How to Leverage Competitive Analysis in Your Pricing Decisions

Competitive analysis results can inform leaders how to price their products so that items will support their bottom lines while remaining enticing to current and potential customers. Which steps should executives take for the most actionable outcomes? 

Gather and Analyze Competitor Pricing Data

The best starting points are collecting and studying similar companies’ pricing details. This awareness can reveal whether prices are too high or too low.

Leaders can begin with a few manual checks by visiting their competitors’ websites and comparing the price-related differences. They should also analyze aspects such as size, quantity and actual or perceived quality. Some companies get more from competitive analyses by using technologies such as artificial intelligence (AI) to automate steps. Some AI products can automatically track online price changes, sale periods and other particulars.

Understand Market Positioning

Some companies achieve strong market positioning by showcasing an item’s particular use or highlighting how it will solve a common pain point. Others emphasize long-term benefits, such as a specific laptop bag’s durability. Apple upholds its market position as a high-quality brand by running numerous quality tests on its iPhones before they leave the manufacturing facilities.

However, CEOs should know that market positioning techniques do not always translate across geographical boundaries, even when the brands are well-known in many regions. Such was the case with Swedish retailer IKEA. The brand has struggled to gain momentum in India, and analysts blame several factors, some of which touch on cultural differences between how Indian consumers shop for and use furniture compared to people in the markets where IKEA does well.

Western consumers largely perceive IKEA as an affordable option. However, some Indian shoppers can get reasonably priced furnishings from other established providers. Additionally, these consumers prefer durable, long-lasting pieces, which does not always align with IKEA’s priorities.

Extensive research should reduce obstacles by providing insights into market circumstances and how companies can position their products to compete on price or other factors.

Use Value-Based Pricing for Differentiation

Value-based pricing revolves around customers’ perceived value for products and services. Since it is not always possible for a company to offer the lowest prices among its competitors, executives must find other ways to elevate perceived product value.

One option is to provide solutions that save people time on essential but cumbersome tasks. For example, some software providers cater to property management agencies and landlords by making rent payments easier to collect. Some options include scheduling or transmitting funds in a couple of clicks, eliminating the need for time-consuming, physical payment methods, such as mailing checks or bringing them to an office.

Those software providers can use a value-based pricing strategy, showing how these solutions save time, reduce errors and increase convenience. When it is easy and fast for people to pay their rent, those receiving the funds can justify adjusting their budget to accommodate the necessary software.

Balance Pricing With Other Concerns

Pricing is often a top-of-mind matter for today’s executives, but it is not the only aspect they must consider when determining how to make their offerings attractive. They should consider profit margins, the typical cost of a product’s raw materials and long-term business objectives.

A 2024 study showed a 14% difference in Amazon’s prices versus its competitors. The e-commerce giant’s offerings were the lowest priced among all 15 categories studied. Although price is a major selling point, shoppers also care about whether products are in stock and whether they will arrive within the stated delivery time frames. Some also raise concerns about Amazon’s labor practices.

Executives must understand the impacts of these matters on customers’ likelihood to buy and remain loyal. Price matters, but consumers weigh other considerations, too.

Adopt a Data-Driven Approach

After applying some of the above suggestions, business leaders will accumulate useful data to shape pricing decisions. Now is an excellent time to take the next steps and build frameworks to make data-backed pricing decisions so enterprises can nimbly respond to market dynamics while maintaining brand value.