“Sorry, you’re way out of our budget for this year,” says one prospect. “Your competitor is WAY cheaper” says another. “They threw in a year of free customer support!” says a third. Again and again, your company loses potential sales over pricing. How is it even possible, when your offering is so close to the same as the competitors? How much should you be charging, and what should be included in that price?
Pricing B2B products and services is no easy task, and pricing them appropriately is even more difficult. Which is why many companies will look to their competition for clues as to how to price their own products and services. According to HubSpot, competitive pricing strategy uses the competitors’ price as a benchmark, and is deployed by many companies looking to price a new product or service – or to confirm that their existing pricing strategy is supporting growth, not lost sales.
However, when looking for competitive pricing, online research often can only get you so far. Sometimes “Pricing” pages of competitor websites seem promising at first, with multiple tiers of service all clearly laid out and priced according to the size of the customer, or sale…until the top tier – the always-secret, “Contact Us” tier. The Holy Grail of competitor pricing information, especially in highly competitive industries.
Components of pricing strategies
When competitor pricing is not made publicly available, it generally signals two key things: 1) that components of the total price are variable/negotiable, and 2) that a number of customer-based factors determine the extent to which their business will be sought after. Pricing strategies often include many of the following considerations:
- Differentiation – Price will be higher for a highly-differentiated, or unique product.
- Intangible customer value – Price can be lowered for high-profile customers that a vendor particularly wants to win.
- Geography – Price can sometimes change based on where a customer is located.
- Contract length – Price will often be reduced for customers that are willing to commit for a longer term.
- Volume or value – Price will be lower for customers who will do more with what is sold, either in total units (volume) or sales (value).
- Services included – This can include customer support, consulting, implementation, training, and more.
- Opportunities for cross-selling – Prices are sometimes set lower when a vendor has an opportunity to sell its customers more.
Ways to determine competitor pricing
There are many different approaches that can be taken to determine competitive pricing and pricing models, and HelloInfo uses a variety of these in each pricing study, depending on the complexities associated with each client and their respective industry. The first step of each project, however, is to determine who the competitors are – and for this we look both at direct competitors (who sell exactly the same products or services), and indirect competitors (who sell comparable alternative products). To determine the prices charged by direct or indirect competitors, options include:
- Research the companies themselves – Not all competitors keep their prices under lock and key, so we make sure to look at their websites first! Even if all the pricing is not available, pricing pages on websites can give great indicators into products, product features, tiers, and more.
- Ask your network – We all have connections in industry and business, and there is a good chance that we all know someone that can help with a tidbit of intelligence. Even prospects will often tell your sales representatives the price they need to beat, or what was being offered by a competitor. Ensure that your organization has a systematic way of collecting this information as it is shared with your sales team (and if you need help developing this process or with speaking to your prospects, HelloInfo can help with that too!).
- Implement a win/loss program – Another HelloInfo core capability, conducting win/loss analyses enables your organization to understand exactly why it has earned or lost business. Because pricing is so often tied to success (or not), a win/loss program will regularly retrieve competitive pricing insights that will be valuable to your organization.
- See what customers have to say – Pricing details can often be found via customer feedback forums such as G2 or Capterra. In the absence of insights being available online, HelloInfo can interview customers of competitors to not only understand pricing, but also about features, strengths, and weaknesses of competitors.
- Ask the competitor – Surprising, we know. In cases where pricing information is not readily available via other avenues, HelloInfo can help by interviewing current or former members of competitive organizations to understand pricing cues. Ethical rules apply!
Pricing is one of the top questions HelloInfo is asked to look for in strategic competitive research. Do you need a little bit of support in understanding what your company is up against pricewise? Do you have a new product or service that you want to make sure will be met with market approval? Schedule a call to learn more about how we can support you in making sure that you are pricing in the most competitive way possible!