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January 24, 2019
Should Competitors Dominate Your Pricing Analysis?
By:
A client recently asked my advice on how his company’s deal desk should be including competitive intelligence to inform their pricing analysis. His concern, given the intense competition his sales reps face in the field, their deal analysis should be based on what price is necessary to beat what the competitors are offering, even if that means pricing below their target levels.
On one level, I can understand his point. After all, you can’t grow the company’s revenues if your prices are not competitive enough to win deals. However, the question itself is fundamentally flawed, because it assumes a company has to begin in a reactionary position. This is the crux of the problem companies face when they consider (if they consider) how to use pricing as a lever to grow revenues and hit their numbers. Over the years, I have encountered far too few companies who regard pricing as a strategic lever, to be leveraged proactively, rather than in reaction to a competitor’s moves.
At the strategic level, competitive analysis is one part of the broader evaluation of where a company should play and how it can win in the market segments it regards as strategically important. This process should be performed for new product launches and major product enhancements, and re-evaluated regularly – at least semi-annually or quarterly in the case of more dynamic markets.
The key questions to ask include the following:
Download the Competitor Response Tool to learn how to identify the revenue streams most at risk from competitor’s actions, how to evaluate where you are best positioned to respond to competitors, and to leverage tactics for each quadrant in the competitive strategy grid.
Competitive Strategy Grid
Insights gleaned from the above analysis can be used to develop a competitive strategy grid to assess the market segments where the company should play and where it is best positioned to win. This grid can also be used to guide cross-functional discussions on how the company should respond if a competitor reduces its prices. Evaluating this situation proactively for key competitors increases the likelihood of responding based on logical analysis instead of emotion.
Determining Competitive Strategy
The grid can be used to proactively determine how best to compete in each type of situation, based on strategic objectives and positioning. Before responding to a competitor’s price moves, you should first consider which markets and/or segments are actually impacted by the competitor’s actions.
Then evaluate whether to respond and by how much based on the following context:
How To Get Started
To begin developing your competitive strategy grid, here are three key steps you need to take:
Download the Competitor Response Tool to learn how to identify the revenue streams most at risk from competitor’s actions, how to evaluate where you are best positioned to respond to competitors, and to leverage tactics for each quadrant in the competitive strategy grid.
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