3 items tagged "pricing strategy"

  • Competitive pricing analysis: getting familiar with competitors' pricing strategies

    Competitive pricing analysis: getting familiar with competitors' pricing strategies

    What should be the right price for your product or service? Are you optimally pricing your offerings or leaving money on the table? Should you deploy differential pricing, that is, higher prices at locations with lower competition and more attractive prices in competitive markets?

    Even established companies struggle with such fundamental questions. When done intelligently, pricing could be one of the most important levers for profitable growth. According to Bain & Company, B2B companies earn an 8% increase in operating profit for every 1% of improvement in prices. But, when pricing is done unintelligently, the dangers are equally significant.

    Yet while companies dedicate ample resources to continually reduce costs or sell greater volumes, they rarely invest to the same extent in developing their pricing strategy. As a result, they either underprice their offerings or leave the door open for competitors to capture the market share and also the profits.

    For example, an unintelligent pricing strategy would be to have high list prices and then offer heavy discounts. This strategy will get the company knocked out in the early stages of a bid because most B2B companies include list prices as a filter in the initial screening of suppliers.

    According to a recent study by Market Track, 80% of respondents said they compare prices from different suppliers before making a purchase. This phenomenon is not limited to B2C. It is equally applicable to B2B products as well. But there is one key difference.

    B2B buyers are looking for the best value, which doesn't always mean the lowest prices. A competitive pricing analysis will reveal what your target customer segment values and what they are willing to pay for it. More on this later.

    In today's increasingly competitive world, organizations that meticulously collect and analyze their competitors’ pricing data and their pricing models, and then develop their own pricing strategy after mapping their price positioning in the market landscape, are more successful when it comes to competitive bids.

    In this article, let us understand what pricing strategies are, how a competitive pricing analysis can help your organization, and how to find out your competitor’s pricing information. Let's begin.

    What is a pricing strategy?

    Pricing strategy and overall business strategy are two sides of the same coin. A pricing strategy is a model or method used by organizations to establish the prices for their products or services, which plays a pivotal role in determining their target customer segment, which drives the overall business strategy.

    Pricing strategy helps answer important strategic questions: Should you go after increasing the market share by selling at high-volume and low-prices, or go after high margins by targeting a premium segment with a low-volume and high-prices strategy; or have differentiated products for different segments. For example, a lower-priced version of your premium product with restricted capabilities?

    In the ideal world, your target customer segment should define the pricing strategy. But it can work the other way around also. You first define the price of your offering based on what’s possible for your organization, which is a function of your internal capabilities and strengths. And then define the customer segment based on the predetermined prices.

    Pricing strategies and tactics can differ from company to company, and can also differ for the same product of a company for different geographies, customer segments, and industry segments.

    Benefits of intelligent pricing are not limited to the larger business strategy. All functions of your organization can benefit from a thorough competitive pricing analysis. It can drive tactics for your sales, product, go-to-market, operations, finance, and HR. Let’s see how.

    How does a competitive pricing analysis help your organization?

    The need to innovate and continue growing your business never dissipates. ‘Innovation’ is not limited to adding something new – a new technology or a new feature. Innovation could be in your communication strategy, hiring tactics, or in your pricing strategy. ‘Innovation’ is a mindset of your organization that always asks, “How can we be better than yesterday?” Similarly, your pricing has to continuously evolve and should never stop. Therefore, a company should have a process for regularly checking competitors’ price moves.

    Innovation in your pricing strategy based on your competitive pricing analysis can have an immediate and direct impact on your company’s bottom line. Below are some examples of how different functions in organizations can use competitive pricing analysis:


    A comprehensive competitive pricing analysis can help in determining the strategy of the organization. Does the target segment have the willingness as well as the capacity to pay your prices? What are the alternatives to your offering? What does this segment feel about the prices of your competitors?

    The strategy, based on the above answers as well as internal capabilities, can be to maximize profitability (highest possible price) or to maximize the market share (lowest possible price).

    It can also be used to defend an existing market from new entrants by reducing the price to lower than the cost price (a common tactic of companies loaded with venture capital) or to enter a new market by offering heavy discounts.


    Are your customers interested in higher capital expenditure to avail tax benefits of depreciation or planning to shift CapEx to operating expenses, which will require you to offer subscription-based pricing? Such pricing decisions will drive your product priorities.

    Competitive pricing analysis can help in understanding how your customers value different offerings, products, and features. This analysis can help you map the pricing parameters and corresponding features that are offered by your competitors. This will help your product teams to define the roadmap and prioritize those features that provide the maximum value to your target customers, and can also command a price premium.


