Pricing strategy is one of the most important and, at the same time, most difficult decisions to be made by every seller. Whether your business operates offline or online, price is always an important factor contributing to successful sales. How, then, should you select the right pricing strategy? Why should you check how your products are positioned in comparison with your competitors?
The pricing strategy of a brand should be based on several factors – most importantly, on the type of the product and its target group. The pricing strategy can be defined in several ways. The most frequent strategy is the cost-oriented strategy (where you total the manufacturing costs and add a margin), demand-oriented strategy (where you try to estimate how much the customer is willing to pay for a particular product) and competitive-oriented strategy (where you set your prices by analysing the prices of your competitors). To use the last of these three methods, you will have to determine how your brand should be positioned on the market.
There are at least several methods for classifying pricing strategies. The most frequent classification is the following:
- low pricing strategy
This strategy is normally used for strongly competitive markets and products that are easy to substitute. The seller has low margins, choosing sales volume over high profits. The prices in this strategy are lower than the average market price.
- neutral pricing strategy
This strategy is used for products priced at approximately the same level as the average price on the market. The manufacturers who use it usually avoid competing through price and try to encourage the customers to buy their products by emphasising the benefits of their offering other than the price itself.
- high pricing strategy
This strategy is generally used for products with exceptionally high quality, which are frequently innovative and difficult to substitute. Such products include, in particular, premium and luxury goods. The prices in this strategy are higher than the average price on the market, and sellers charge high margins, frequently disproportionate to the manufacturing cost. However, they can increase the value of the product as it is perceived by the customer through appropriate marketing communication.
Marketing communication is a very important aspect of selling and brand building. Premium products are intended for a completely different target group than economy products, which means that the methods you have to use to convince the customer to buy your products will also be different. Knowing how your products are positioned in comparison with competition is one of the most important factors when planning marketing communication. Why is this knowledge so critical?
Imagine a situation where a manufacturer advertises itself as a premium brand. It turns out, however, that its products are actually the least expensive option in certain stores. This will not go unnoticed by the consumers, who may conclude that the product is worth much less than the seller would like. Through regular monitoring of your prices in comparison with the competition, you can make sure that your communications are consistent and avoid such slip-ups. It should be noted that the price positioning of brands is not constant, and it may change along with the development of the product, both to the benefit and detriment of the manufacturer. By observing price positioning, you can regularly monitor the situation and respond accordingly in order to maintain the consistency of the image of your company and its communications.
How to monitor prices in comparison with your competitors? One of the ways is to check the actual price positioning of the brand by using the latest monitoring tools. They offer a wide range of price monitoring options, starting from the prices of your own products as well as the products of your competition and ending with the monitoring of special offers, individual categories and stores or out-of-stocks.
For instance, Dealavo prepares reports for clients that show the market prices for the selected product categories, broken down into different price levels. Thanks to transparent summaries, containing the names and pictures of the individual SKUs and relevant price ranges, our clients can easily verify their position on the market and compare their offering with that of the competition. The Dealavo report can also be used to check your positioning not only in comparison with the entire market but also in specific stores and selected price ranges. With such a transparent summary, our clients can easily notice when the actual positioning of their brand is inconsistent with the selected communication strategy, and they can make the changes needed to maintain a consistent image.
Although Dealavo is a platform dedicated primarily to e-commerce, you can also monitor offline sales channels. You can check which products – your company’s or the competition’s – are available at the physical stores of the retailers.
Contact us if you would like to learn more about price monitoring. Our experts will help you pick the right solutions to effectively monitor your market and acquire the valuable data you need to improve your pricing and marketing strategy.