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“Hell, no!“ That’s the visceral, automatic reaction I get when hearing “You need to price based on your competitors’ prices“. While it sounds logical, the market can be (usually is) underpriced. There are many reasons to it, yet the most common one is because it takes a model of “What it costs me” + “My ‘desired’ margin”. A cost-plus model. Take this into account: while taking the market as a sanity check, and getting yourself a sense of confidence in what you offer, it also assumes that the market knows they have the right pricing. If that were true, all your competitors (and you too) would make the same amount of profit (because if the market charges X, and everyone has a similar thing, the profits/margins should be roughly similar). That would also put you in a scenario of one more “me too” offering… which means you’ll blend right in, and any differentiation you thought you had goes down the drain. You can’t be different if you’re too similar. If you’re different, your price needs to be different. The market usually doesn’t know. |