    Marketing success depends on the understanding of your (Ideal Customer Profile). Your competitive pricing analysis can help the marketing function to clearly define your ICP.

    This data gives an additional perspective to your marketing function about the target customers and market segment with respect to your competition. It helps them plan marketing promotions, and highlight your appropriate strengths and the limitations of your competitors’ offerings.

    For example, customers that are less exposed to cost pressures and thus less price-sensitive, usually attribute a much higher value to the brand. For such groups, marketing will develop a premium positioning by focusing on branding rather than sales leads. A strong brand gives confidence and enables companies to command a premium price even if the offering is similar to the competition.


    Your pricing has an immediate and direct impact on your sales function. But salespeople perpetuate incorrect beliefs when they frame conversations with customers around price rather than the value and differentiated aspects of your pricing. For example, we must have lower prices for our salesforce to close deals; or, higher prices and a tougher stance on pricing will cause customers to defect.

    You need to equip your sales team with competitive pricing analysis and help them make smart decisions. Educate your sales team on the value proposition that differentiates your offerings from the competition.

    For example, reliable delivery and quality could fare better than the lower price; the ability to integrate with other systems could be more valuable than the features; ability to customize the product and ease of use could be the most important criteria; a diverse product portfolio so that the customer can purchase multiple items from the same supplier; a willingness to hold inventory and consultative advice.

    Information on your competitors' pricing strategies can be one of the most important tools in your sales rep’s arsenal to knock out your rivals and accelerate the sales cycle.

    Therefore, your pricing strategy should include a detailed and up-to-date understanding of your direct (as well as indirect) competitors’ pricing strategies. This requires accurate data, context, and insights, but these tend to be scattered across different places, both inside and outside of your organization. In the next section, we’ll show how a competitive intelligence software acts as a catalyst to collect this data and enable your competitive pricing analysis.

    How to find competitor's pricing information

    Competitors’ pricing information is one of the most common asks from competitive research by sales, marketing, and strategy teams. Enterprise sales teams need this information almost regularly for individual deals. But companies conduct comprehensive competitors’ pricing analysis only when they are launching a new product or a significant revamp to their existing offering. To stay ahead in the game, companies should have a process to regularly monitor and evaluate their pricing against competitors. Without further ado, let's dive into ways to conduct a price analysis.

    Competitors’ websites

    Some companies list their pricing information and pricing policy on their website. Getting such publicly available information, and tracking changes, are the minimum that you need to even stand a chance in your competitive landscape. Most likely, this will bring you at parity with your competitors because they are definitely capturing such information. Your salespeople should be updated on this information because your prospects are already aware of it.

    But, this is easier said than done. More than pricing changes, it is more common to change the features offered in different packages and pricing policies. It’s not possible to manually visit all the competitors’ pages and spot such changes. To achieve this, you need a market and competitive intelligence software.

    Analyst reports

    Analyst reports are a good source of competitive intelligence. These reports, usually, provide the industry trends and compare key features of different vendor solutions. Often, as a part of their detailed vendor evaluation, they discuss prices (or range of prices) of different vendors.

    You'll find numerous analyst reports on the internet, unfortunately, most of them will be paid. Before purchasing the report, read through the summary, abstract, and TOC (Table of Contents) to make sure that pricing and pricing trends are covered in the report. You may also directly contact the sales team of the analyst firm and ask for some sample data.

    “Insight: Sometimes you may find these analyst reports for free by searching vendor websites who may have licensed them for free distribution.”

    Review sites

    Customer reviews are a great way to get competitive intelligence, including pricing information, directly from the users of your competitors. Some review sites like G2 and Trustpilot have entire review sections dedicated entirely on the pricing. Reviews are a great way to learn about your competitor's strengths and weaknesses, and then use them to arm your sales people with intel, or modify your pricing to outmaneuver them.

    Insight: Review sites can be a valuable source of information on not only product pricing but the product itself. Insights gleaned from user reviews, whether positive or negative, can be leveraged by your organization. For example, in the above image, a miffed user tells us that the subscription signup is misleading, and omits whether the subscription will be auto-renewed when you sign-up. Great ammo for your sales team in future deals!

    Talking to prospects

    Your prospects know the pricing details of your competitors either through their own research or competitors’ salespeople. Your sales team is talking to those prospects, but not necessarily asking for the details of competitors’ pricing. This is either because they are not trained to, or no one asked them to capture this information. Or, they find it uncomfortable to ask for such information.

    However, this is a missed opportunity. Let’s put it this way: The worst that could happen is that the prospect says no. It’s true that not all prospects will divulge this information, but chances are that a handful will voluntarily give away this pricing information. Sometimes just to drive a bargain! So it’s never a bad idea to ask.

