Your second price consideration should be how you price relative to competitors. This depends on your positioning statement and how your target audience perceives price.
For example, if you position your brand as delivering the highest quality in the market, the implication is you’ll be the most expensive product. Customers expect to pay more for better quality products.
On the other hand, if you decide you want to appeal to the greatest number of customers, a lower price point would be more appropriate. (known as cost leadership – see out article on competitive strategy for more on this).
The price point you choose positions your product against competitors. Use market research and feedback from the sales team and customers to help decide on the ideal price point. Work with your finance team to look at different P&L scenarios based on volume and price forecasts.
In our hypothetical T-shirt example above, we might be a #2 player in the market looking to take volume share from the #1 (Competitor A). So our price plan is to maintain a 10-15% price discount at all times.
But we also recognise that a lower quality cheaper competitor (Competitor B) might start to take volume share from us if the price gap is too wide. So we might set a cap of how much more expensive we would ever be than them. In this example, we would never be more than $10 more expensive than Competitor B.
In this case, we would also detail any additional benefits or limitations to the promotion. So, securing more in-store space when we have a promotion that will run through more units, or running a specific promotion through only one channel or one customer. So, free delivery for online shopping in this case.