Who Are Your Competitors, and How Do You Compare?

Understanding your competitive landscape is essential for positioning your product or service effectively. By evaluating your competitors’ strengths and weaknesses, you gain insights into where your brand stands and how to differentiate yourself. This post explores how to analyze competitors in terms of pricing and benefits, providing examples from Tesla and GreenClean to illustrate the process.

Step 1: Identify your competitors (M6)

Competitors in any market typically fall into one of several categories based on their positioning and market strategy, particularly in how they align with key benefits identified in your market. Understanding these roles provides a framework for evaluating competitors effectively:

• Leader: Excels across multiple key benefits, often setting industry standards. Leaders tend to dominate on aspects like performance, innovation, and brand trust.

• Challenger: Focuses on select benefits to compete directly with leaders, often balancing affordability with strong perceived benefits.

• Game Changer: Disrupts the market by emphasizing new or underserved benefits, redefining customer expectations (e.g., sustainability or traceability).

• Follower: Mimics the offerings of leaders or challengers without significant differentiation, usually relying on competitive pricing.

• Niche Player: Excels in one or two highly specific benefits, targeting a distinct audience or segment.

Begin by identifying your key competitors. For each, gather the following information:

• Price per unit (M7): The actual cost of their product or service. Identify their market role (e.g., leader, challenger, game changer).

• Perceived price (M8): How customers perceive their pricing relative to competitors.

• Perceived benefits (M9): How well competitors perform across key benefits that matter to customers.

• Comments (M10): Observations on competitors’ positioning, strengths, or weaknesses.

This forms the foundation for understanding how your offering compares.

Step 2: Analyze perceived price (M8)

Price isn’t just about numbers; it’s about perceived value. Customers may pay a premium for products they see as more valuable. Use the following formula to calculate perceived price:

Formula for perceived price (M8):

M8=24(E−C)×(M7−C)−12

• E: Maximum price per unit in the market.

• C: Lowest price per unit in the market.

• M7: Your product's price per unit.

This formula provides a score between -12 and +12, helping you understand how your pricing is perceived.

Example: Tesla model S (M7: Leader)

• Maximum price (E): €120,000

• Lowest price (C): €50,000

• Tesla model S price (M7): €100,000

M8 = (24)/{120,000 - 50,000} x (100,000 - 50,000) - 12 = +4.8

Tesla’s perceived price is higher than average, reflecting its luxury positioning.

Example: GreenClean (M7: Challenger)

• Maximum price (E): €15

• Lowest price (C): €6

• GreenClean price (M7): €10

M8 = (24)/{15 - 6} x (10 - 6) - 12 = -1.33

GreenClean’s perceived price is lower, appealing to price-sensitive customers.

Step 3: Evaluate perceived benefits (M9)

To calculate perceived benefits, assess competitors across key benefits (identified earlier in your analysis). For each benefit, score competitors on a scale of -3 (completely disagree) to +3 (completely agree).

Competitor comments (M10) should play a critical role in interpreting perceived benefits. For example, understanding why a competitor excels in specific areas can highlight strategic opportunities or challenges for your brand. Comments might also identify potential collaboration opportunities or gaps to address in your own offering.

Example : Tesla vs. competitors (M9)

1. Performance

2. Innovation

3. Sustainability

4. Customer Trust

Example Table: GreenClean vs. Competitors (M9)

1. Effectiveness

2. Convenience

3. Sustainability

4. Customer Trust

Step 4: Compare and interpret results

With perceived price and perceived benefits calculated, create a summary table to identify where you excel or need improvement.

Example : Tesla vs. competitors (M10)

1. Tesla: Leader in EV innovation, leveraging superior battery performance and software integration.

2. Porsche: Luxury competitor, lacks EV focus.

3. BMW: Established brand, but less innovative.

Example: GreenClean vs. Competitors (M10)

1. Greenclean: Challenger with a sustainability focus, offering affordable alternatives to premium eco brands.

2. EcoPure: Leader in premium eco-friendly solutions.

3. NatureFresh: Budget competitor, lacks differentiation.

Final thoughts

Understanding your competitors goes beyond pricing and benefits. This process helps identify gaps in the market, refine your positioning, and strengthen your value proposition. By analyzing perceived price and benefits, you can develop strategies that resonate with your target audience while staying ahead of competitors.

As seen with Tesla, a high perceived price can align with high perceived benefits to justify a premium position. Similarly, GreenClean shows how affordability and sustainability can differentiate a product in a price-sensitive market. Use these methods to assess your landscape and uncover opportunities to lead.