    You cannot draw any meaningful and definite insights by getting pricing as discrete data points in an ad-hoc manner. But capturing this information and not utilizing it properly is nothing short of a crime.

    The right way is to aggregate such strategic information from all possible sources and then analyze it to create a clear picture of your competitor’s prices and maybe even their pricing strategy.

    Your sales team should be trained that every time they get any pricing-related information, they have to enter it into a common database, which should be your market intelligence platform. To encourage this behavior, you should log who submitted this information and acknowledge the salesperson in the organization-wide forum. Have a look at the image below, which represents how field intelligence is added into a competitive intelligence software.

    Some companies are capturing this information in their CRM, which is a good start. But a CRM is not designed for competitive pricing analysis. Specialized products such as market and competitive intelligence platforms are necessary not only for analysis but also to inform other stakeholders in your organization, so that all the stakeholders are on the same page.

    Reseller and partner sites

    If your competitors are selling through channel partners, then these partners could be another valuable source of competitive pricing and sales strategies. Sometimes these partners provide valuable information about competitor price points. By using a website monitoring system, you can track price sheets, packages, and training materials on developing sales quotations that are lying unsecured within your competitor’s website.

    Monitoring channel partners of your competitors should be a part of your regular competitive intelligence program. Also, do not forget to monitor the global sites of such partners.

    Government websites

    If your competitors are selling to the government, chances are their prices are published on some government websites. Governments all over the world are trying to make their processes transparent to make themselves efficient and accountable for the taxpayers’ money. Transparency is becoming a norm for all government contracts, particularly regarding information on what is being exchanged and for what price.

    For example, the majority of states in the US have enacted price transparency laws to allow patients to shop for care and to prevent price discrimination of the uninsured. In California, hospitals must provide a price estimate to a requesting uninsured patient and cannot bill for an amount greater than the reimbursement the hospital would receive from a government payer.

    GSA Schedule is a long-term governmentwide contract with commercial firms providing federal, state, and local government buyers access to more than 11 million commercial supplies (products) and services at volume discount pricing. The prices of these suppliers are listed on the GSA website.

    In addition, after a government bid is over, you can get access to the bids using Freedom of Information Act (FOIA) requests. The standard turn-around time of FOIA request is 1 month, or it could be longer, but it may be worth it.

    Win/loss analysis

    A win/loss analysis is an extremely important process to determine exactly why a prospect bought your product—or why they didn’t. It can surface some of the most effective competitive insights that are immediately actionable. It can help improve the sales strategy, product features, customer service, customer retention rate. It also provides insights into buyer behavior and ideas for future product development. Last but not least, it provides insights into the competitor price and pricing strategy.

    For example, if after compiling data from several interviews you find that one of the top deciding factors for NOT choosing your product is pricing and your price points aren’t competitive, then you know that either your margins or your costs are higher than industry standards, or the added value is not apparent to your prospect. You might need to work on your marketing collaterals or sales process, or both.

    We’ve established why competitors’ pricing analysis is important and how to capture this vital information. Unfortunately, such analyses are not practiced in a systematic manner in most organizations. Why? Because it cannot be achieved manually without using a competitive intelligence software that is specifically designed for this purpose. Such software not only helps to gather pricing information on your competitors, but helps you gain a 360-degree view of your market and competitive landscape.


    Pricing is a game of trade-offs. It often dictates the success or failure of a business. Thus, it is crucial to invest in developing the right strategy. You must never stop refining your pricing strategies by accepting the prevailing market prices. That is lazy thinking.

    Your goal is NOT to be the lowest value product or service, but to solve your customers' problems with a broad portfolio of products or services. All companies should avoid the dreaded race to the bottom; that is the self-defeating exercise of trying to beat competitors on price.

    The key is to continuously experiment and evolve your pricing strategies. At Contify, we run experiments to determine the right price for different customer segments in different geographies to match the price with the value that our Market & Competitive Intelligence software provides.

    Testing the price acceptability of your offerings compared to your competition is the main idea behind competitive pricing analysis. Competitive pricing strategies also include not only the monitoring of your competitors’ prices but also their reaction to your pricing changes.

    Author: Malay Mehrotra

    Source: Contify

  • How to create successful products and services by using conjoint analysis?   

    How to create successful products and services by using conjoint analysis? 

    Successful businesses know what their customers want (and need) and subsequently act on this. Finding out what your customers exactly want, however, can be quite challenging. Studies into the success vs. failure rates of new products generally show that 75% to 95% of newly introduced products fail, underlining the importance of knowing your customers’ needs.  

