10 Ways to Beat Competition: Way 1 – Using Price
Price is the monetary figure (amount) at which a particular item is valued, in other words, what an individual is willing to pay to have access to/ownership of a particular goods/services. What individuals are willing to part with for an item differs;
- Depending on the value they attach to that item; For instance, to an art fanatic, a piece of Monalisa painting is priceless but to someone who is not into arts, it is just another painting of an old lady.
- Their financial capabilities; people can’t spend what they don’t have or don’t have the hope of getting. Rational people tend to spend within the limits of their income.
- The alternatives available to them; when customers have full market information, they want to take advantage of things like price, quality and logistic convenience.
So pricing of your product is very important when you want to beat competition. However, depending on the type of goods/services you offer, the pricing approach differs. Here are the 3 basics, you need to know.
- Lowered Price: This is reducing your price, slightly lower than that of competition. This works very well for essential goods, common goods and inferior goods (non-luxury goods/services). Take for instance, Pepsi and Coke in Nigeria, Pepsi has always tried to be one step cheaper than Coke and it seemed to work well for them until recently when Coke dropped price to be sold at the same price with Pepsi. Another example is price of data between Glo and MTN in Nigeria.
- Price reduction can be absolute, for instance, few Nairas less than competition’s price. If competitions sell at N1500 you can sell at N1449.
- Price reduction can also be on discount basis; for instance if the general market price N1500 you can come up with 3 for N4200 while one still remains N1500 or 10% discount purchases above 10pieces or N15,000.
- Increased Price: This is raising your own price above the market price. This would work well for luxury goods and goods that people attach so much importance to quality than price. For goods like these, there is an illusion that goods with higher prices are of more quality. For instance, Gold, Jewelries and accessories, Designer wears etc.
- Price Discrimination: This is pricing based on customer’s class and location. A typical example, 2 pieces of corn on the island (Lagos) may cost you as much as N400 while same pieces may cost you less than N100 on the mainland. This requires you to profile your customers and business location before fixing your price, while also taking into consideration point 1&2.
Pricing as a means of dealing with competition, is like a war that may never end as you should expect reaction from competition. Hence I will suggest you prepare for that by reading the next article Ways to Beat Competition: Way 2 – Using Uniqueness.