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1、The Ultimate Guideto Competitive PricingBreaking down 5 time-tested strategiesand 5 essential sources of intelligence Introduction.5 Time-Tested Competitive Pricing Strategies Penetration pricing.Loss leader pricing.Prestige pricing.Sticky pricing.Value-based pricing.5 Essential Sources of Competiti
2、ve Pricing Intelligence Your competitors websites.Analyst reports.Review sites.Your prospects(via your sales team).GSA price list.Conclusion.Table of Contents1 23568 910111213 15If you were to ask 100 people to give you an example of competitiveadvantage,youd probably hear quite a bit about scale,ne
3、twork effects,switching barriers,and the like.And if you were to ask your respondents to explain their examples,someof them,inevitably,would mention pricing.For example,some of those who answered your initial question withscale would likely bring up the fact that Walmarts gargantuan sizeenables them
4、 to buy in bulk and pass the savings along to consumers(inthe form of low prices),thus giving them the upper hand in their market.They would talk about pricing,in other words,as an outputaconsequenceof competitive advantage.Few people,however,wouldtalk about pricing as an inputa catalystof competiti
5、ve advantage.Thats what the first half of this guide is all about:Walking you throughfive pricing strategies that you can use to give yourself an edge over the other companies in your market.In the second half,wellshine a light on five places you can go to determinejust how much your competitors are
6、 chargingtheir customers.IntroductionIntroduction|1Retain customers who already have affinity for the product,andGenerate new customers based upon credibility the product hasbuilt in the market.1)Penetration pricingPenetration pricing is designed specifically to help new productssucceed in the marke
7、t right away.The goal is to initially chargecustomers a lower rate in order to drive sales volume.Over timeassales scale and the product gains tractionprices increase,with atwofold goal:1.2.Penetration pricing is particularly handy in hyper-competitive industries.So,if youre Head of Product at a mid
8、-to-enterprise level business,andyoure trying to bring a new product to market,you can set that productup for relatively quick success by(1)seeing how other products in thespace are priced and(2)suggesting a slightly lower initial price point.Doing so can help do the valuable work of building your c
9、ustomer base,growing your marketing lists,arming your acquisition team with high-intent remarketing audiences,and kick-starting growth that you may not have otherwise experienced if you had initially priced aggressively.5 Time-Tested Competitive Pricing StrategiesStrategies|2Keep in mind,though,that
10、 penetration pricing is a slippery slope.If leftunchecked,it can influence your market into joining a“race to thebottom,”where your competitors adjust their rate cards down tocompensate for the new entrants lower price floor,and the productsthemselves end up becoming commoditized.So,if youre enactin
11、g a penetration pricing strategy,have a data-backedplan to back yourself out of it.Dont price your product so low that youwater down its value,or risk alienating a segment of your customer basewhen you raise prices along your pre-determined timeline.2)Loss leader pricingLoss leader pricing is simila
12、r to penetration pricing,but differsmeaningfully in that its not used to bring a product to market(at leastnot always).In a sense,youd price your product lower without having agoal to increase it later,and youd make up for lost margin on the“backend”of the customer journey.The initial goal of loss l
13、eader pricing,like penetration pricing,is to get customers in the door with pricesthat are lower than the competitions.The ultimate goal,however,is to cross-sell or upsell other products once you close the initial sale.5 Time-Tested Competitive Pricing Strategies(cont.)Strategies|3The classic exampl
14、e is Gillette,which sold razors at extraordinarily lowpricesonly to sell replacement cartridges at a higher price point.Theygot customers in the door,and they drove a profit.Win-win.In some instances,loss leader pricing can be considered aggressiveand predatory.Think,for instance,about WeWork,which
15、kept prices solow for so long that their competitors couldnt possibly keep upandmany of them folded.This,of course,presented WeWork with a goldenopportunity to charge more.A more traditional,non-predatory example would be a marketing agencythat sells an affordable site audit to get clients in the do
16、or,with theintention of selling them a complete redesign once theyve signed on.Or consider Costco,which charges low prices on some itemseventaking losses in some casesin order to build customer affinity andincrease volume on products for which they have better margins.If youre considering loss leade
17、r pricing,keep in mind that its verydifficult to run a loss leader strategy if(1)youre a smaller company,(2)you dont have other products with their own revenue streams,or(3)you dont have complementary products that would be a natural fit for an upsell or cross-sell.5 Time-Tested Competitive Pricing
18、Strategies(cont.)Strategies|4Loss leader is a strategy best reserved for mid-to-enterprise levelbusinesses with high budgets and high margins for error.3)Prestige pricingPrestige pricing,also referred to as premium pricing,is a strategy inwhich a brand purposely prices a product at a higher level in
19、 order toascribe quality.In theory,prestige pricing is similar to the above two pricing strategies,in that youre deliberately pricing your product differently than itsalternatives in order to position it favorably.In practice,though,its the antithesis.Rather than undercutting yourcompetitors,premium
20、 pricing gives your product a cache that it may nototherwise have.It says,this product is more expensive because it ishands down better than the rest of the field.Think about Apple products,which are consistently priced at higherlevels than competitor products.The Apple example is instructive becaus
21、e it denotes one very important thing about prestige pricing:Your product has to actually have some level of functional or aesthetic superiority in order to sell in volume at a higher level.5 Time-Tested Competitive Pricing Strategies(cont.)Strategies|5That is to say,it would be easy to disrespect p
22、otential customers with aprestige pricing strategy if their out-of-pocket cost far exceeds yourproducts value.If you know,on the other hand,that your product is superior to the fieldand you have anecdotal data to back that up,a higher price point thanthe competition would serve to communicate that s
23、uperiority to yourpotential customers.This is where its especially handy to havecompetitive pricing data that allows you to track and react to changes inthe market over time.4)Sticky pricingPrice stickiness refers to a products ability to remain at the same pricepoint while market conditions change.
