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How Do You Implement Competitive Pricing?

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Setting the price of your products and service is not for the inexperienced and faint-hearted. The person tasked with this role requires in-depth knowledge of how pricing works, your target market, your competitors, as well as the workings of your business. Products need to sell so your sales grow, your costs are covered, and there’s a healthy profit for working capital and investment.

When it comes to setting the prices of your products, your business can use many strategies. Competitive pricing is one option, and it’s the focus of this blog article.

What is Competitive Pricing?

Competitive pricing is one of the four main pricing strategies, and it is applied in saturated markets, i.e. many suppliers. The other three types of pricing are:

  • Cost-Plus Pricing: You add a set margin to the cost of the product. The cost takes into account manufacturing and other overhead expenses. You then raise the price by a set margin
  • Markup Pricing: This is applied by adding a percentage to the wholesale price
  • Demand Pricing: As the name says, it is decided by the market demand for the product. By gauging the demand, you weigh the pros and cons of opting for profit margin or sales volume. If there is a huge demand for that product and you are sure you can make a lot of sales, a small profit margin might be enough. You can make up for it in sales volume.

With that said, how can competitive pricing work for your business?

Where there is ample supply, and product prices have thus stabilized the focus turns to increase in sales. To up the volume of business pricing is one of the factors that can set your company apart from its rivals. Set your price above or below your significant competitors or choose to go with the crowd and match prices with your main competitors.

To implement competitive pricing, look not just at competitors and their strategy, but also take into consideration how the price will impact on company profitability.

Another consideration for this strategy is knowing if your target customer segment will buy the product from you should you choose to increase the price.

Pricing Options

However, the price can also go down or you can price-match rivals.

Higher Price

Setting a price higher than the average price of the product is considered premium pricing and this provides the perception of luxury or that your business is a premium brand.

The higher price for your product may be justified for its inclusion of added features or add-ons, i.e. special features or service. Your product might have a feature that is not present in competing products or an extended warranty. Other add-ons can include free delivery and after-sales service.

Justify the higher price, and the product will sell.

Lower Price

If your product is very similar to others on the market, you may want to compete by setting a lower price to higher sales volume. Do your homework, can your business make a profit with a lower profit margin? Work out the volume of sales required to make it a successful strategy. You should also take care to avoid a race to the bottom of the barrel in price wars.

Price Matching

Choosing to match prices with your competition is a safe strategy when you are confident your brand reputation will secure the sales. Implement a dynamic pricing solution to adjust prices, or you can offer discounts should the customer find the same product or service for less somewhere else. The onus is on the customer to prove the product is at a lower price elsewhere, and with this knowledge, your business can make the adjustments. It will work out cheaper to reduce the product price by say 10 or 15% then engage a researcher to continuously gauge the market.



Competitive pricing allows you to leverage competitor prices to your advantage.

Premium Prices

By setting premium prices, you draw attention to your product or service and highlight its advantages to the customer, to convince them to accept the higher price.

Low Prices

With low prices, you can attract more customers by letting them save money buying a product with similar features as the competition, at a lesser price

Match Competitors Pricing

Price matching prevents the competition from luring your customers away with their lower prices.


Competitive pricing can lead to price wars, and you can then get involved n a race to the bottom.

Set pricing rules, so you don’t end up with prices so low that even a huge sales volume may not be enough to recover your costs.

Price optimization, especially competitive pricing, is hard to implement manually. You have to consider so many different factors within your own business and also take into account external elements, like competitor strategies.


One way around the challenge is to implement a price optimization solution to automate the process, and there are a few providers, including Intelligence Node’s InOptimizer.

For simplicity and efficiency, these systems streamline the process of collection and analysis of data from many channels so you can adjust prices within the parameters set for your business. Particularly in a saturated market using software for data capture, measurement, and personalization just makes sense.