products together at significantly lower combined price than individually.

Versioning

Offer clearly delineated good/better/best options at ascending price points.

Match buyer psychology – don’t just logically calculate pricing based on costs and competitors.

Typical Buyer Price Sensitivity Factors

Understand drivers behind resistance:

Buyer Sophistication

Novice buyers lack understanding of value to assess fairly.

Procurement Processes

Organizations require formal justification for purchases.

Budget Expectations

Certain industries expect low pricing like apps or templates.

Commoditization Perception

Oversaturated markets with undifferentiated interchangeable competitors foster deal-seeking.

Unclear Value

Customers require education on less tangible or obvious benefits.

High Switching Costs

Raising prices risks angering customers stuck with you.

Address sensitivities proactively through messaging, packaging and pricing models.

Strategically Bundling Products to Increase Perceived Value

Savvy bundled pricing:

• Combine complementary products frequently purchased together
• Offer bundles at meaningful discount over individual prices
• Promote savings, convenience and exclusivity benefits of bundles
• Utilize tiered bundles with ascending products and discounts like Bronze, Silver, Gold
• Include hot new offerings, upgrades or limited-time bonuses in bundles to boost appeal
• Make bundles available both to new and existing customers to incentivize loyalty
• Rename bundles creatively after key differentiators like industry or persona

Attractively priced bundles increase order sizes while making purchases feel rewarding.

Pricing Strategies for Market Disruptors

Gain share disruptively:

Freemium Model

Offer free version with limited features plus paid pro upgrade. Removes barrier to entry.

Flat Low Monthly Fee

Price access significantly below competitors with small recurring fee vs large upfront license.

Premium Brand Focus

Provide highest-end niche experience justifying much higher pricing.

Innovative Packaging

Bundle otherwise piecemeal add-ons into single integrated solution justifying premium value.

Cross-subsidization

Use high-margin products to subsidize steep discounts on products battling competitors.

Ladder Pricing

Set entry package significantly lower than any competitor to attract deal-seekers and build base.

Rather than compete directly on existing terms, change basis of competition with pricing innovation.

Adjusting Prices Over the Product Lifecycle

Evolve pricing through stages:

Market Entry

Lower initial pricing to attract early adopters

Growth

Increase along with added features and benefits

Maturity

Bundle and offer tiered packages; aim for revenue maximization

Decline

Additional discounts and incentives to retain users unless purposefully letting product sunset

Continuously monitoring sales velocity, churn and demand indicators at various prices allows optimizing pricing fit as market matures.

Handling Competitors Using Predatory Pricing

Respond to unsustainable underpricing without destroying your business model through:

• Communicating true total cost of competitors lacking fees or quality
• Offering lower-tier version with fewer features directly against predatory competitor
• Increasing value through aggressive innovation and enhancement
• Focusing on higher-end tiers and products invulnerable to low-end disruption
• Creating switching costs through bundles, integrations and incentives

Refuse unsustainable race to the bottom pricing wars that only damage entire category long-term profits.

Mistakes to Avoid with Competitor Pricing Analysis

Steer clear of:

• Relying on listed prices alone. Verify through real purchase testing.
• Focusing solely on direct head-to-head competitor pricing. Consider market pricing more holistically.
• Failuring to factor rapdily changing prices and temporary discounts.
• Assuming all features and quality equal across competitors.
• Forgetting to analyze bundles, upsells and add-ons driving revenue.
• Not confirming pricing tiers match to appropriate customer segments.
• Copying competitors without considering positioning.
• Overreacting to or underestimating disruptive competitor pricing tactics.

Superficial, siloed, or reactionary competitor pricing analysis causes poor decisions. Take a measured, continuous approach.

Conclusion

Rather than guesstimate pricing, savvy digital creators turn to hard competitor intelligence to guide pricing strategy. Thorough routine competitive pricing research reveals openings to be priced at premium or discount tactically. Tracking competitor pricing over time provides an early warning system indicating disruptions and opportunities. And understanding psychological pricing principles allows framing pricing resonating with buyer motivations. With competitor pricing intelligence steering monetization, your offers drive maximum revenue while providing unmatched value perception.

FAQ: Competitor Pricing Analysis: Benchmark Against Similar Products

Q1: Why does competitor pricing analysis matter?
A: Competitor pricing analysis is crucial because it:

• Reveals price levels and structures buyers expect.
• Identifies pricing opportunities above or below competitors.
• Highlights which product features competitors monetize.
• Allows matching or improving upon pricing packages.
• Indicates optimal positioning – low-cost or premium.
• Uncovers underpriced areas to capitalize on.
• Provides insight into competitor discounts and sales.
• Prevents blind pricing decisions by using data.
• Tracks competitor price shifts indicative of strategies.
• Helps forecast sales at various price points.