24、Consider the Ritz-Carlton.In the mid-1990s,Southeast Asia was rackedby forest fires,and while their competitors slashed prices,the Ritz kepttheirs as they were and stepped up their game in terms of services andamenities.And the stickiness of their pricing paid off.Weve seen,in some of the above exam
25、ples,how advantageous it can be to have a fluid pricing structure that allows you to adapt to market conditions.5 Time-Tested Competitive Pricing Strategies(cont.)Strategies|6While its certainly an advantage to be flexible,there is also a ton ofvalue in maintaining consistent pricing despite fluctua
26、tions in the market,especially when youre trying to preserve the relationship equity youvebuilt with your current customers.Its the job of product stakeholders todetermine when its in the companys best interest to adapt,and whenconsistency should take precedence.Sticky pricing does not preclude the
27、need for competitive analysis.Infact,it makes having an informed understanding of competitor prices allthe more important.An effective sticky pricing strategy leveragescompetitive intelligence to set prices favorably against competitors forthe long run.Unlike some of the other pricing strategies,sti
28、cky pricing encouragesyou to be more predictive or anticipatory about how your market mayevolve,since youre trying to establish a price point that will remainconstant for an extended period of time.In other words,advantageous pricing is not mutually exclusive with consistency.If you leverage competi
29、tive intelligence to set prices correctly from the get-go,youll equip your product with natural resistance to fluctuations in the market.5 Time-Tested Competitive Pricing Strategies(cont.)Strategies|75)Value-based pricingValue-based pricing looks at key differentiators between your productand its al
30、ternatives and puts a dollar amount on those differentiators.As an example,lets say your company sells email marketing software.Youre trying to bring to market a new“premium”offering,and youwant to know how to price that package in a way thats going togenerate sales.After studying the key benefits a
31、nd features of yourcompetitors productshopefully youve created battlecardsyoudetermine that your premium offering gives customers access toautomation that your competitors cant match.Ask yourself:If you were a customer,how much would that automationbe worth?Can you quantify it?If so,thats how much m
32、ore wiggle roomyou have to increase prices based upon your products value.Value-based pricing has the advantage over some of these otherstrategies of being highly customer-centric.By putting yourself in theshoes of the customer and measuring demand in the context of your competitors,you can create p
33、ricing models that are rooted in data.If youre selling B2B,that gives your sales team ammunition to back up pricing with raw numbers in conversations with prospects.5 Time-Tested Competitive Pricing Strategies(cont.)Strategies|8Now that youve got a sense of how pricing can be leveraged to createa co
34、mpetitive advantage,lets wrap up this guide by shining a light onfive places you can go to determine just how much your competitors arecharging their customers.1)Your competitors websitesYoud be surprised by the number of companies that list pricing on theirwebsite.While some may include it in tiny
35、print on a product page,others are upfront with it for all to see.Take Clio as an example.5 Essential Sources of Competitive Pricing IntelSources|9Imagine you are a Clio competitor,and one of your sellers is running ademo for a prospect who cannot spend more than$75 per user permonth.When your selle
36、r starts talking about reporting,the prospectcomments on how important it is to be able to dig deep into metrics.Thanks to the pricing intel that you gathered from Clios page(whichnow lives in your Clio battlecard),your seller can point out that Cliooffers advanced reporting for their Elite packagea
37、 package far outsidethe prospects budget.When youre neck and neck with a rival,theresno doubt that pricing intel can help seal the deal.2)Analyst reportsOpen up Google and enter your industry,followed by“report”in yoursearch bar.I bet you stumbled across some analyst reports,right?Stepone accomplish
38、ed.The next step is seeking out the reports that directly compare yourcompany with its competitors.Youll likely find reports focused onmarketplace pricing trends(that include price comparisons)and may even find some focused solely on analyzing pricing.It may take some time to find the right report,b
