Pricing can make or break your business.
It affects how your customers perceive your brand and how loyal they’ll remain. If the price is too high, you might scare them away. Price is too low, they may question your product quality.
(Or are these just myths?! 👀 Read on to find out.)
But with the right pricing strategy, you can win over new customers, keep the ones you have, and grow your business.
So, how do you strike the right balance?
Use competitive pricing.
Let’s take a closer look at how competitive pricing can impact your business and help you thrive in today’s market.
Learn your competitor’s secrets with Unkover’s competitive intelligence tools. Try it for free today.
Competitive pricing, price perception, and price positioning – What does it all mean?
To price your product competitively, you need to understand three key essential concepts.
Let’s review how each one shapes your pricing strategy and influences customer behavior.
Competitive pricing
Competitive pricing is about knowing your market and staying ahead of the game. You simply analyze what your competitors charge and set similar or lower prices. For example, if other time-tracking tools charge between six and eight dollars a month for a low-tiered plan, you might charge between five and six.
This helps you make sure your pricing isn’t too high or too low compared to similar ones in your industry.
But beware, relying solely on competitive pricing can lead to a “race to the bottom,” where businesses continuously lower prices to outdo each other, ultimately hurting profitability.
Instead, balance competitive pricing with other important factors, such as product quality, brand reputation, and customer service.
Tools like Unkover can make this process easier by offering real-time insights into competitors’ pricing. Use Unkover to adjust your prices dynamically without sacrificing profitability.
Price perception
Price perception is how your customers view your product price. It’s less about the number itself and more about the value customers associate with it. Marketing strategies, competitive analysis, and price management automation play significant roles in shaping this perception.
For instance, improving your site’s customer experience, offering custom plans and personalized recommendations, and using messaging tailored to an enterprise target market can affect price perception.
Customers are more likely to pay a premium if they believe they’re getting value for their money. A polished online presence with well-timed promotions and the right language can shift the perception from “expensive” to “worth every penny.”
For instance, Wholesale Frames LA focuses on showcasing its premium quality materials and generous discounts on its website. Everything’s quick and easy to find, its customer testimonials rave about product quality, and new customers qualify for a 50% off coupon. Its prices are also competitive compared to other brands in its industry.
By offering high-quality frames at competitive prices, social proof, and a user-friendly experience, the brand attracts loyal wholesale customers who recommend the business to others.
Use Unkover to stay informed about your competitors’ promotions and discounts.
Price positioning
Price positioning is where your brand stands in the market relative to your competitors. It’s closely tied to your pricing objectives, competition, and customer loyalty.
Do you want to be known as a premium brand, or do you serve a budget-conscious audience?
This helps customers better understand your brand and influences their purchasing decisions.
To position your prices effectively:
- Research your competitors’ strategies. Including their pricing models, packaging, and unique features. Tools like Unkover can help you find opportunities to differentiate your brand.
- Make sure your pricing aligns with your brand image. For a premium brand, keep prices high to match the perception. For broader appeal, set competitive prices, but be fair. Don’t diminish your brand’s value.
The benefits of competitive pricing
By following a competitive pricing strategy, you can:
- Attract new customers
- Increase your market share
- Improve your profit margins
Here’s what else you need to know about competitive pricing:
Dynamic pricing strategies
Another tool you can use when setting your prices is dynamic pricing.
Dynamic pricing is when you adjust prices based on demand, time, and market conditions to stay competitive and optimize your revenue.
PS: You can use Unkover to dynamically adjust your prices based on market conditions.
Consider testing the following dynamic pricing strategies:
Season-based Pricing
Adjust prices based on the time of day, week, or year. For example, raise prices during peak shopping seasons or lower them during off-peak times.
For example, Cruise America, a leading RV rental and sales company in the US, uses season-based pricing for its RV sales.
During peak travel seasons, prices adjust to reflect higher demand and maximize the company’s revenue. During the off-season, the brand has lower prices and promotions, making RV ownership more accessible to budget-conscious customers.
