As consumers become more knowledgeable about comparison shopping with the availability of looking up information on the internet, competitive pricing has never been more critical to gaining market share.
In traditional marketing lore, people talk about the 4 Ps of Marketing, which are
However, price strategy marketing is sometimes an afterthought. It is essential to realize that place (online vs. offline retail; proprietary website vs. Amazon; wholesale vs. distributor; etc.) can significantly affect the pricing strategy. A single brand may have many price points based on the method of distribution.
Pricing Sensitivity and Brand Loyalty
There are several theories about price strategy. You can even take an online course from MIT on pricing strategy. As the curriculum for this course indicates, many pricing strategies are focused on the customer perception of a product’s value. Consumers tend to have a relatively high degree of brand loyalty in consumable goods, especially health and beauty products.
While the perception of product quality is the main factor in beauty product repeat purchase, 38% of women state quality is the top reason for their brand loyalty. In addition, because of the price transparency of sites like Amazon and Google Shopping, consumers are able to comparison shop with increasing ease. This means more competitively priced goods can be easily sorted at the click of a button.
Pricing Strategy Examples
Some of the better-known retail pricing strategy examples are summarized below:
Strategy to launch a new product at the highest initial price point it can command before gradually lowering the prices over time. This strategy is often used to attract trendsetters or high-income consumers.
Prices are initially set low and raised as the customer base grows. Good to attract initial consumers at a discount and build brand awareness.
Pricing is set to mirror and slightly beat competitor pricing to engage switching behavior. Useful when you can control production costs.
Consistent higher pricing strategy without discounting; built on perceived brand superiority. Creates an air of superiority; not all will want or be able to afford the product.
Prices are set by calculating costs and adding a percentage of mark-up. Provides full coverage of product’s cost and a consistent rate of return.
Price is set based on how much the customer believes what the product is worth. Often viewed as the best online pricing strategy, as consumers find they ‘get what they pay for.”
Competitor Pricing / Competitive Pricing
This article focuses mainly on using competition-based pricing because no matter what pricing strategy you choose, you’ll want to conduct research to ensure your product is at least competitively priced so that you don’t leave money on the table.
Finding Competitor Prices
There are a slew of platforms that you can subscribe to in order to check and monitor your competitor’s projects. But if you’re a start-up sole proprietor, you may be best served by doing your own research and tracking pricing and features of competitor projects on an Excel or Google Sheets spreadsheet. Also, don’t forget to factor into your pricing analysis elements that affect consumer confidence, such as social proof and online product reviews.
Options Once You Understand Your Product’s Ranking Among Competitors
Once you’ve done your initial pricing analysis (it will be ongoing as you market your product), you can choose one of the strategies below:
- Set your price just above or marginally above your competitor. (Highlight special features and qualities to justify the price.)
- Set your price below your competitor’s product. (Look to reduce production costs to offset profit margin.)
- Match your competitors. (Consider customer service perks, free shipping, and other inducements to switching.)
You will need, of course, to assess the many factors which are a part of pricing strategy. For example, pricing decisions must encompass your production costs and marketing, overhead, shipping, lead times, and more.
Partnering With Pure Source as Part of Your Competitors Pricing Strategies
Efficiently managing production costs is an area where you can leapfrog ahead by partnering with Pure Source, LLC. Specializing in the health and beauty industries, Pure Source offers you consolidated resources for every product need, from product formulation and product development to packaging and labeling.
Pure Source has been providing brands with customized contract manufacturing excellence for two and a half decades. They are a private-label manufacturer for products in pharmaceutical, sun protection, hair care lines, and other products. Their packaging options run the gamut from high-speed filling to gift baskets assembled by hand.
Takeaway on Competitive Pricing Strategies
If you want to ensure you can offer your product at a competitive price, you will want to outsource as much of the development and production process as possible. This is most definitely the case at the start, until you scale.
The definition of competitor-based pricing, being able to price near or below the competitor’s price, depends on your resources and the ability to be flexible with supply. Not having to invest in the overhead of all the product and packaging costs means you can focus on your other business development needs.
Perhaps you envision your product as more oriented towards one of the higher initial price points, such as a new-to-market approach, like price skimming or quality-branded premium pricing. Consider that working with Pure Source as your trusted ally ensures your product has essential consumer-trust certifications. Some of the seals of assurance that can be added to your labeling, subject to the formulation, include “Made in the USA,” “Cruelty-Free,” “Organic,” and more, as shown below.
Finally, to ensure quality, all staff at Pure Source are all trained on GMPs, SOPs, and all FDA rules and regulations.