    One of the most powerful research tools for identifying these needs is Conjoint Analysis (CA). This method provides the required customer insights before huge amounts of money and time are committed to the (new) product/service. Incorporating CA within decision-making can therefore provide a strategic advantage. For many companies it is a must-have tool for a variety of dynamic business questions. 

    What is conjoint analysis?

    Conjoint analysis is a quantitative research method that enables you to determine the preference and importance that customers place on various product attributes and features. It helps to understand how customers make (purchase) decisions. The underlying principle of CA is that any product can be broken down into multiple attributes that impact users’ perceived value. It is a statistical analysis that helps uncovering and understanding trade-offs customers would make by forcing them to choose out of several alternatives of product options/configurations. Central in the analysis is the idea that attributes can increase or decrease the likelihood of an overall product offering being purchased; meaning preferences can be quantified.  

    With the acquired insights, businesses can respond to the precise wants of customers by optimizing their product(s) and its elements. This results in a win-win situation for both the business and their customer. 

    How does conjoint analysis work?

    CA is conducted by presenting varying product configurations (also referred to as options, bundles, etc.) as alternatives. Participants are given instructions to evaluate the product configurations and select the one they are most likely to purchase or what is most appealing. In each question, respondents must choose one of the alternatives presented to them. Usually the number of alternatives per question is two to four. There is also the option to include the option ‘none’ as an alternative. This way it is not only measured which of the product offerings is most likely to be purchased, but also whether customers would actually buy it. Respondents are shown a series of choice sets and make trade-offs while proceeding through the questionnaire. The selected alternatives give insight in which attributes/features and combinations between them are most frequently chosen. And vice versa, which configurations are less attractive to customers.  

    Steps in running a CA: 

    1. Determine the attributes and levels 
    1. Create experimental design 
    1. Create survey design 
    1. Data collection 
    1. Analysis 
    1. Reporting 

    There are different types of CA, each having its own specific application. However, the above mentioned general steps are central in all CA types. The most common types are the choice-based conjoint analysis (CBC) and adaptive conjoint analysis.  

    Example food supplement

    Application areas of conjoint analysis

    Arguably the most researched topic in CA is price elasticity/sensitivity. When pricing is the central topic, businesses can use CA to optimize market share, profit, revenue, and to find pricing sweet spots. The insights learn businesses whether there are untapped potentials to be unlocked. However, pricing policy isn’t the only application area of CA. 

    Moreover, CA can be of value to any business department, answering a wide variety of business-related questions.  

    ‍Some examples to illustrate: 

    Optimal pricing policy

    • How can we create freemium and paid versions based on customers’ valuation of the offerings?  
    • How do customers value (either relative/monetary) offerings and their separate features/attributes? How much are customers willing to pay for a premium feature? 
    • What role plays price in customer decision making?  
    • Are customers price sensitive and what are pricing sweet spots? 
    • Which product configuration should we offer to maximize revenue? And profit? 

    (New) product development & design

    • Which specific features should be prioritized in R&D? 
    • Which attribute is most influential in customers’ decision making? 
    • How can we design ideal offerings? 

    Marketing/advertising strategies

    • What marketing messages lead to the highest customer activation? 


    • Which packaging design is most appealing? 
    • Does packaging impact willingness to purchase? 

    Competitive landscape & shares

    • How does our offering compare to competitor’s offerings in terms of market shares? How does shifting in product configuration affect our market share? 
    • What product characteristics are most valued in the market and should we do to compete best against current offerings on the market? 
    • Which product configuration should we offer to maximize our customer base? 

    Repositioning existing products

    • What are the best improvements we can make to our current products? 
    • Is a price increase justified (and profitable) by adding a new functionality to our product/service?  

    Running market simulations

    To answer any of the above questions, thorough analysisof the collected data is key. A very effective way to do this is by using market simulations.  

    In a market simulator, various product configurations based on combinations of attributes and differing levels can be created in numerous scenario’s (or forecasts). This allows for running sensitivity analyses, examining customer shifting behavior, assessing which features are essential in decision making, and testing alternative strategies/options. Businesses get answers to any ‘what if’ questions they have, based on which they can improve and optimize f.i. their products, pricing, profit/revenue and customer base. In these simulations, preference data (utilities) from respondents are used to compute the percentage of respondents preferring each product in a given scenario. Simulations can be done for the total group of respondents, but also for specific segments (e.g. based on demographic data like country or age). This results in more precise insights per customer segment and provides opportunity to customize product offerings per segment.  

    Conjoint analysis is an essential addition to your MI toolbox!

