Do you know who your competitors are? What makes them a competitor? Why do buyers choose their product over your own? Buyer perception is everything. By understanding and influencing buyer perception, you can increase the willingness to pay and capture more market value.
Your ability to grow revenue depends on your ability to influence these perceptions. Price is a direct reflection on perceived value, and it is proof of what a customer is willing to pay. The buyer’s knowledge of your performance compared to your competitors will dictate whether you can win, and at what price premium.
Determine how you can invest your sales and marketing dollars to position yourself against competitors by leveraging SBI’s comprehensive guide of best practices for Price Positioning. Download SBI’s PDF Workbook to get started on your Pricing Strategy.
Conduct a Litmus Test
The next time you speak with one of your reps and managers, test this. Pretend you are a prospective buyer. Ask your rep/manager: Why should I buy (new product) from you? What’s different about you vs. (competitor)?
Listen to their response. Chances are you will get a feature and benefit pitch. Possibly a long-winded monologue about how your product is superior. Ask yourself if your customers will be able to tell the difference. Or, if they are going to care? Would you buy based on the answer you got?
It is crucial that your sales team both understands and can articulate the company-wide plan for differentiating against your competitors. When a buyer asks, “How are you different,” will your organization respond effectively and create a unique experience that the buyer desires? Before your team can deliver a consistent message, the strategy for differentiating needs to be developed.
We all know a basic differentiation strategy usually consists of:
- What markets are we going after?
- What problems are our buyers experiencing?
- How do our competitors go to market?
- What unique value do we bring?
Check out this SBI Blog for more on differentiation: Is Your Company Suffering from False Differentiation?
What is often overlooked is how you price your product or service – and this can be your edge against the competition.
There is no single ‘right’ price for a customer. Their willingness to pay encompasses a range of viable price points. Take a look at the airline industry, which implements an effective pricing strategy.
Typically, passengers are either on business or traveling for leisure. Airlines know that leisure passengers usually book months in advance, so they set the price point for these seats relatively high – and adjust to market response. Meanwhile, for typical business routes, prices start low to fill a minimum capacity – then increase steeply as corporate passengers tend to book last minute.
Through understanding their buyers, airlines have successfully taken advantage of a pricing technique to reach that maximum willingness to pay.
Your Competitive Positioning
If customers do not know what they are paying for, and managers do not know what they are charging for, it is almost impossible for companies to identify their competitive positions. Do you and your executive team have trouble mapping the status of your brand against those of key rivals? Do you tend to rate your firm’s offerings in different spots on a price-benefit map?
Few executive teams know the primary benefits that their product offers while almost all overestimate the interests of their offerings in comparison to those of competitors.
Measure your performance against competitors that you often run up against in your market. For instance, you should:
- Show superior understanding of the customers’ needs
- Demonstrate stronger solution value
- Have product configurability and flexibility
- Provide multiple solution options
- Exploit the competitors pricing structure
- Message around the value proposition
To understand how competitively you are positioned in a market, you should determine the following:
- Identify which competitors are direct, indirect, or a replacement of your solution.
- Identify buyer evaluation attributes and priority for each type of competitor (direct, indirect, replacement).
- Quantify your performance vs. competitors for each competitor and segment.
- Classify each attribute as compared to the closest competitor (Competitive Advantages, Competitive Disadvantages, Potential Disadvantages, and Overinvestments).
- Quantify your positive or negative differentiation (i.e., you are 20% worse/better than competitor X).
- Quantify each decision criteria and perceived value each is expected to deliver.
- Quantify how much value you expect to deliver to a new customer.
- Quantify the benefit on perceived value for each marketing initiative.
- Prioritize all initiatives by the most significant impact on the decision criteria buyers feel are most important.
To understand these factors and incorporate pricing strategy into your competitive positioning, here are a few analyses you should conduct:
- Competitive Differentiation Analysis: Determine perceived competitive advantages, disadvantages, areas of overinvestment.
- Value Map: Know the perceived relationship between price and value for multiple competitors.
- Positive Differential Value: Quantify the value premium that your product is perceived to have.
Communicating value to buyers is critical to capturing the market value and hitting your growth target. You may know you are better than your competitors. Your competitors may even know it. But if your customers don’t, they will not pay more for your product. To get the price premium that your differentiation commands, you need to reinforce that positioning through value messaging in all your communication touch points with the buyer.
Value can be created and destroyed. Pricing has a direct correlation to the perceived value of your company and your products. Investing in fully understanding your competitors and where you position against them will enable you and your team to implement an effective pricing strategy with a strong ROI that’ll help you reach your growth objectives.
Download the Competitive Map Tool to get started on your competitive positioning strategy. Quickly see where your product falls against competitors when it comes to pricing and value.