If you’ve got the power to raise prices without losing business to a competitor, you’ve got a very good business
Warren Buffet
Price point can drive or destroy a company’s operating margins. Strategically selecting price points for your goods or services based on competitor pricing in your industry or niche, rather than basing prices solely on business costs or target profit margins is a powerful strategy that can significantly increase sales performance.
Customer Loyalty
Since 2020, a record 80% of consumers are diverting from their loyalty brands, citing price point as one of their primary motivations. Stocking issues were also cited, making food and beverage brands – the sector that usually maintains the highest rate of brand loyalty – is now at the greatest risk of customer churn.
Harvard Business Review reports that reducing customer churn by a mere 5% can boost profitability anywhere from 25% to 95%, and introducing competitive pricing can offer an additional 2 to 7% increase in return on sales.
Addressing customer loyalty through a competitive pricing can be a game changer for brands vying for a foothold in a high competition marketplace. It is an essential strategic maneuver for brands currently prioritizing:
• Gaining a competitive advantage
• Increasing your market share
• Improving your customer retention
• Reducing customers’ price sensitivity
• Expanding your customer reach
• Attracting more price-sensitive customers
• Increasing sales through upselling & cross-selling
• Employing comparative advertising
How to get started
Competitive pricing starts with an in-depth study of your market and how your competitors price their products in comparison to you.
Observational Data is the Most Reliable Way to Gather Necessary Data
Observational data is firsthand, up-to-date, and as close as possible to verifiably accurate, making it more reliable than reported data sets. Unlike POS data, observational data can reveal conditions at the shelf, offering data on product prior to a sale, undisturbed by inventory issues or sales inaccuracies. It also doesn’t rely on retailer or competitor cooperation.
The Bottom Line
Whether you’re looking to disrupt the industry, drive revenue, expand your margins or pioneer a new space in the market, implementing competitive pricing strategies effectively can reduce customer sensitivity to price and position yourself as a stronger competitive presence in the retail marketplace.
