A company’s effective strategic planning relies on an analysis of competitors’ pricing, allowing them to optimally position themselves in the market. A study found out that companies who used competitive price strategies based on data analysis, increased their sales volume by 25%.
Unfortunately, in-depth analyses can lead to misguided conclusions that cause fallacies in business decisions and lead to loss of revenue.
One such fallacy is focusing on prices set by direct competitors while ignoring the indirect ones that pose threats to the market. Outdated knowledge, which arises from irregular analysis, is also a problem.
These problems can be either solved or mitigated with advanced software such as Dealavo, which provides comprehensive market overviews that aid in pricing decisions. This short piece will provide skepticism on the five most popular mistakes made while analyzing competitors’ pricing strategies.
Incomplete Competitor Identification
Many companies make the critical mistake of focusing exclusively on direct competitors, assuming that their biggest threats come from well-established players within their industry.
While monitoring these rivals is essential, this narrow approach often leads to missed opportunities and an incomplete understanding of pricing structures, market shifts, and emerging threats.
One of the most significant risks businesses face is overlooking smaller competitors or new market entrants. Startups, niche players, and disruptive innovators often enter the market with novel approaches, undercutting traditional models and reshaping customer expectations.
By the time established companies recognize the threat, these emerging competitors may have already captured a loyal customer base or shifted industry standards.
To stay on par with the competition, broader categories of competition, including indirect ones, must be analyzed deeply to grasp the market evolution and trends better.
Overlooking Market Trends and Dynamics
While monitoring competitors’ prices is a crucial element of pricing strategy, it should never be the sole factor in determining a company’s pricing model. Businesses that rely exclusively on competitor-based pricing risk overlooking broader market dynamics, which can make their pricing ineffective in the long run.
Pricing is not static; it must adapt to external influences such as industry trends, economic fluctuations, consumer behavior shifts, and seasonal demand patterns. A price that is competitive today may become unsustainable or unappealing tomorrow if businesses fail to anticipate these evolving factors.
Inconsistent and Irregular Analysis
An occasional competitor price analysis will not suffice. Price changes in a market happen rapidly, and failure to analyze them regularly will result in missed opportunities to adjust prices in a timely manner.
Regular analysis aids in identifying patterns or shifts that inform important price-setting decisions. This proactive approach helps firms anticipate change rather than respond to it.
Misinterpreting Competitor Pricing Strategies
A competitor slashing their prices does not always imply that the same action should be taken. Many companies make the mistake of analyzing pricing decisions without considering promotional activities, stock depletion, or other financial implications of the price change.
A logical approach to pricing would first analyze the competitor’s price and then look for their reasoning. Looking at prices from a broader perspective will help avoid actions that will unnecessarily weaken profit margins.
Lack of Actionable Insights
Gathering pricing data from competitors becomes futile without action. Pricing is one area where companies collect data, but most of them do not bother to act on it. Collection of data regarding competitor pricing must result in some type of action—be it price changes, promotional advertising, or the altering of the product’s place in marketing strategy.
Without useful information that can be acted upon, even the most thorough research will not provide a competitive advantage.
Competitor pricing analysis is not something to be done just once; it is a continual activity that is essential in making effective business decisions. Continuously analyzing data allows businesses to respond to market changes promptly, minimize mistakes, and anticipate trends.
An effective pricing policy helps companies stay in the market where they are making profits.
To ensure that data analysis and computation are as easy as possible, Dealavo offers price monitoring and retrieval services. Using these applications will help companies alter prices, increase profits, and consolidate their market position.
Article and permission to publish here provided by Tomasz Rezik. Originally written for Supply Chain Game Changer and published on February 21, 2025.
Cover image by Robert Owen-Wahl from Pixabay.