We’ve talked before about the importance of your competitive positioning strategy, of understanding the market landscape, its opportunities, and working to fill them.
When you do this well, you position yourself to capture as much under-served market share as possible, maximizing your growth potential by working smarter, not harder.
But if you’re to do that, there’s one crucial element you cannot overlook. Your pricing strategy.
The article gives you an overview of competitive pricing intelligence.
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What is competitive pricing intelligence?
Competitive pricing intelligence is simply data on your competitor’s prices. But the practice of gathering and analyzing pricing intelligence sees you monitoring your competitors’ prices, promotions, and pricing strategies. The aim is to inform your own pricing strategy and make you an even more dominant player in the competitive landscape.
Why is competitive pricing intelligence important?
Alright, so far so simple. Why should you care about pricing intelligence?
Though simple, information about your competitors’ prices is powerful. Whether you’re selling personal training services online, leather jackets on the high street, or software as a service to businesses, pricing intelligence is information that can help make you more competitive.
Here are some reasons why:
Easier benchmarking:
First, when you know what your competitors are charging for products and services similar to yours, you have an idea of how to benchmark yourself.
But a solid pricing strategy goes far beyond pinning your prices in the ballpark of your closest competitors.
That’s why competitor price data is best viewed in context. That context being the other the rest of the competitive intelligence you've managed to collect. Together, price data and other intel pushes you towards a complete understanding of your competitors’ pricing strategies.
Understand competitor positioning:
Second, you can learn a lot about a product by its price. You can also learn a lot about how a business wants the market to perceive its product, in turn learning valuable information about its positioning strategy.
Understanding a competitor's positioning is a great springboard for developing your own brand positioning strategy. Essential if you want to dominate your own subsection of the market.
Boost sales and profitability:
Finally, prices have a direct impact on your sales and profitability. If all your competitors price themselves lower than you, you’ll need to work that much harder to communicate why your product is still great value at its higher price point.
Get this right, and it can work massively in your favor. Prestige pricing strategies take advantage of exactly this effect. But to do that, you first have to understand the game you’re playing, and where you stand within it. Competitor pricing intelligence can help with that.
What is a pricing intelligence strategy?
Your competitive pricing strategy is the set of strategic decisions you make about the price of a product or service in an effort to drive more sales and profitability, capture more market share, or more competitively position your brand and your products.
Again, you can tell a lot about a product or service by its price. Everyone loves a bargain, but there’s a ton of research indicating that price affects perception.
Pricing and perception
In one study, 140 participants were served three wines, each at different price points: one cheap, one expensive, one in the middle.
The catch? The prices were entirely made up. The results showed that deceptively marking up the price of a wine boosted its ratings.
The same goes for reviews, too. Consumers’ ratings of wines improved if they had been shown positive reviews by experts first, and decreased if they were shown negative reviews.
If this is true, higher prices make for better products.
These findings have all sorts of fascinating implications for consumer behavior. One possible conclusion is the positive reviews and/or the high prices affected consumer perceptions to actually improve their experience.
If this is true, higher prices literally make for better products. After all, if someone enjoys their meal more, because they feel they’re treating themselves to expensive, fine wine, then it was worth what they paid for it. Regardless of how much a restaurant marks up the price.
Everyone loves a bargain! Or do they?
So what does this have to do with your pricing strategy?
As we’ve seen, pricing impacts perception, but pricing isn’t the only way you try to affect buyer perceptions. Your whole positioning strategy is built around this, too.
Budget vs premium options:
Some of your competitors will position themselves as the ‘budget’ option. That comes with a bunch of associations and implications, both positive and negative.
But there’s a section of the market that needs a solution and loves a good bargain. They’ll be more open to the positive associations, and more oblivious to the negative ones. They’ll be less put off by the tradeoff in features, or customer service quality, and more attracted to the low price point.
But this doesn't necessarily mean you need to price your products low all the time. Nor that you should make yours a budget brand. Loss leader pricing strategies see businesses pricing items low temporarily, or strategically pricing only essential items low.
On the other hand, there’s a section of the market looking to pay high prices. They’d rather spend a big chunk of the budget on something that offers value in the form of peace of mind, reliability, and personable customer service reps. In exchange, they’re willing to pay ten or even a hundred times the price of the budget option.
Building your strategy
Your competitive pricing strategy is a subset of your competitive positioning strategy. When it comes to marketing, pricing is a part of positioning. Pricing affects everything from how enticing your offer is to how your brand is perceived as a whole.