39、ut the valuable insights you receive will be worth the digging.5 Essential Sources of Competitive Pricing Intel(cont.)Sources|10For instance,check out this report preview geared around nine leaderswithin the software engineering market.To determine whether a reportholds strong pricing intel,read thr
40、ough its synopsis.In this case,thesynopsis emphasizes that the report covers“price data”and“pricepatterns.It even covers revenue and gross profit data as well.Although you may need to pay to download some reports(this oneincluded),these are effective resources to explore if youre coming upshort with
41、 your pricing research.3)Review sitesIf online reviews are common in your market,you can probably findpricing intel on sites like G2,Trustpilot,Quora,and Reddit.In fact,G2has an entire review section focused entirely on pricing.Take a look atthis Keap G2 review as an example.5 Essential Sources of C
42、ompetitive Pricing Intel(cont.)Sources|11Bingo!Theres that intel you were looking for.Under number 3,the userstates exactly how much she pays per month:$149.Now,I bet youre wondering how you can activate this intel.Letsimagine you are a Keap competitor.Clearly,this reviewer isexperiencing some stron
43、g ROI.Assuming thats one of Keaps primaryselling points,this nugget of pricing intel might be an indicator that itstime for you to arm your sellers with an ROI calculator.That way,whentheyre going head-to-head with Keap and pricing is a point ofdiscussion,theyre well-equipped to win.4)Your prospects
44、(via your sales team)Think about the number of calls your sellers make each month.Itsprobably in the hundreds.That means your sales team has ampleopportunities to gain insight into competitor pricing.And when youretalking to that many prospects,chances are at least a handful of themwill voluntarily
45、spill pricing information.So,how do you guarantee that pricing intel is shared in real time so that you can activate it quickly?You build and maintain strong relationships with individual sellers.5 Essential Sources of Competitive Pricing Intel(cont.)Sources|12Its crucial to be interconnected with s
46、ales and have a plan of action inplace,so sellers share the right information,in the right format,in theright place.in real time.Some ways to stay in the loop in a timely fashion include schedulingregular check-ins with reps and/or encouraging the use of a competitivepricing Slack channel to share i
47、ntel directly.Also,emphasize to yoursellers that youre happy to join any calls where conversations areexpected to be pricing-drivenwhether youre a fly on the wall or assistin guiding the conversation to close the deal.Sometimes the answer to your question(in our case pricing)is rightunder your finge
48、rtips!5)GSA price listThanks to public records,some industries make it easy to keep tabs oncompetitors pricing.If your rival sells to the government,chances aretheir prices are published on the GSAs(General ServicesAdministration)price list.Each listed company provides products and/or services to fe
49、deral,state,and local buyersover 11 million businesses to be exact.5 Essential Sources of Competitive Pricing Intel(cont.)Sources|13Hover over“Buying&Selling”in the left-hand corner,select“Purchasing Programs”,and navigate to“GSA Schedules.”From the GSA Schedule“Overview”page,click on 12 largecatego
50、ries.Select a category from the left-hand menu(e.g.,InformationTechnology).Select a subcategory(e.g.,Telecommunications).Select a sub-sub category(e.g.,Wireless Mobility Solutions).Find the list of vendors and investigate their price lists.To unlock your rivals price list,head over to the GSA websit
51、e.Fromthere,click on the following:1.2.3.4.5.6.Price lists can provide you with vast information including a companyslowest-priced item,hourly rate,maximum and minimum order pricing,cost per month,and more.While this makes it easy for you to gatherextensive pricing intel,wed be remiss not to point o
52、ut that the contractpractically guarantees increased sales and improved profits for yourcompetitor.pros and cons.5 Essential Sources of Competitive Pricing Intel(cont.)Sources|14Here at Crayon,we know that well-executed competitive pricing can bethe difference between selling and not selling.Between
53、 driving revenue and being left in the dust.Between winning and losing.Thats why weve developed a suite of competitive intelligence toolsdesigned to give brands better insight into how to position,promote,and launch products.Competitive pricing plays an integral role.Take afree spin through our platform today,and learn how Crayon can helpyour brand price its products to outmatch the competition.ConclusionConclusion|15