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What are the key factors to consider when setting your pricing strategy in a competitive market?
Reading time: 4 min.
1. Customer Segmentation

1.1 Why is it important to start with customer segmentation? Because we must clearly understand what the key goals, pain points and values of each segment are. By putting forward price hypotheses without this information, we risk falling into many traps of our subjective perception.

1.2 Each segment may have its own pricing strategy, since the factors described above can have a significant impact on the format and structure of purchases.

1.3 Segmentation is a regular process; based on updates in segments, adjustments are made to the corresponding pricing strategies.

2. Value-Based Pricing

2.1 Customer perceived value is one of the important factors to consider when developing a pricing strategy. Note that how you perceive your value may be very different from how the customers perceive it.

2.2 To avoid falling into perception traps, conduct regular research to determine the current level of value you provide to each individual customer segment. You need a live, as unbiased opinion as possible from the customer; how you get it, the methodology, the tools depends on your resources.

3. Cost Structure

3.1 Costs and margins are the basic concepts of pricing. Ignoring costs and operating at a loss entails corresponding consequences.

3.2 Focus on the key points of financial control. How much money have you spent and how much have you earned over the same period of time? What are the results of the current pricing strategy? What costs can be optimized? What opportunities are there to increase margins at the moment?

3.3 Based on regular monitoring, determine the minimum price that covers your costs and allows you to achieve your financial goals.

4. Competitive Analysis

4.1 Monitoring competitors' prices allows you to see the big picture of the market. Even in a highly competitive market, price may be an important but not the deciding factor.

4.2 If you focus on the points mentioned in the previous paragraphs (customer goals, problems and values, perceived customer value, etc.), then competitors' prices are something that can add clarity to seeing the big picture. Of course, you can't ignore competitors' prices, but a good approach is to focus more on your customers rather than competitors.

5. Pricing Tactics

5.1 There are many pricing tactics; please act with respect and care for your customers. Remember that long-term partnerships with customers are always good.

5.2 Please remember: pricing tactics should not conflict with your strategy for each individual segment. Test price hypotheses through experiments, and make decisions based on numbers.

5.3 Be careful with your spending, especially when using price-cutting tactics. Always soberly assess your condition and the surrounding reality.

Key points

1. Make pricing hypotheses based on your profit and loss, the characteristics of your customers, the value you provide, the market situation, etc. Conduct experiments and add the results to your knowledge base.

2. Make decisions and implement changes based on experimental results (remember the required statistical significance), facts and figures.

3. Always keep pricing processes under control; do not leave them unattended.

Good luck!
Methodologist of Guidbase
Author
Guidbase
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