Competitive Pricing
Competitive pricing sets your price by where you sit against named rivals in the customer's mind, not by your costs plus a margin, because customers compare you to alternatives whether you've done that work or not.
The sequence opens by naming your closest rivals and closes with a fixed review cycle, not just a reaction when a competitor moves first.
Reach for this when…
- You set prices from cost-plus and then wonder why customers call you expensive.
- A competitor cut prices and you don't know whether to follow.
- You're launching into a category where customers already have three prices memorised.
How to run it
- List the two or three competitors customers actually compare you to.
- Track their pricing, including real prices paid after discounts, not list price.
- Decide your position deliberately: below, matching, or above, and what justifies it.
- Set the price and make the justification visible where the customer decides.
- Review on a fixed cycle, not only when a competitor moves first.
A worked example
Situation. Sanne de Vries ran De Vries Bouwmarkt, a home improvement retailer in Rotterdam, Netherlands, pricing everything at cost plus a fixed markup regardless of what the two big chains nearby charged.
Applied. Tracking real shelf prices at both chains for her top forty lines showed she was overpriced on commodity items customers price-check on their phones, and underpriced on specialty items where she had no real competitor.
Result. She cut prices on the price-checked commodities to match, raised the specialty lines where she was the only local option, and overall margin improved even though average prices fell.
The catch
Racing to match a competitor's price is a fast way to compress everyone's margin, including yours, if they can absorb it and you can't. It also assumes customers are actually comparing you on price rather than convenience or trust, which isn't always true. Know which of your lines customers actually price-check before you reprice anything.
Matching a rival's price is a decision, not a default - know why before you do it.