Analysis 47: Competitor Price Point Pricing Index

PURPOSE: This analysis quantifies the price differences across competitors at a given product price point, usually the Standard Leader product. This price point of each competitor has a set of benefits equivalent to that of every other competitor.

APPROACH: The marketing and sales organization gathers the prices and benefit structures for each competitor. The Company arrays the product price points of each competitor according to their benefits into groups (i.e., Standard Leader, Performance Leader, Price Leader or Next Leader) with related benefits. It then compares the prices of each competitor in a given group.

The Company would use these results to serve as a starting point for an analysis of growth and profitability of these competitors. The Company would test whether the lower priced competitors have high growth and low profitability. If lower priced competitors have high growth and high profitability, it is likely the industry is facing a declining price environment in the future. This analysis may also suggest the Company's entry into the high growth product price points, if it does not already compete at these price points.

• Video #78: Competing Against Low-End Competition Part 1

Return to Diagnose Pricing: Price Sensitivity and Competition

Analyses:

• Analysis 48: Average Price Received by Competitor

• Analysis 49: Market Segments Where Share Moves on Low Price

• Analysis 50: Returns from Price Leverage Roles

• Analysis 51: Loss On Price Index

• Analysis 52: Time To Lateralize Price Discount

Symptoms and Implications: Symptoms developing in the market that would suggest the need for this analysis.

• While still growing some competitors are losing share

• The larger companies are squeezing out the smaller

• Foreign competitors are expanding with low prices

• Large competitors are maintaining price levels as smaller competitors discount

• Some competitors seek price increases more aggressively than others

Perspectives: Conclusions we have reached as a result of our long-term study and observations.

• "Is Your Industry Ripe for Hostility?"
  A company enjoying above average margins probably has a competitive advantage. But if margins are high for an entire industry, tough times may lie ahead. (1993)

• "The Leader's Trap"
  Being the market share leader should be an advantage. But leadership also has its dangers. Many times, in a range of industries, leaders have allowed themselves to be trapped. (1991)

• "The New Pricing Structure"
  The structures of industry prices are fundamentally different in hostile and non-hostile markets. (1994)

• "Who Has Pricing Power?"
  One of the first clear signs that a market has become hostile (or that hostility has ended) is a change in who sets prices. Pricing power shifts as a market moves into and through hostility. (1994)