![]() ![]() It can be combined with another pricing model but not solely used as a stand-alone pricing method. Is competitive pricing analysis right for SaaS?įor many SaaS businesses, competitor based pricing may not be the right pricing model. This will not help your brand stand out and you will not be able to explain to your customers why your product is priced in this particular way. One amongst the herd - Since it’s a strategy implemented solely based on your co-market players, you will not be seen as different and will be a part of a huge herd offering the same products orand services at the same price. You future profits and revenue might take a hit from relying on someone elses strategy. You soon to be account for consumer demands and other market information.ĭon’t have access to the details and reasoning for the pricing - When you’re implementing a competitive based pricing model, you’ll be missing out on the details your competitors might have and if they went wrong, you go wrong as well. This is a model attributed to short term goals and you’ll be casketing your profits in the long run if you follow the same strategy, because as you scale you need to evolve your pricing strategy based on your product and not based on what someone else has to offer. ![]() Your competitors might be improvising based on the market pricing data or might change pricing completely with a change in marketing strategy to focus on a different market segment. Unsustainable strategy in long term - A competitor-based pricing strategy can sustain during the initial stages of market entry, but as you progress you cannot use it long-term. By combining two models, you’ll be aware of the market and have a sound strategy to stay ahead of the competition while covering your costs.ĭisadvantages of competitor based pricing But, before arriving at a final price solely based on the above two models, you can compare yourself with the competition and modulate your pricing a bit in order to be on-par with your competitors. Used in conjunction with other pricing strategies - A company can calculate their pricing based on a value based pricing model or a cost-plus pricing. Low Risk - Since your competitors are well-known players in the market and have been around for some time, the chances are slim that your pricing strategy might go wrong if you base it according to them. It takes only a few hours to arrive at a decision for the same. Simplicity - A competitor based pricing model is very simple to implement as it requires basic research and insight into who your competitors are and what they’re doing with product and prices. It can also be adopted when you want to provide a competitive price for your customers in order to grab their attention, increase sales and your brand value. Pricing below the competition: Pricing below competition shouldn't be a strategy, if at all, you would do so if your product is limited in terms of features and functionality. ![]() But here, your primary focus should be on the added value your product has to offer even though your product and its features are the same as your competitors. You price your product similar to that of your competitors. Pricing on the same level: Also known as price matching. ![]() It is usually done when you feel the products or services you offer are a notch above your competitors. Pricing above the competition: Offering products or services priced superior to your competitors. There are three methods as to how you can price your product after doing a thorough analysis of your competitors They may be products that might have only one or two similar functionalities as yours and don’t compete for the same market share in a wholesome way.Īfter finding your product’s fit in the market, and accounting for internal expenses such as production costs, you must now understand competitive pricing and analyze how to price the product. Indirect competitors: Indirect competitors offer products or services which will overlap with yours and partly solve the problems in a completely different way. With a competitor based pricing strategy, you have two different types of competitors you need to be aware of while grouping them together:ĭirect competitors: Direct competitors offer similar products or services and compete for the same market share. In order to arrive at a reasonable pricing decision that maximizes profit margins, group your competitors together according to relevance in ascending order and see where your product and brand fits in the range between them. How is competitor based pricing calculated? ![]()
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