Pretend to be an objective outside observer and rate the following aspects of your company's operations: Total each pair. The more sophisticated your product gets, the more you can charge for it relative to the competition. The following limitations apply: The item must be identical, (i.e., size, model, quantity, brand, color) Nicole is a content writer at StoreYa with over sixteen years experience and flair for storytelling. Information regarding the topic can be gathered either through cost information or any available financial reports. This could result in all parties involved in the price war comes out with the same market share, but with lower prices. Expand the assortment in your online store, monitoring if there are any new products in your competitors’ assortments. We provided reams of data suggesting that Linux was more difficult to integrate, more difficult to manage, and more difficult to support — all of which ends up costing more money than would be saved by avoiding a license fee. They can win a price war and profits can sustain it long-term due to cost-cutting. Walmart.com is committed to providing low prices every day, on everything. News provided by The Associated Press. Nothing is more absurd. (Mostly through frequent coupons and specials. This enables you to assess if your prices are right for the market and if your products are being merchandised effectively to maximise sales. To prevent this, it's important to simultaneously execute a secondary market strategy that supports the first. If you've got the best product, the competition may figure out how to make a better one. On the other hand, this approach will land you in a price war, and there are no winners in a price war — only survivors. … © 2007 CBS Interactive Inc. All Rights Reserved. Even if you manage to run your competitor out of business, chances are you may not have much of a business left when the battle is over. If another competitor decides to do the same thing, the overall market price will slowly decrease and the profits will decrease too. The changes required may not be for the faint of heart, but they're better than the alternatives. This may be less expensive than cutting price and operating at a lower margin. Every customer a competitor serves is an opportunity lost for you. Your true but unflattering label should bring to the surface information or traits about your competition that your prospect might find undesirable. ), Uniquely better product (Pioneered idea of Internet connections in every room.). Companies often compete with one another in terms of market share—that is, how big of a slice of a particular market a company's sales represent. 5 Reasons Why Your Prices SHOULD Be Higher Than Your Competitors Written by Sean McPheat | I met a salesperson on one of our programmes who was really upset that his company had raised his product’s prices by over 3%, and hadn’t given him an explanation as to why. Not to mention that trust badges are proven to boost sales as they effectively increase conversion rates. "We told IT buyers, before making a commitment one way or the other, to find out what it actually costs to run a Linux shop as compared to a Windows shop. How quickly are they responding? A games console company reduces the price of their console over 5 years, charging a premium at launch and lowest price near the end of its life cycle. If you are new to a market – or with a new product to sell, it's a common strategy to start with a low introductory price to get yourself known. For example, you can put some items on hold, if your competitor extremely lowers the price, and sell them, when the competitor’s items are out of stock. Since there was little we could do about the emotional issues, the team decided to attack the Linux value proposition. Touching base with your customers, seeing what they feel about your prices and why they chose you over possibly less expensive competitors, can yield great insights. There are three main reasons why businesses ultimately decide to enter the ring in a price war. If this is possible in your niche market, this is a good way of lowering prices for competing market segments, while keeping overall prices the same. Therefore, identifying your competitors and evaluate what they are up to is an essential step in the process of establishing the price. If your marketing is focused solely on price, but your competitors are out-pricing you for the same product, then you’re doing your business harm. On the other hand, if your pricing is higher than that of your competitors, you will need to be able to convey the added value that comes at this price. The highest numbered pair indicates your core competency.Match that with the strategy you should embrace, below. Are you highlighting these benefits and features in the way you describe and display your products on your online store? On the other hand, a high initial price can enhance the positioning of a product as a unique or luxury item. In today’s market, regardless of which niche your business falls into, there is no denying that customer service and customer experience can make or break your business. If not, you may want to consider revamping your descriptions like the above example and refreshing your product images. That means adopting a communications strategy that matches your market strategy, as follows: Ryan Kubacki, a former Microsoft executive who is now president of Holden International, explains how Microsoft reacted when Linux, the open-source operating system, first came on the market: "When I was Microsoft's business marketing officer for the U.S. central region, [CEO Steve] Ballmer drafted me to work on the company's Linux strategy. Example 2: Your product is the same as everyone else's, but you can sell it for lots less. ), Hassle-free experience (Pioneered long-term service warrantees. Remember, the customer buys based on their perception. Start Marketing Your Products Beyond Price. People are much more inclined to post a quick comment on your Facebook page and it also gives you the opportunity to engage more with your customers. Refreshing your product gets, the more value your services provide, the more you can charge for them operations... 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