Many criteria contribute to price. These include distribution methods, customer service, business reputation, price range, product features and target market.

However, this article will not cover all of these. It will instead concentrate on just three: the price range, the people who are expected to buy the product, and the features that the product provides that competitive products do not.

To make these points easier to comprehend, I'll discuss one of my products as an example.

Impact Of Competition On Pricing Strategy: Determine The Price Range Of Competing Products

The first impact of competition on pricing strategy is the price range for similar products.

Every product has a price range. For some this range is small, and for others it's large. You may need to do a little research to determine the price range for competitive products.

For instance, I did some research on Amazon.com and discovered that the competition for my market segmentation book ranges from $6.95 to $159, with a median of $82.98. So I know to price my book somewhere in this price range.

You need to discover the price range of your competitor's products as you determine your price. Whether your price should fall on the low or high side of the price range for competitive products depends upon your product's features compared to your competitors'. It's also influenced by your target market.

Impact Of Competition On Pricing Strategy - Determine The Features Offered By Competing Products

The second impact of competition on pricing strategy relates to features.

It's not enough to just provide the features that all similar products provide. To stand out in your customers' minds and to get a good price, your product should provide something more.

For instance, if my book only provided a definition of market segmentation and other standard market segmentation information, it would be hard to sell. People expect that information so it's not a selling feature.

So for my book to sell, it has to provide something different. It provides detailed and thorough information on market segments that can be used by laymen to get professional results. Unlike many market segmentation books, it requires no statistics and uses a simple process. That makes it different and provides a selling feature.

Impact Of Competition On Pricing Strategy: Learn The Target Market Of Competitive Products and Go After A Different One

Another element in the impact of competition on pricing strategy is the target market. If you create your product for a particular group of people, you can charge more than if you create it for everybody. And if that is an exclusive group, you can charge even more. For instance the highest priced market segmentation books are written for marketing agencies. They can afford to pay top dollar for information that they can mark up to their clients.

Just because you have a product that is similar to competitors' doesn't mean that you sell your product to the same type of people.

For instance, the target market for most market segmentation books are either student or professional marketers, managers of large businesses, or businesses in a large industries.

I've not found one that is designed for small business owners. And most are just so complicated that, even if a small business owner bought these competitive books, they wouldn't finish reading them.

Impact Of Competition On Pricing Strategy: Synthesis

By knowing the range of prices for competing products, the unique features of each, and target markets, you'll be much better prepared to price your product.

To illustrate how to use this information, I priced my market segmentation for the specific target market so I didn't go to the high end of the price range. After all, small business owners have limited resources. Still I didn't go to the lowest of the range because my book provides features not available with competing products. Although I know that my book has quality, I decided to price it barely half of the median price. First I wanted to price it right for my target market, and second, it's presently sold only as an e-book.

Just as I arrived at a good price by considering the impact of competition on pricing strategy, you can too.