Competitive Analysis Blog 3: The role of pricing
In our ongoing discussion on competitive analysis, we consider the role of pricing and how it is managed within the context of brand building.
Test The Waters
Your natural starting point will be to base your pricing strategy around what you’ve developed within your home market. In simplistic terms, if you’ve positioned yourself as either a value-for-money, mid-range or premium brand, the pricing models you operate will reflect this. These can still be used as a benchmark for your expansion, but ideally need to be tested in advance of your entry.
Intelligence gathered at trade shows or through discussion with potential channel partners can help enormously here. Pricing is regarded as a hugely sensitive issue, but you need to confirm whether you are pitched in the right ball park within your market segment(s). It may be difficult to compare on a like-for-like basis, depending on how your competitors package services and products. Worth noting: lower priced products do not necessarily reflect inferior quality; expensive products do not necessarily guarantee premium quality and service.
The Customer is King….
Local culture can have a greater than desired impact on your pricing programme. I have referred previously to the concept of quality versus premium. Crucially, whilst quality may be a high priority amongst key decision makers, they may not be prepared to pay for it, or at least not at the level you may be anticipating. Incumbent suppliers may be able to match your offering at a lower price, through economy of scale.
…Therefore Segmentation is Vital
Typically, when targeting prospects, your segmentation may go no further than SMEs versus Corporates. This is no longer sufficient. You need to start identifying sales by vertical sector, and within these target clusters of like-minded customers. Examples are:
• Banking: International banks with overseas branches may adopt a homogenous approach to technology, as they can reassure all their customers of the value they place on security of data. They may seek premium products. Local banks may opt for a more value-for-money service.
• Education: in emerging regions, more universities are adopting an American approach to attracting students, by offering “best-in-breed” technological facilities; similarly, their governments are investing heavily in technology within primary schools, although these budgets may be capped. In the UK, government is seeking to reduce expenditure, so software offering efficiency gains and cost savings will be favoured.
• Real Estate: despite the pre-recession construction boom in the Middle East, not all countries have adopted legislation or regulation on Health & Safety. This may now be an emerging opportunity.
There are many more examples, but the principle guiding factor here is that your pricing programme may have to be reviewed if your portfolio is considered to be over-engineered for the local market. You may not generate the margins you’d hoped.
Only by knowing your customer base can you appreciate their values, and adapt to offer products and services they actually need. Identify when plain old vanilla will do versus when rich features are necessary.
Back to your competitors. Scrutinise their marketing literature. Decipher what they offer as part of their “solution”, “turn-key solution” or “diagnostics”. Try to gather intelligence on their logistics and general reputation. All of these areas feed into the overall customer experience, and will colour perceptions of your brand. These factors all help sway the discussion away from pure discounting and more toward relationship building. Here you can control how you differentiate.