By: Ed Heskins, Head of Pricing, Europe
To be in business is to be in competition. Few, if any, businesses operate in a vacuum, and even if your products and services are highly differentiated, customers will often seek alternatives to compare you with. In this way, pricing against your competition is as challenging as it ever was.
In other respects, however, the challenge today is far greater. With the rise of eCommerce and, alongside it, dynamic pricing, consumers have never been better informed, nor better able to take advantage of differences in pricing. And Price Wars have never been easier to start. So how should the savvy pricer look to stay on top of pricing in a competitive environment?
Document your value
The first step is to document precisely how and where your business offers differentiated value. Define who your competitors are, how these differ between different customer segments, and the extent to which different aspects of your offer meet customers’ needs.
We use Price Value Mapping, which allows businesses to visualize their market and develop hypotheses for pricing responses in different scenarios. Begin by building up a picture of your competitive environment based on the knowledge across your business, including input from Sales, Marketing, Finance, and Product or Service Delivery teams.
Once you have documented value drivers and performance scores across your various customer segments and product areas, validate these insights through direct research with your customers. Be prepared to challenge assumptions within the business on what factors customers consider important, and how your solution is perceived to perform.
Segment your offer
For different customers, your offer will provide different levels of value. For this reason, price segmentation is the backbone of any good pricing strategy, and is especially important when customers have a range of options from which to choose. Using your value maps as a guide, identify those customer groups where you offer the greatest incremental value relative to the competition.
Now identify how you can segment your offer to ensure your value proposition is targeted for each group. This may be by offering low-cost, low-value products to cater to your most price-conscious customers, or bundling together features in a way that maximizes the value offered to attract those with a higher willingness to pay. An affordable core proposition combined with value-add opportunities can help you navigate a fast-moving customer base.
Gather intelligence
“The most meaningful way to differentiate your company from your competitors… is to do an outstanding job with information. How you gather, manage, and use information will determine whether you win or lose.”
Bill Gates (2009). “Business @ the Speed of Thought: Succeeding in the Digital Economy”, p.12, Hachette UK
If you are in a consumer-facing or eCommerce business, then there has never been greater access to pricing data than there is today. Pricing data can be bought or built through the use of web-scraping solutions capable of tracking price changes on a weekly, daily, or intra-day basis. These can alert you to price adjustments requiring action before you see any shift in sales volumes.
For businesses whose competitors do not publish pricing online, gathering pricing data is complicated but just as important. Insights on competitor pricing and tactics, gleaned from conversations with clients, are often held within sales teams, but frequently remain undocumented. Capturing this in a central hub will allow for a joined-up response to changes in tactics. Customer research can also be used to build a picture of competitor pricing by proxy.
Plan ahead
Armed with this information, it’s time to build out our playbook. In the modern pricing environment, reacting swiftly to changing price conditions is crucial to maintaining an advantage, and defining our responses in advance will save you from wasting valuable time securing stakeholder buy-in when quick decision-making is required.
Define your pricing floors and ceilings; identify which competitors to track, which to monitor, and which to ignore; and agree on your authorization processes in advance. Build out your anticipated response to different price moves, including time to respond. Agree on what the KPIs performance will be measured on and where this will be captured.
Track results, document lessons learned, iterate, and improve
Pricing challenges in a competitive market are not fixed. What works today may not work tomorrow. It’s important to capture data on pricing performance, monitor your pricing strategy’s effectiveness, and adapt as needed. Look out for changes to market trends, customer feedback, and competitor pricing strategies, which can all be indicators that you need to consider a change to your pricing strategy.
Ultimately, successfully navigating pricing challenges in a competitive environment requires a comprehensive understanding of your value proposition, segmented by customer type, and supported by price data and pre-approved responses. With these in place, your business will be in a strong position to rise above the competition.
Iris Pricing Solutions offers targeted strategies tailored to your unique value propositions. Utilizing innovative techniques like Price Value Mapping, we visualize your market, empowering you to prioritize, segment, and strategize effectively. With our team of pricing experts, we ensure your business stays agile and responsive. Stay steps ahead of competitors and adapt swiftly.
