A study found that on average companies spend only six hours over the entire life cycle of their product developing their pricing and packaging strategy, in contrast with other research that indicates that pricing and packaging is the top determining factor for 87% of customers when making purchasing decisions. While there are several factors that should be considered when developing a Pricing and Packaging Strategy, like Voice of Customer and the Market Landscape, in this article we will examine the importance of gathering competitor pricing and packaging intelligence to support an effective Go-to-Market (GTM) strategy that drives sustainable competitive advantage.
In this article:
- The Importance of Pricing and Packaging in Go-To-Market Strategies
- Why Pricing and Packing Intelligence is Critical
- The Role of Competitive Intelligence
- How Its All Connected: Pricing, Packaging, and Strategy
- Regularly Revisiting and Evaluating Competitor Strategies
- Ethical Considerations in Competitive Intelligence Research
Understanding the Importance of Pricing and Packaging in Go-To-Market Strategies
In today’s fiercely competitive business environment, a well-crafted GTM strategy is vital for success. Central to this strategy are the twin pillars of pricing and packaging. These elements play a crucial role not only in product launches but across various market initiatives, impacting everything from identifying the target audience and ensuring market fit to assessing competition and selecting distribution channels.
What’s alarming is the lack of attention many companies pay to their pricing and packaging strategies, dedicating on average only six hours over the entire lifecycle of a product. This oversight is significant, given the crucial role pricing plays in influencing customer decision making. Companies often set their pricing strategies early on and revisit them only when faced with market disruptions, missing out on potential strategic adjustments that could enhance their market position.
Why Pricing and Packaging Intelligence Is Critical
Gaining insight into competitors’ pricing and packaging is a key component of developing a successful strategy, yet companies face difficulties in obtaining accurate and comprehensive intelligence on pricing and packaging. To maintain flexibility in their pricing strategies, companies often choose not to disclose these details publicly. This strategy not only makes it harder for competitors to monitor their pricing but enables them to adjust prices based on factors such as demand or quarter-end sales targets.
Additionally, understanding the strategy behind pricing is as important as knowing the price itself. This involves recognizing when and why a company might adjust prices or offer discounts. Given the numerous variables across different customer segments and product mixes, it’s often impractical to compare prices across all categories. Establishing baseline prices and understanding the overarching pricing strategy are crucial for predicting prices in different scenarios.
For this reason, it is necessary to extend competitor research beyond what’s available through online searches or company websites. While these sources may provide basic information, they often fail to provide in-depth detail into the competitors’ true pricing and packaging.
The Need for Professional Competitive Intelligence
Competitive Intelligence (CI) can play a vital role in gathering pricing and packaging intelligence, but distinguishing between basic CI research that might be conducted by a product manager and the sophisticated research and analysis conducted by a professional CI firm is important. Professional CI practitioners are trained and experienced in specialized research, exploring various sources where pricing information might be hidden, and engaging in primary research through direct human interactions. Professional competitive intelligence firms are uniquely capable of combining these research techniques with sophisticated analysis yielding deeper insights than can be obtained from traditional desk research.
How Its All Connected: Pricing, Packaging, and Strategy
In addition to competitor and pricing intelligence, it is also important to understand how pricing interacts with other GTM strategies. For example, knowing competitors’ prices without understanding their bundled features or packaging, offers limited insight into their true value proposition. Packaging is often more opaque and less transparent than pricing, with many companies not clearly defining what their packages include. Often the final cost may include additional charges or fees that are not initially clear but can have a significant impact on the total cost.
A case in point is Sedulo’s engagement with a technology company that was losing market share to a competitor offering a seemingly similar product at a much lower price. A detailed competitive intelligence study revealed that the competitor’s product, while cheaper, offered significantly fewer features and support. This insight enabled the client to adjust their sell-against strategy, rather than lowering their price, which subsequently led to increased win rates while maintaining their target margins. This example underscores the need for thorough competitive intelligence to grasp the complete value proposition of competitors in the market.
It’s also important for companies to leverage the information gathered for both tactical and strategic purposes. Often, companies use this intelligence either at a high strategic level or solely at the sales or product level. The most effective approach is to ensure that the insights impact all relevant areas of the business, from sales tactics to overarching business strategies.
Regularly Revisiting and Evaluating Competitor Strategies
Regularly revisiting and evaluating competitors’ pricing and packaging strategies is essential. The goal of this research and analysis is not solely to adjust a company’s own prices but to gain insights that can impact various aspects of business strategy, such as marketing messages, product features, and market alignment. These studies offer a broader perspective that can significantly influence business decisions and strategic planning.
One crucial best practice for companies is to conduct competitor pricing and packaging studies early in their product development process. Whether launching a new company, pivoting to a new service, or introducing a new product, it’s vital to perform this research before setting prices. Early research can shape your pricing strategy more effectively. Additionally, revisiting these studies frequently – ideally twice a year or at least annually – ensures that your strategy remains relevant and competitive.
Ethical Considerations in Competitive Intelligence Research
Ethical considerations are paramount in competitive intelligence research, especially when leveraging primary research to obtain competitor pricing and packing intelligence. Misrepresentation to gather data is a breach of ethical standards and can have serious implications. This is why many companies opt to outsource their CI research to professional firms specializing in conducting research ethically and legally.
Tying It All Together
Understanding competitors’ pricing and packaging strategies is not just about adjusting a company’s own prices but gaining broader insights that can significantly impact various aspects of business strategy. By working with a professional CI firm, like Sedulo Group, to conduct these studies early and frequently, going beyond surface-level data, leveraging insights both tactically and strategically, and adhering to ethical practices, companies develop a more well-rounded, informed approach that addresses the multiple facets of market engagement and GTM execution.
Start by scheduling your free consultation with Sedulo Group.