What strategies have worked for you in understanding competitors? Share your experiences and insights in the comments!

Marketing Canvas - Pricing

Last update: 24/11/2024

In a nutshell

The Pricing sub-dimension in the Marketing Canvas examines how your pricing strategy supports your value proposition, aligns with customer expectations, and reflects your brand positioning. Pricing is not merely a financial decision but a strategic tool that communicates value, differentiates your offering, and influences customer behavior toward sustainable choices.

For instance, a brand like Green Clean might emphasize pricing transparency and offer incentives for sustainable behaviors, such as discounts on refillable products, to align with its eco-friendly mission and customer expectations.

Introduction

The Pricing sub-dimension in the Marketing Canvas is critical to ensuring your value proposition is both competitive and aligned with your brand’s goals. A well-designed pricing strategy balances customer Willingness To Pay (WTP), perceived value, and cost structure while promoting sustainability. It ensures your offering creates more value than its cost and encourages customers to engage with your brand’s most impactful and sustainable options.

Pricing also reinforces brand positioning by reflecting the quality, exclusivity, or accessibility of your product or service.

What is pricing?

Pricing is the monetary expression of your value proposition, reflecting the worth of your product or service to customers. A strong pricing strategy:

• Communicates Value: Ensures that customers perceive the benefits of your offering as exceeding its cost.

• Reflects Willingness To Pay: Aligns with what customers are willing to pay for solving their problems.

• Covers Costs: Accounts for the full costs associated with delivering your value proposition.

• Supports Positioning: Aligns with your brand’s image and goals in the category.

• Promotes Sustainability: Incentivizes customers to choose sustainable options.

For example, Green Clean might set a premium price for its eco-friendly cleaning solutions to reflect their unique value while offering subscription discounts for refills to encourage long-term sustainable behaviors.

Pricing: an in-depth perspective

PRICING is a pivotal element of your marketing strategy that requires meticulous analysis due to its complexity and profound impact on value creation. In the Marketing Canvas Method, PRICING goes beyond simply competing with market rates for similar offerings. Instead, it focuses on leveraging pricing as a strategic tool to create or preserve value, propelling your brand upward on the economic value curve.

Perceived Price and the Value Curve

At the core of effective PRICING is the concept of the Perceived Price—how customers interpret the value of your offering relative to its cost. Understanding the standard pricing unit in your market is critical to analyzing your position.

For instance:

• In a supermarket, shampoos or soaps are typically priced per milliliter in Europe, while coffee is sold by weight.

• In the service industry, consulting services are often charged per hour or day.

Once the reference pricing unit is established, you can calculate the perceived price of your offering compared to competitors using the formula:

24 / (E - C) * (M7 - C) - 12

Where:

• E is the highest unit price in the market,

• C is the lowest unit price,

• M7 is your unit price.

This calculation helps determine your position on the value curve, indicating whether your PRICING strategy accelerates or impedes your business growth.

Example: Artisanal Coffee

Suppose your artisanal coffee beans are priced at $15 per pound (M7). In your market, the highest-priced coffee is $20 per pound (E) and the lowest is $10 per pound (C). Applying the formula provides insight into where your pricing strategy positions you on the value curve.

A strong position on the curve suggests your pricing reflects perceived value, while a weak position may signal the need for adjustment to better align with market conditions and customer expectations.

PRICING and Perceived Value

PRICING is intrinsically tied to how customers perceive the value of your product or service:

• If your offering is seen as a commodity, customers will gravitate toward the lowest price.

• Conversely, if your unique value proposition is clear, customers may accept higher prices that reflect this differentiation.

For example:

• Starbucks customers willingly pay premium prices because they perceive value beyond the coffee itself—a unique experience.

• A luxury fashion brand can command high prices because it offers a transformational experience, making cost secondary for its target audience.

Key Principles of an effective PRICING strategy

An effective PRICING strategy should adhere to the following principles:

1. Be Value-Based: Align your price with your position on the economic value curve.

2. Consider Market Conditions: Analyze competitor pricing and customer price sensitivity to ensure relevance.

3. Enhance Your Brand’s Purpose and Positioning: Reflect your brand identity. For instance, a disruptive brand might challenge market norms with innovative pricing.

4. Strengthen Your Value Proposition: Reinforce the unique aspects of your offering to justify the price.

Ignoring these principles can lead to a PRICING strategy that acts as a brake on your progress, rather than an accelerator.