Q2: When should I conduct competitor pricing research?
A: Analyze competitor pricing:

• Initially before setting prices for a new product.
• When entering a new niche or targeting a new buyer segment.
• Before planning seasonal sales or temporary discounts.
• After competitors launch a pricing change, sale, or new offering.
• If customer feedback indicates your pricing seems out of line.
• Annually as part of strategic planning to confirm pricing still aligns.
• When product costs change significantly impacting minimum markup.
• During recurring revenue analysis identifying potential to optimize pricing tiers.
• When releasing substantial new features potentially warranting increased price.

Q3: How can I gather competitor pricing intelligence?
A: Collect pricing insights from:

• Competitor websites.
• Price comparison sites.
• Customer interviews.
• Support conversations.
• Sales team insights.
• Resellers/marketplaces.
• Public earnings reports.
• Industry pricing reports.
• Conference attendance.

Q4: What are the key competitor pricing metrics to track?
A: Record competitor:

• Entry-level pricing.
• Average selling price.
• Highest tier pricing.
• Add-ons and extras.
• Package components at each tier.
• Discount bundles and bulk rates.
• Frequency of sales, coupons, and promotions.
• Payment options.
• Guarantees and risk reversal policies.
• Average number of add-ons purchased.
• Average subscription duration.
• North Star Metric – pricing of most popular offering.
• Churn and retention by pricing tier.

Q5: How should I organize competitor pricing data?
A: Use spreadsheets to easily compare:

• List competitors as columns.
• Add pricing factors as rows.
• Summarize packages in separate tabs.
• Use color coding.
• Include notes.
• Update regularly.

Q6: How can I leverage competitor price testing in my strategy?
A: Learn from competitor experiments:

• Note products and packages frequently discounted.
• Track successful launches at premium prices.
• Monitor failed price hike rollbacks.
• Pay attention to commonly used price anchors.
• Consider running your own pricing tests.

Q7: What pricing strategies can I use based on competitor positions?
A: Position against competitors by:

• Pricing lower.
• Matching price.
• Pricing higher.
• Use positioning to your advantage.

Q8: What psychological pricing tactics can I employ based on competitor intelligence?
A: Influence perception with tactics like:

• Odd pricing.
• Marginally undercutting.
• Price anchoring.
• Framing.
• Bundling.
• Versioning.

Q9: What factors influence typical buyer price sensitivity?
A: Factors include:

• Buyer sophistication.
• Procurement processes.
• Budget expectations.
• Commoditization perception.
• Unclear value.
• High switching costs.

Q10: How can I strategically bundle products to increase perceived value?
A: Savvy bundled pricing involves:

• Combining complementary products.
• Offering bundles at meaningful discounts.
• Promoting savings, convenience, and exclusivity.
• Utilizing tiered bundles.
• Including hot new offerings or upgrades.

Q11: What pricing strategies can I use as a market disruptor?
A: Gain share disruptively with strategies like:

• Freemium model.
• Flat low monthly fee.
• Premium brand focus.
• Innovative packaging.
• Cross-subsidization.
• Ladder pricing.

Q12: How should I adjust prices over the product lifecycle?
A: Evolve pricing through stages:

• Market entry.
• Growth.
• Maturity.
• Decline.

Q13: How should I handle competitors using predatory pricing?
A: Respond to unsustainable underpricing by:

• Communicating true total cost.
• Offering lower-tier versions.
• Increasing value through innovation.
• Focusing on higher-end tiers.
• Creating switching costs.

Q14: What mistakes should I avoid with competitor pricing analysis?
A: Avoid:

• Relying solely on listed prices.
• Focusing only on direct competitors.
• Ignoring rapidly changing prices.
• Assuming all features and quality are equal.
• Forgetting to analyze bundles and add-ons.
• Not confirming pricing tiers match customer segments.
• Copying competitors without considering positioning.
• Overreacting or underestimating disruptive tactics.

Q15: What is the conclusion on competitor pricing analysis?
A: Rather than guess pricing, use competitor intelligence to guide strategy. Thorough competitive pricing research reveals pricing opportunities and threats. Tracking competitor pricing over time provides early warnings. Understanding psychological pricing principles resonates with buyers. With competitor pricing intelligence, your offers drive maximum revenue while providing unmatched value perception.