Utilizing competitive pricing intelligence to the fullest is much more than getting your competitors’ prices and information and then reacting to it. You have to look at your own pricing in new ways to find out where can you make money, save money, and increase your profit margins. Here are some wizardly ways to use your competitive pricing intelligence to maximize profits.
#1. Must Have: Strategic Plan
Don’t make the mistake of thinking that competitive pricing is only about setting numerical values. It’s really about creating a set of strategies to maximize your company’s profits. You’d be surprised how often we hear that our customers don’t have a strategy, until they begin using our pricing intelligence tool. You have to develop a real plan of how you’re going to proceed, and continuously monitor your prices.
2. Beware The Pitfalls of Underpricing
Many businesses underprice their products hoping to drive up volume by offering their product as the least expensive alternative. There are at least two downsides to this: 1. Not knowing that you are pricing a lot lower than your nearest competitor results in thin or greatly decreased profit margins, and leaving money on the table unnecessarily. 2. If you price low on purpose, but don’t have brand recognition, your product may be perceived as being “cheap” or suspect and people won’t buy it.
#3. Find Additional Value in Your Product
You may have opportunities to price higher by providing additional value. Do you offer additional service with your product or are your goods of perceived higher quality? Will you take returns without question? Do you cover return postage? If so, you may be able to justify a higher price.
#4. Raise Your Prices and Monitor What Happens
A pharmacy owner tried to figure out how much to charge for a pack of panadol. Sales were steady at N100, but what if he could charge more? To find out, he raised the price from N100, to N200, and observed whether or not customers continued to buy the aspirin. If sales fall off, cut the price back down to what the market will bear. If they remain steady, keep pushing up the price. The key is to constantly monitor the effects, tracking your sales volume to be sure that you are benefiting from these actions.
#5. Lower Your Prices without Lowering Your Prices
— You may have priced your products too high for part of your target audience. The question is, should you lower them to accommodate everyone? (Answer): No. You can always discount your products or give customers something free in order to get them to try your product or generate traffic. You can offer special holiday or promotional prices; or price promotions based on joining a club or email list. The key is that you are not lowering the price, but you are offering special prices to special people at special times.
To be successful, you need to monitor your data incessantly and analyze competitive pricing changes over time to get the true picture.
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