Assessing your pricing strategy

To evaluate your pricing, consider a scoring scale from -12 to +12:

• 12 represents a low price that may correspond to a low perceived value.

• +12 indicates a high price with a high perceived value.

For example:

• If your artisanal coffee is priced above average market rates but customers appreciate its unique quality and sourcing, resulting in a high perceived value, your pricing might score a +8 or higher on this scale.

• On the other hand, a low-priced coffee with limited differentiation might score closer to -8 or -12, reflecting a misaligned pricing strategy.

Value Map that helps you understand your current pricing situation

Translating pricing into action

A strong pricing strategy should consistently reflect your value proposition and support customer decision-making. Pricing decisions should be based on insights into customer behavior, cost structures, and competitive analysis, while integrating sustainability as a core principle.

Questions to consider:

• Does your pricing strategy create more value than the cost for your customers compared to alternatives?

• How well does your pricing align with your customers’ Willingness To Pay for solving their problems?

• Does your pricing account for all costs associated with delivering your value proposition?

• Is your pricing consistent with your brand positioning and category goals?

• How does your pricing strategy encourage sustainable choices?

Method for self-assessment

For a comprehensive evaluation of your understanding and application of the Pricing concept, rate your agreement with the following statements on a scale from -3 (completely disagree) to +3 (completely agree):

1. Your value proposition is creating more value than the cost of the next best alternative for your customers.

2. Your pricing strategy is based on customer Willingness To Pay (WTP) for solving their problem.

3. Your pricing strategy takes into account all costs associated with your value proposition.

4. Your pricing strategy is aligned with your brand positioning and your goals for the category.

5. Your pricing strategy encourages customers towards the most sustainable option available.

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Marketing Canvas Method - Value Proposition - Pricing by Laurent Bouty

Interpretation of the scores

Negative scores (-1 to -3): Negative scores suggest that your pricing strategy is misaligned with customer expectations, cost structures, or brand positioning. This can result in undervaluing your product, losing competitive advantage, or failing to support sustainability goals. Immediate action is required to reassess your pricing approach.

A score of zero (0): A neutral score reflects uncertainty or incomplete alignment in your pricing strategy. While some elements may be in place, such as cost coverage or WTP analysis, they lack cohesion or fail to drive sustainable behaviors effectively. Further refinement is needed to strengthen your strategy.

Positive scores (+1 to +3): Positive scores indicate that your pricing strategy effectively communicates value, aligns with customer WTP, covers costs, and supports brand positioning. Additionally, your pricing encourages sustainable choices, reinforcing your commitment to long-term impact and differentiation.

Case study: Green clean’s pricing

Misaligned understanding (-3, -2, -1): Green Clean’s pricing fails to reflect the value of its eco-friendly products, either undervaluing them compared to competitors or setting prices that exceed customer WTP. The lack of cost alignment and sustainability incentives weakens the brand’s positioning and reduces customer appeal.

Surface understanding (0): Green Clean’s pricing covers basic costs and aligns with industry averages but lacks differentiation or focus on sustainability. Customers may perceive value but are not incentivized to choose more sustainable options, limiting the brand’s impact and competitive edge.

Deep understanding (+1, +2, +3): Green Clean’s pricing highlights the value of its unique features, such as non-toxic ingredients and zero-waste packaging, while aligning with customer WTP. By offering subscription discounts and promoting refillable packaging, the brand encourages sustainable behavior. This strategy reinforces its eco-friendly positioning, builds customer loyalty, and ensures profitability.

Conclusion

The Pricing sub-dimension is a strategic tool for aligning your value proposition with customer expectations, brand positioning, and sustainability goals. By creating value beyond cost, basing pricing on WTP, and incentivizing sustainable choices, businesses can enhance their competitive edge, foster customer loyalty, and achieve long-term success.

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Sources

1. Market and Economic Value, Laurent Bouty, https://laurentbouty.com/blog/2019/marketing-canvas-market-and-economic-value

2. Neil Patel - 5 Psychological Studies on Pricing That You Absolutely MUST Read, https://neilpatel.com/blog/5-psychological-studies/

3. The Ultimate Guide to Pricing Strategies, https://blog.hubspot.com/sales/pricing-strategy

4. Replyco, 23 Pricing Strategies Any eCommerce Seller Can Use to Increase Sales, https://replyco.com/brainery/23-pricing-strategies-for-ecommerce-sellers/

More on the Marketing Canvas

Marketing Canvas by Laurent Bouty