Have you ever wondered what your competitors were doing? Of course, you have, we all do. We’re all curious about our competition. What are they doing? What are they charging? How do we stack up against them? It’s completely normal to want to know how you rank compared to your competition. There are so many areas you can focus on when doing competitive research.
Today we’re going to talk a bit about how you research your competition when it comes to pricing. When you’re setting prices for your business, it’s important to know what the competition offers and what they charge for their products or services. You never want to be the least expensive option, nor do you want to be the most costly. You’re better off somewhere in the middle.
To complete your pricing research, you’ll need a notebook and a pen. It’s pretty easy and shouldn’t take more than a few hours in most cases.
First, if they have a website (and who doesn’t in today’s world?), then you may be able to find the information you need quickly and easily. Check the website to see if they include pricing information. Now, some businesses will share everything, and others will share nothing. That’s just how it goes. If you luck out and your competition shares pricing information online, you can do your research pretty quickly.
Take notes and write down what they’re offering and what they’re charging for that product or service. You’ll need detailed information to analyze your findings later and make your own pricing decisions.
If they offer something similar to you but slightly different, note both the similarities and differences so that you can review the data objectively if they sell packages or groupings, what do they sell together and for how much? What do you sell and how much do you charge for your product or service?
This type of research will be easier for retail businesses, some services, and restaurants. If there’s the expectation of having pricing information easily accessible, then it’s likely on the website.
Then it’s a little trickier but can still be done. If they have a brick and mortar location that you can visit, you might want to go in and visit them in person. You can buy their product or service, see what it’s like inside their location, and ask for information on their products or services. You should be able to find pricing information while you're visiting their location.
If your competition doesn’t have the information on the website and they don’t have a store you can visit, it may be a little more complicated, but you can still do your research. If you’re in an industry where businesses participate in trade shows or events, you may be able to attend the event and do lots of competitive research and networking at once. Let’s say you’re a wedding planner and you want to know what the competition charges for their services, well you could go to the bridal fair. Ask a friend to go with you. Have her pose as a potential bride and ask questions and gather information from the competition. You could also introduce yourself to the florists and bakeries and dress shops and begin to build out your network while you're there.
If you have other friends who are in your industry and have used competitors, you could ask them about pricing. I’ve learned a lot from old friends who hire businesses similar to mine. If you don’t have friends, who are able to help maybe you can find out some information from community groups or friends of friends. Many local areas have large Facebook groups where people go for referrals and information on businesses in the area. If you have something like that in your area, you could join it and ask if people would share approximately what they paid for your type of business or service.
Special note: I don’t recommend calling the competition and posing as a customer if you’re in an industry where it takes time to prepare proposals or someone has to come to meet with you. Do the research you can do without imposing on or taking advantage of someone. Don’t call a competitor and have them quote a custom kitchen remodel to find out what they’re charging. That’s not fair to them because it’s a huge waste of their time. Don’t make work for them when there’s no real business opportunity available.
Ideally, you want to check on the pricing for 3-5 companies. I want you to check out at least three competitors because you need to make sure you are gathering enough data to make a decision. Limit yourself to five or you may end up in analysis paralysis and that’s no good. Too much data can lead to data overload and the inability to make a decision. Three is a great number you can find the averages; you can get a good feel for what’s going on in your area.
Review your pricing, review your competition’s pricing. Are you higher or lower than they are? Is your price close to theirs (5-10% different) or is it much higher or lower (30-50% or more different)? You want to be in line with your competition. You also want to review what they’re offering for the price. How does your quality or experience compare? Saying, “I’m better” doesn’t count unless your customer truly feels you’re better and worth paying more. Ultimately, it’s your customer who will decide if your prices are fair. Businesses can increase rates each year, and most should. You do want to be careful that you don’t raise it so much that you price yourself out of the market.
I recommend running a competitive pricing audit on an annual basis. It’s good to see if the competition is offering something new or if they’ve eliminated a product line. It’s important to know what their pricing is compared to yours and make sure you’re still in line with where you should be.