You may be in a position where one or more of your competitors are offering similar products to you, but they also claim that they can do it for a much lower price.
Competitor prices offering a cost differentiation which could be turning your customer’s heads. It is possible that they are buying the market share, and they will not be able to sustain it.
Your sales team may be telling you this too. However, just saying statements about your competitor does not make it right. Buying market share by reducing prices rarely lasts long, and it is not a very smart strategy to attract customers long term. Buying the market happens a lot less than people think.
However, it’s possible that your rivals may hold a significant cost advantage over you. You have to do something about it but be armed with intelligence, not hearsay. Take a look at your cost structure and then compare (benchmark) them with your competitors.
Compare yours and their labour costs, materials, technologies used, distribution, the cost and structure of the sales and marketing teams. Look for unusual looking overheads and obvious omissions.
What about suppliers?
What about their suppliers? How do they differ from each other? Their production capabilities and actual production rates. Never rely on what they say in the press. We know from experience what a production plant says it’s producing bears little resemblance to what they are actually doing. Take a look at their past and current sales figures, right down to product level if you can.
Are your competitor’s products really like for like? Does your product have certain features, but do your customers care about them enough not to switch sides? Also, are the prices really like for like. What about their extras?
Analyse the results and get a better picture of what’s going on, why its happening and then decide what you can do about it. Then tell the world.
This article was called Competitor Prices. Is The Price Right?