Competitor analysis part 4

THE STRUCTURAL BASES

There are four fundamental factors that your product price should always be based on

• Cost of providing the product/service

• Cost of promotion

• Competing with market price

• Long term/short term demand

The way you will measure the price will depend on the type of product or service that you offer. And it will also depend on how you are providing that product or service. The reason been that there is a cost to providing any type of product or service. It could be cheaper or expensive but either way it will affect the price. And an additional thing that you must know is that any types of product or services will also have another extra cost in addition for the cost of making it and that will be the cost of promoting the product or service. Without the promotion of the product or service you cannot attract potential buyers and this is something that is similar to the supply cost which mean that it can be very high or very low in terms of what is the product or service you provide or based on how you provide it.

VARIATION EXAMPLE

If you are an ecommerce store you will have to measure the price of what you sell based on the cost that your supplier will charge you. And that will be the cost of providing the product. This means that you are not producing the product yourself, but you are directly buying a product and that will be your cost. The overview here is that the product could be cheap meaning that you could resell it for a cheaper price. Thus making it more attracted to buyer. But it could be an expensive product meaning that you could have a harder time buying it and this obviously depend on many factors like what is the product you are selling and what it the average price of that product. On top of that you will also have the cost of promoting the product to the people

you want to sell it to. And occasionally you will also have the cost of delivering the product. This mean that overall you will always have to make the price of the product you are selling is very high since you have a starting cost that you must pay in order afford all those things.

VARIATION EXAMPLE 2

If you provide your own product you will have to measure the product price based on the cost of making/manufacturing the product and promotion cost. This could mean the addition of more cost because when you are making the product yourself the production could be divided in several part this could include the cost of material the cost of manufacturing the cost of labour and the cost of supply all this combined together will make the cost of production. And in addition there will also be the cost of promotion for the product and due to all of this if the product is your only source of income then it will mean that you will have to sell it at a price that is very high compare to the cost of both making the product and promoting the product. So this could be the costliest example. But again it depends on what is the product you are selling and how you are selling it.

VARIATION EXAMPLE 3

If you provide a service especially online services e.g. online coaching, you will base your price on any cost required from any platform you use to coach and promotion cost. The cost of starting a digital service might always be less than any other regular services. Since it is done on the internet there are far less thing that you have to pay for and that is the advantages of running a service digitally. Everything that have been moved from been done physical do be done digitally has greatly reduce the cost. So it might seem that the digital service overall is the least costly example of the three variations. But this again could depend on several factors for example out of all the digital service that you provide advertising online is one of the most expensive of all. And since your service if fully done on the internet this will

mean that you will heavily rely on digital advertising to run your service so you might put a lot of money into that sector. Aside from that the platform or digital tool that you will use will also be considered some of them could be free, but most could have a cost.

PROMOTION COST

Whatever types of business you are, you will always need to promote your activity, and this will always have a cost in order to make your activity work you must raise awareness about it. And this is done through marketing. And the cost of marketing will vary in many ways depending on how to decide to market your product. The best way to minimize promotion cost is by building a loyal fan base each time you promote your product

PROFITABILITY

When selling in a new market take the price that the top sellers in that market charges. This could include the top ten or twenty sellers in that market and find out the average price they charge. you do this by adding up all their prices and dividing it by the number of prices there is. The competitor's price could be higher or lower than your cost which is how much you spend on making the product or service you are offering If the average price is higher, measure how high it is. If it is just slightly higher or very high The reason for the client to charge the price they charge is to generate profit, so their cost is originally smaller than the pr ice they charge So if their price is very high, then their cost could be either higher, the same or lower than your cost.

If their price is just slightly higher or about the same than your cost, then you are not going to make a lot of profit . Your cost should be no more than fifty percent of the competitors' price. If that average price is just slightly lower, the same or slightly higher than your cost then you must make the following decisions. First try to reduce the cost of the product to a more than fifty percent to maximum seventy or one hundred percent of the average market cost if possible . spend more time on product analyses and find what extra features you could add to your product that could draw more client base in the market and add it to your product

The extra added features could increase the cost. If extra features will not cost extra add as much features and sell the product at a higher price than the average market price . If extra features will cost more focus more on the production of the product and break it down into different part to see which part of the production can be decreased in cost . If your cost is decreased or already close to a hundred percent less than that average market price you measured, you could consider selling you product at a lower price . If your cost is fifty percent of the average market price. Sell you product with more features at a higher price than the average marker price

LONG-TERM AND SHORT-TERM DEMAND

When selling a product you should obviously know if it is a product that is going to gradually sell for a long period . of time or if it is a product that is going to sell only for a certain limited amount of time. There are many reason for this. But what you should know is that each of the terms should be a way you could use to increase your profit margin.

Long term demand:

This is usually applied to product that are sold daily. This are fast moving consumer good as suggested. Meaning that they will generate profit over the long term and as a result this product aren't very scarce. So this are the types of product to which you could include things such as long-term discount. Because one thing to know from this products is that if it reduces in profit for a while, since it is a long-term selling product which sell all year, you will still be able to make for the lost profit later because the product sell long term. So with this products' the price could be malleable. By offering thing such as discount, special offers etc. To keep its demand.

Short term demand:

The usual products been sold in this case are product that are limited to a certain time. This are not product that will sell for the year. An example of this could be winter coats. This product will only sell the most from the end of the year toward the start of the next year because it is at that period that the demand of this product is at its peak. So the product will sell far more during this time but during other time of the year like during the middle of the year the demand will be at its record low since people will not be buying winter coats in the middle of the summer. Therefore there will be no demand. And for this matter, the price of the product will be at a record high during the winter time since it is when it is the most sold so the supplier will make the most to maximize profit during that time and during the summer time the price will be low as the will be virtually no demand.