This dynamic pricing model helps Cruise America stay competitive year-round while providing value to its customers.
Demand-based pricing
Set prices based on current demand. High demand may warrant higher prices, while low demand may need discounts or extra value-adds to encourage people to buy.
For example, if demand spikes after a trend or announcement, you might raise prices to boost profits. When demand is low, you might roll out a generous special to attract new customers.
Segment-based pricing
Offer different prices to different customer segments.
You might offer discounts to first-time buyers or loyalty program members. Or you might charge differently based on where a customer lives in the world. For example, if your product isn’t typical or the economic conditions are poor in a particular country, you might offer customers in that region a lower price.
You can also segment customers based on size. You might vary your pricing based on the number of team members a company has or how large a business is. For example, you might have a price for small businesses, another for mid-size, and a third for enterprises.
There’s a caveat when it comes to dynamic pricing, though …
While dynamic pricing can be effective, be sure to manage it carefully. Frequent price changes can confuse customers and affect trust if you’re not transparent. Make sure your dynamic pricing strategy aligns with your brand positioning, values, and customer expectations.
Debunking 5 pricing myths
When it comes to pricing, there are several myths that can hold your business back.
Let’s debunk some of the most common ones.
Myth #1: Customers want the lowest price
Customers don’t always want the lowest price. In fact, they may associate the lowest price with low quality. Research shows that customers are more concerned with getting a fair price for the value they receive.
For example, a customer shopping for a smartphone might bypass the cheapest option because they suspect it lacks essential features or durability. Instead, they opt for a mid-range option that offers a better balance of quality and price.
In other words, don’t compete solely on price — focus on offering value. Highlight the unique benefits of your product or service, and make sure your pricing reflects the quality you provide.
Myth #2: If you increase your prices, you’ll lose customers
Increasing prices doesn’t mean losing customers. If it did, Netflix and other media subscriptions wouldn’t consistently raise prices year after year.
Yes, an unreasonable price hike can deter buyers. But a reasonable increase is expected as time goes on — especially if your customers are loyal and value what you offer.
In fact, a well-justified price increase can even enhance your brand perception. It signals that your product or service is worth more, which can attract higher-end customers who are willing to pay for quality.
Myth #3: Pricing is how to stay competitive
Pricing is important, but it’s not the only way to stay competitive. To truly stand out, you need to consider other factors like product quality, brand reputation, and social proof.
For instance, a customer might choose a more expensive product because it comes with excellent customer service, has outstanding reviews, or is backed by a brand they trust. These factors are sometimes just as important, if not more so, than price.
Myth #4: Changing your pricing strategy is too complicated
Many businesses stick with outdated pricing strategies because they believe changing them is too complicated. But the truth is, adapting your pricing strategy doesn’t have to be a daunting task.
In fact, failing to do so can be much more risky and costly in the long run.
Staying flexible and open to change will help you remain competitive and profitable.
Myth #5: You have to sell more to make more
While increasing sales is one way to grow, it’s not the only — or even the best — way to strengthen your bottom line.
Increasing your profit margin through strategic pricing changes can be a more effective approach. For example, by raising prices slightly, improving product packaging, or offering premium features, you can boost your profits without necessarily increasing your sales volume.
This is particularly useful for businesses with limited capacity or those operating in saturated markets where increasing volume isn’t feasible.
Need inspiration? Check out these examples of stunning pricing pages that work.
What’s your pricing strategy?
Your pricing strategy is a powerful tool that can help shape your brand, attract customers, and inspire growth.
Whether you’re looking to attract new customers, increase market share, or improve profit margins, having a well-crafted pricing strategy can help. And with tools like Unkover, you can stay ahead of the competition, adapt to market changes, and optimize your pricing for success.
Start a free Unkover trial today to see how competitive pricing analysis can transform your business in a competitive market. When you use competitive-based pricing, you can focus on price matching to land those potential customers you’ve always dreamed of capturing.
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