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Pumping Up Prices
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Article 7: Keep Tabs On Competitors’ Prices
We do business in an increasingly competitive market for virtually all goods and services. Consequently, the range of prices for similar wares is more likely than ever to be compressed. Similar products delivered or packaged similarly are likely to be similarly priced.
For that reason, you might be able to justify a price increase when your competitors increase their prices.
If everyone’s selling a loaf of bread for 98 cents, then everyone except you raises the price to $1.05, you probably won’t lose many customers if you increase your price by the same amount.
However, there are two significant exceptions to going along with the crowd.
1. If you can maintain a comfortable profit margin at the present, lower price, you may be able to pick up a greater market share by not raising prices when competitors do.
A segment of every buying public makes purchasing decisions based on price. Even shoppers who don’t insist on finding the absolute lowest price may still like the idea of saving 2-percent off the prevailing rate.
If you can resist going along with competitors’ price increases, it can be a marketing advantage, particularly if you’ve already established your brand as comparable in quality and value to your competitors’.
To maximize this marketing opportunity, tout the bargain: “Buy our same, trusted widgets, now 3-percent less than Brand X’s.”
2. If the competition has not increased prices, you may still be able to raise yours without suffering dire effects.
In fact, you may need to. As important as competition is in setting prices, ultimately you need to turn a profit or it won’t matter what your competition is doing.
If soaring costs and rising expenses have shrunk your profit margin, you may need to raise prices simply to keep your bottom line in the black. Also, just because the competition is frozen at the same old price, there’s no hard and fast rule that you must stay there too.
If your buyers are noteworthy for their loyalty to your brand, or if you have established a perception of added value, you may be able to increase prices – and profits – even though your competition stays at the lower price.
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