When you price your products properly, as part of an overarching strategy, it won’t matter whether you’re outrageously expensive or losing money on every initial unit. If the strategy as a whole is sound, the price becomes a hook, grabbing people’s attention and emotions and urging them to examine the deal further.
Let’s say you’re an SEO consultancy. All your competitors charge high prices from the outset. You want to differentiate, so you offer a free audit to businesses to generate leads.
That’s where the strategy really kicks in. You funnel all these leads to an upsell in the form of a one-time consult call with you to run through the results. After demonstrating the value of this kind of consult call, you upsell the takers into further calls. Perhaps at biweekly intervals for more advice and accountability.
Separately, you put all leads into another email funnel with information about your technical SEO makeover service. With this service, you remap website folder structure to make it more crawlable by search engines, improve site speed, and perform a bunch of other neat tricks to rapidly boost rankings.
On the initial consultation, you lose money, sure. But your initial offer is so much more attractive than the competition that you generate more than enough converting leads. So many, in fact, that you offset your losses with a ton of margin leftover. And when you take lifetime value (LTV) into account? Then you’re really winning.
Benefits of Competitive Pricing Intelligence
Alright, but what are you actually trying to achieve with pricing intelligence?
Here are a few of the key goals:
1) Increase Revenue
Better pricing strategies mean better positioning strategies, which means a more concrete chunk of the market can be yours to own.
When you own a particular chunk of the market, you’re said to have a niche competitive advantage. Just like it sounds, a competitive advantage means you’ve got an edge the competition doesn’t. If you can sustain that competitive advantage, it means an even higher probability of increasing your revenue over time.
2) Strengthen your competitive advantage
Like any strategy, your pricing strategy exists to help you win.
Data on how your competitors price their products helps you make more informed pricing decisions about your own, leading to better pricing and positioning strategies overall.
And, as we’ve implied throughout this article, a strong competitive positioning strategy gives you your best shot at dominating a specific niche in the market. You’ll avoid competition where it’s unnecessary, and win where it’s unavoidable.
Pricing information is also an essential component of any successful competitive battlecard. When you’ve got up-to-date pricing data on your key competitors, you can add the information to your enablement material. This ensures your sales team has the knowledge it needs to maximize win rates.
3) Gain Insights into Market Trends and Consumer Behaviour
Supply and demand influences prices. As much as you might want to take the spot of the most expensive, most premium product in your category, you have to turn a profit at the end of the day.
If the market disagrees with you about what your product is worth, and there’s no demand for it at that price, you’ll have a hard time making money.
But consumer perceptions of value change over time as supply and demand shifts. If you weather a financial downturn, for example, but your main competitor doesn’t, customers now have one solution fewer to choose from. As such, you’ll be in greater demand and be able to charge more as a result.
Viewing your competitors’ pricing decisions through this lens is enlightening. Trending fluctuations in their product prices over time can reveal information about consumer sentiment and supply and demand.
4) Avoid Price Wars with Competitors
The ‘race to the bottom’ never works. When a business doesn’t know its value, it thinks being the cheapest is the only way to win. Most often, they peg the price right below the current cheapest competitor.
This is a losing strategy. Positioning your product as a commodity only works if you’ve got deep pockets, the experience to play the long game (and win), and if you’ve built your business around this strategy from the start.
If your business isn’t built from the ground up to manufacture, process, market, and fulfill its services and products as cheaply as possible, your margins will be too small. When you start driving prices down, they’ll quickly dip into the negative.
A smart marketing team can create a positioning strategy that makes the most of your unique differentiators. Combine that with a bit of competitive intelligence, and you’ll have yourself a smart competitive positioning strategy.
No product is created in a vacuum
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🪛 A top-to-bottom tear down of the positioning process, and how CI fits in.
🏹 How to use competitive positioning to shatter your org’s revenue ceiling.
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How to gather competitive pricing intelligence?
So - a competitive pricing analysis sounds pretty useful, huh?
We thought so too, which is why we’d be letting you down if we didn’t tell you how to perform one. Here's how you do it. 👇
Collection and Analysis of Competitor Pricing Data
It all starts with collecting competitor pricing data.
We won't lie - this step can be difficult. The ethics of competitive intelligence can be murky, and it’s up to you to make sure you’re not getting hold of any information you shouldn’t have access to.
Even secret shopping is a gray area. It's unethical to misrepresent yourself, so don’t hide your business email address when you go signing up for a free trial of your favorite competitor's service.
Field intelligence:
First, a lot can come from the ‘field’. There’s a lot to be said for ‘crowdsourcing’ your CI efforts, and that holds true for gathering competitor pricing information. That means talking to customers, as well as finding out what your colleagues know.
