Using strategies to compete
Competition exists in every successful market, and you must be able to employ the strongest competition strategies to make the most of your business.
Market research should provide evidence of your competitors' prices and the price customers are willing to pay for your products and services. It is vital to set your prices at a level that ensures your business remains profitable yet prevents your customers from looking elsewhere.
Pricing strategies can include:
- value adding – consider adding additional services or options to your product, service or experience (e.g. a workshop on how to use the product or offering a bottle of wine with a night's accommodation)
- discounting – temporarily lowering prices or offering 2 for the price of 1
- image pricing – where the perceived image of the product outweighs the actual price, such as in luxury goods.
There are pros and cons to each pricing strategy.
Learn more about pricing products and services.
You can also get guidance on setting prices from the Australian Competition and Consumer Commission (ACCC).
Engaging in a price war with your competitors is risky business. When prices are low, customers are often willing to buy more; however, there is no guarantee your product will be the one a customer will choose. Price wars also often lead to reduced profit margins and lower prices across the market.
To ensure the stability of your business, a sensible strategy that avoids price wars an focuses on value is almost always a better approach. If a competitor engages you in a price war, it can be better to try to reinforce your unique selling proposition to sidestep the challenge.
Quality and service
Though many customers will see a product's price as the crucial factor in deciding where to spend their money, in the long term a business can benefit more from creating good-quality products and offering excellent customer service.
If your customers have a positive buying experience, they are far more likely to come back. Customer retention is important for competition and gives your long-term business prospects a boost.
It is vital to maintain high levels of quality and service – if standards begin to slip, customers may be unforgiving and switch to your competitors. Read more about providing excellent customer service.
Sales and marketing
A good sales team and a solid marketing plan are excellent ways to communicate the benefits of your products and services to customers. Businesses grow by securing new customers, and effective sales and marketing strategies can help you succeed.
Find out more about sales and marketing strategies for your business.