Pricing and margin against competitors

When many sell a similar product you are tempted to cut your price. But a price race eats your margin and hurts your brand.

Look at the market

• Collect the prices of five similar products and what they offer.
• Ask: what justifies a higher price from me? Fabric? Detail? Packaging? A guarantee?
• Remember the customer buys the whole experience.

Work out your margin

An illustrative example: cost 16 and selling price 50. Markup = 50 ÷ 16 = about 3.1, and margin = (50 – 16) ÷ 50 = 68%. Then take off the marketing and returns costs that eat into the margin, as in the marketing course.

Do not compete on price alone

If you have nothing that sets you apart you will compete on price alone and lose. Go back to the differentiation lesson and strengthen it.

Exercise

Collect five competing prices and set your price with the reasons it is justified. Then work out the markup and the margin.