In Competitive Intelligence Certified, Alex McDonnell, Director of Competitive Intelligence and Product Marketing at Airtable, recommends devoting a question to competitor pricing during your customer research and win/loss calls.
"It might sound like, 'Hey, after all that, what was the cost for XYZ competitor?', or maybe more broadly, or a little bit more gently, 'How did we compare on cost, or how did our product compare to [the] competitor's product on cost?'"
Whether you have a third party do this for you, or you handle the program internally, you can be the one to create the list of questions you need answers to.
You can then supply sales reps with these questions, uploading it to wherever they like to consuming their content. This has the benefit of giving you a chance to optimize phrasing for best responses, and to ensure these questions are never missed.
Competitor websites:
Second, competitor websites are a treasure trove of insights. Price monitoring software is out there to help you, but you can always have your dev team build you your own dynamic pricing strategy with web scraping libraries and packages.
Pricing data you can gather doesn’t just have to include product prices, though. It can also include data like:
- Discounted pricing.
- When particular discounts and promotions run.
- Who these promotions and discounts are offered to.
Once you’ve collected as much data as you can, it’s time to analyze what you've got.
As we alluded to previously, this involves viewing the pricing information you’ve got in context. That means in the context of each competitors’ positioning strategy as a whole. It also means comparing pricing strategies between competitors.
Internal teams:
Finally, be sure to gather competitive intel from internal stakeholders, too. Reps from various teams including sales, product, and customer success, make for great sources of intel of all kinds.
Sales and customer success reps (in particular those handling retention), are likely to come across pricing data while on calls with customers. Use what they know to aid your pricing efforts.
Challenges of competitive pricing intelligence
Pricing intelligence is notoriously tricky to get hold of, but in some industries it's almost impossible. In last year's Competitive Intelligence Trends Report, one respondent listed the acquiring of price tariffs as one of CI's main challenges:
"Pricing tariffs are hard to get, whilst dtails of product features can be sketchy."
Of course, that doesn't mean the best competitive intelligence pros give up. But you sometimes have to get creative.
Here are some of the challenges you might run into while gathering pricing intelligence:
- Competitors often don't list their prices.
- Ethical solutions can be hard to find.
- Product trials and secret shopping are vulnerable to bias.
Let's examine these in more detail:
1) Competitors often don't list prices
Depending on your sector and industry, you might not be lucky enough to have competitors that list their prices on their websites.
Many businesses, especially in the B2B space, only offer their prices on request.
Not only do they not want you, their competitor, knowing how much they charge, but they also want to capture every real lead and, depending on the projected value of the account, may even offer discounted prices in a bid to win a high value prospect.
2) Ethical solutions can be hard to find
There's a limit to what you can find ethically when your competitors don't want to list information publicly.
Sometimes, you have to dig a little deeper, but you must do so without misrepresenting yourself or breaking any laws. That means getting creative.
SEC filings, earnings reports, and other official documents are a necessity when prices aren't printed in plaintext on a competitor's website, or when a company representative won't share them.
Make informed pricing estimates:
Such official documents won't list product prices, though. Instead, you'll have to combine this information with a whole lot of lateral thinking to project what their prices are likely to be based on what you also know of other competitors.
For example, if you know what competitor X's production costs are, but you know both competitor Y's production costs and their prices, you might be in a position to extrapolate what competitor X's prices might be. Especially if their production costs are similar.
In practice, you'll likely need more than two pieces of information to triangulate probable prices. But doing so can help you fill in the blanks to a reasonable degree of certainty.
3) Product trials and secret shopping are vulnerable to bias
Not only is it unethical to misrepresent yourself, but even if your competitors do let you in the door for a trial or conversation, you're only guaranteed a very limited snapshot of their pricing strategy.
Some businesses have huge product lines. Quotes for customers can vary massively depending on the particulars of a given deal. Some customers will drive harder bargains, some accounts will be considered more valuable. All of these factors can alter the final price one customer gets versus another, even for the same product.
What's more, you're not the customer. And you're biased (whether you know it or not). You're likely to live and breathe the intricacies of your own products, and your competitor's product is likely similar. It'd be oh so easy to emotionally trivialize many of the very real benefits competitor products offer to customers.
So after putting together a report on a competitor product informed from a free trial, you should ask yourself, can I really trust this?
TL;DR
Competitive pricing intelligence is valuable. In many industries, it's also rare. But get your hands on even a good approximation of your competitors' prices, and you'll be well on your way to crafting a more competitive pricing strategy.
Stay on the right side of the ethical line, get creative, and put in the work, and you'll experience first hand how prices can shape perceptions and profits.
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