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Judging the impact of competition on pricing strategy requires that you learn about your competitors’ products and how they are similar and different from your product.

Many criteria contribute to price. These include distribution methods, customer service, business reputation, price range, product features and target market.

It would take more than reasonable article length to cover all of these. So instead this article will cover only price range, product features and target market.

To make these points easier to comprehend, I’ll discuss one of my products as an example.

Impact Of Competition On Pricing Strategy: Know the Range Of Prices That Your Competitors Charge For Their Products

To determine how to price your product, do a bit of research and determine the range of prices that your competitors charge.

Research on competitive products will tell you the low and high prices, and the range between them.

For instance, I did some research on Amazon.com and discovered that the competition for my market segmentation book ranges from $6.95 to $159, with a median of $82.98. So I know to price my book somewhere in this price range.

You need to discover the price range of your competitor’s products as you determine your price. Whether your price should fall on the low or high side of the price range for competitive products depends upon your product’s features compared to your competitors’. It’s also influenced by your target market.

Impact Of Competition On Pricing Strategy - Determine The Features Offered By Competing Products

The second thing you need to learn about the impact of competition on pricing strategy is that price varies by features.

Now your research should go beyond core features. Customers expect all products to have core features. To get more than the minimum price, your product should provide at least one feature that makes it different from all competitive products.

For instance, if my book only provided a definition of market segmentation and other standard market segmentation information, it would be hard to sell. People expect that information so it’s not a selling feature.

But the exact process to conduct market segmentation can differ drastically. Some processes require complicated statistical analysis that are usually conducted and understood only by marketing agencies specializing in market segmentation. Others use simpler processes that require less complicated statistics. Very few require no statistics. So ease of the market segmentation process covered in my book is a feature that relates directly to readers’ benefits.

Impact Of Competition On Pricing Strategy: Determine How Your Target Market Differs From Competing Products

Another element in the impact of competition on pricing strategy is the target market. If you create your product for a particular group of people, you can charge more than if you create it for everybody. And if that is an exclusive group, you can charge even more. For instance the highest priced market segmentation books are written for marketing agencies. They can afford to pay top dollar for information that they can mark up to their clients.

Just because you have a product that is similar to competitors’ doesn’t mean that you sell your product to the same type of people.

For example, most market segmentation books are written for one of three target markets: marketing students, marketing professionals, and executives of large businesses.

Small business owners just aren’t being served well by these competitive market segmentation books.

Impact Of Competition On Pricing Strategy: Conclusion

Once you know the price range of competing products, the extra features offered by each, and the target market for each, you will have a much better idea of how to price your product.

To illustrate how to use this information, I priced my market segmentation for the specific target market so I didn’t go to the high end of the price range. After all, small business owners have limited resources. Still I didn’t go to the lowest of the range because my book provides features not available with competing products. Although I know that my book has quality, I decided to price it barely half of the median price. First I wanted to price it right for my target market, and second, it’s presently sold only as an e-book.

If you use the information in this article, you can also set a good price for your product by noting the impact of competition on pricing strategy.

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