How can you analyze a competitor's pricing strategy?

1 Price comparison

Price comparison is the simplest and most common method of analyzing a competitor's pricing strategy. It involves collecting and comparing the prices of similar products or services offered by your competitor and other players in the market. You can use online tools, surveys, mystery shopping, or industry reports to gather this information. Price comparison can help you assess how your competitor positions itself in the market, how it differentiates itself from others, and how it responds to changes in demand and supply.

2 Price sensitivity

Price sensitivity is the degree to which customers change their purchase behavior in response to a change in price. It can vary depending on factors such as product quality, brand loyalty, income level, availability of substitutes, and perceived value. You can use methods such as conjoint analysis, van Westendorp's price sensitivity meter, or Gabor-Granger technique to measure the price sensitivity of your competitor's customers. Price sensitivity can help you understand how your competitor attracts and retains customers, how it sets its optimal price point, and how it maximizes its revenue.

3 Price elasticity

Price elasticity is the ratio of the percentage change in quantity demanded to the percentage change in price. It indicates how responsive customers are to a change in price. It can be elastic, inelastic, or unitary depending on whether the percentage change in quantity demanded is greater than, less than, or equal to the percentage change in price. You can use methods such as regression analysis, arc elasticity, or midpoint method to calculate the price elasticity of your competitor's products or services. Price elasticity can help you estimate how your competitor's sales volume and profit margin are affected by a change in price, and how it can leverage its pricing power.

4 Price skimming

Price skimming is a pricing strategy that involves setting a high initial price for a new or innovative product or service and then gradually lowering it over time as the market becomes more competitive or saturated. It aims to capture the maximum value from customers who are willing to pay a premium for the product or service, and then attract more price-sensitive customers as the price drops. You can use methods such as market segmentation, product life cycle analysis, or value-based pricing to identify if your competitor is using price skimming. Price skimming can help you evaluate how your competitor creates and captures value, how it manages its product development and launch costs, and how it maintains its competitive advantage.

5 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?