    To conclude, conjoint analysis is a highly efficient and effective tool for uncovering customers’ preferences. After determining attributes and translating them into the research design, which is a crucial part of setting up the CA, respondents choose their preferred alternative from a number of choice sets. The acquired insights can be used in a wide spectrum of (business) departments and industries by providing vision into many objectives. It is a unique methodology specializing in answering questions that other research methodologies cannot.

    Source: Hammer Market Intelligence

  • Why you should use data analytics to determine your pricing strategy

    Why you should use data analytics to determine your pricing strategy

    Every company must have a strategy to price their goods. Your pricing strategy is a fundamental component to your marketing process as pricing can increase sales or send customers to your competitors. Because a variety of factors such as product life cycle, competition, and customer perception can affect pricing decisions, it’s important to consider these when determining the best pricing strategy for your company. 

    Data analytics provides a clear, consolidated view of your pricing, allowing you to make sound pricing decisions. We've examined the three most common strategies: cost-plus, competitor-based, and value-based, and how data analytics can help manage each one across your customer base.

    Cost plus pricing

    When people think of the term ‘pricing strategy’, cost-plus pricing is what comes to mind. This is the simplest form of pricing as it is just a matter of pricing your products above cost. Simply total all of your costs and add the margin you want on top to determine the price. The benefit of this strategy is that there is no strategizing. There is very little data analysis or market research involved. Due to this, cost-plus pricing has been considered a good starting point for a new company with little overhead.

    However, cost-plus pricing is harder to manage over time as you may not be able to predict all of your costs since costs can fluctuate. If, for example, your company calculates your costs and adds a 15% margin, this may work well for the first quarter. But if some unexpected cost comes up, such as a supplier raising their prices, your margin may be cut to 10%. A data analytics solution will help manage these unforeseen costs and you can set up alerts to advise when margins drop beyond a set threshold.

    Competitor based pricing

    Rather than using costs as a benchmark, this strategy is based on setting your prices according to your competitors’ pricing.  This is common when companies are vying for the same contract with government in health or construction. When you are in a market with a product that is not unique or where prices are already established, it’s best to set your prices somewhere in the middle but data analytics can help you do modelling for tenders so you can put forward desired volumes to receive the preferred price.

    On the other hand, if you are offering a better product with new features or more value, you should consider pricing your products higher than your competitors. And setting your prices below your competitors is similar to cost-plus pricing as this depends on your resources. Are you to be able to withstand unexpected costs? If not, you risk impacting your profit margins. In any case, your pricing should be close to those of your competitors if you’re in a highly competitive market.

    The drawback to competitor-based pricing is that you don’t have a strategy that addresses the unique needs and concerns of your company. By developing your own pricing strategy, you can focus on adding value by offering better products at the right price. Data analytics will allow you to determine best selling products, in what markets and to what customers which will help drive a more efficient pricing policy.

    Value based pricing

    Value-based pricing is setting your prices based on what your customers believe your product is worth and what they are willing to pay. The more value your product offers your customers, the more money they will be willing to pay. Rather than looking at your costs or competitors, value-based pricing requires you to look to your customers. By getting to know the people who decide whether to purchase your product, you ensure that you understand what your customers truly want, and that you are offering the most value for the best price.

    When determining the price point for a product, consider factors such as whether your product is different from your competitors. Will it help your customers to save time or money? Will it help your customers gain a competitive advantage? What features can you develop over time? Answers to these questions will help you determine your product’s value and whether your customers are willing to pay for it. Once you know your customers are willing to pay for your product, you can set a higher price point and then raise prices as you add more value.  The downside to value-based pricing is that it takes time. You must be willing to invest the time to get to know your customers and understand their needs to set effective prices this way. 

    Data analytics allows you to compare and assess different strategies

    With data analytics, you can price according to your target market. Analytics enables companies to dramatically improve profitability by developing optimal pricing strategies to win more contracts and offer the most value to customers. Combining pricing with analytics allows you to leverage your data to understand both the internal and external factors affecting profitability at a granular level.

    In spite of the wealth of data available, many companies are still in the dark when it comes to understanding their customers. Yet, facing growing complexity and a multi-channel business environment, companies must be able to answer fundamental questions such as 'Who is my most profitable customer?' and 'What is my most profitable product or region?' Answering these questions can help you understand your customers and their buying behaviors to create the most effective pricing strategies. In other cases, analytics can highlight your most unprofitable customers so you can realign their discounts or other incentives to increase profits. With analytics, you have a mechanism that functions as both a catalyst and a metrics engine for managing profitability. 

    Source: Phocas Software

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