Pricing case: approach to adopt

Question

Hello,

How to approach a pricing case regarding the 2 following questions:

- Should we always use the 3 pricing methods at the same time, except when it's a new product for which we don't use the competition-based approach? What's the approach and logic here?

- How does competition-based pricing work? I know it's about comparing our offer with the competitors, but how does it work in detail?

Thanks

Answer 1

What to do if you don't have a competitor?

If you don't have a competitor… you probably still have a substitute product (e.g. in the same category). That's your competitor… you always have a competitor!

Imagine you develop teleporting. Well, you wouldn't have a competitor with the same product. But you would still have to compete with flights, trains, taxis, etc.

When mobile phones started there was not competition, right? Well, they still had to compete with regular phones and phone booths. And the first phones were competing with the telegraph, mail, etc.

How does it work?

First you need to have a market segmentation, i.e., know to which specific segments do you deliver higher value? Then you have to compare the competitor value propositions, and understand how much more (or less) value you provide to those segments, and then price based on that.

[By the way there are more pricing strategies… but yes, at the basic level there are only three: value based, competitor based, and cost-plus based].

Answer 2

Hi there,

I would be happy to share my thoughts on your questions:

First of all, what is the exact question? This would make it easier to provide a meaningful answer.
Moreover, you should make a hypothesis about the most meaningful pricing option, as you typically do not have enough time to perform the calculations for all pricing options.
Lastly, for competition-based pricing, you need both the prices of competing products and the relevant criteria that determine pricing, and use this as the basis for determining the fair price.

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Best,

Hagen

Answer 3

Sorry, but it's impossible to help you without having the full prompt for context.

My suggestion is that you repost the question with full context and you also attempt an answer. This way you're going to get more out of it.

Best,
Cristian