Why Copying Your Competitor’s Prices Is a Dangerous Pricing Strategy

Want to know why copying your competitor’s prices is a dangerous pricing strategy? Whether you are revising the price of a current offer or trying to set the price for something new, it’s easy (when you aren’t confident with setting prices) to find yourself looking at what a competitor is charging and then thinking you should do the same. However, for so many reasons, it is not a smart business move to do so. Keep on reading to find out why copying your competitor’s prices is a dangerous pricing strategy.

 

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WHY COPYING YOUR COMPETITOR’S PRICES IS A DANGEROUS PRICING STRATEGY

 

 

1. You could have completely different financial goals

 

Your prices have a direct impact on the amount of revenue your business can generate, and if you are only selling one-to-one services, then your pricing will ultimately determine the maximum amount of revenue you can generate in a certain period of time. If you copy your competitor’s prices, you could find yourself in a situation where it’s impossible for you to hit your financial goals, whether that be a revenue goal, profit goal, take-home goal or something else.

 

People have a wide range of financial goals for their business. Some people are running their business as a side hustle and have a full-time job as another income source. Some people are running their business because they love what they do and enjoy having some extra income, but financially, they are supported by someone else. Some people are running multiple businesses and have numerous income sources. Some people are happy making 50K per year, some want to make 6-figures, some want to make multi 6-figures and some want 7-figures.

 

The likelihood is that your financial goals aren’t the same as your competitors’. And so whilst the prices they’ve set might be right for them, it doesn’t mean they are right for you.

 

HAVE COMPLETE CONFIDENCE  THAT YOUR PRICING MEANS YOU CAN ACHIEVE YOUR FINANCIAL GOALS – BOOK A PRICING POWER HOUR I’ve helped hundreds of coaches, consultant and services providers to review, review and set their prices and I can do the same for you. I’ll ensure you have properly thought through all of the pricing, across your whole offer suite, so you can achieve your financial and lifestyle for goals. Whether you are setting your prices for the first time or want your current prices reviewed a Pricing Power Hour will help – and fast! To book, or find out more about, the Pricing Power Hour click here.

 

 

2. You have no idea how well they are selling

 

Usually, when a business owner decides to copy a competitor’s prices, it’s because they assume the competitor is selling well, and they think if they have the same prices, it will mean there is the potential for them to sell well too. But if you are not working in that business, you have no idea how well something is selling. Even if a business is publicly sharing that they are fully booked that doesn’t mean you know how many sales they’ve made. One business’s version of fully booked can be completely different to another.

 

So you might think they are selling well and that means the pricing is ‘acceptable’ to buyers, but in actual reality the prices are too high and they are struggling to make sales.

 

3. You don’t know if that offer is profitable for them at that price or not

 

Without working inside of another business, you have no idea if, at that price point, an offer is profitable for the business or not. You can see what they are charging, but you don’t also know…

• How much it costs for them to deliver the offer
• How long it takes to deliver the offer
• Whether the work is being done by the business owners, employees, freelancers or a mixture
• What they spend on marketing to acquire clients
• The overheads of the business

And even if you knew all of that and could work out if the offer was profitable for that business, it doesn’t automatically mean it would be profitable for your business.

 

Your business isn’t going to be exactly the same as your competitors. Even if you are delivering relatively similar offers, the reality is you could have different costs and therefore different profitability.

 

4. You might have completely different offer suites

 

Whilst you and a competitor might have one very similar offer, and that’s what pricing you’ve been looking at, the reality is the pricing of one offer shouldn’t be taken out of consideration for how it works amongst the whole of an offer suite.

 

For example, an offer might have purposefully priced higher or lower in order to drive people into a certain offer within an offer suite. For example, if a business have three offers (A, B and C), but really want everyone to purchase B then it might have made A slightly more expensive than really they thought it should be to make the difference between A and B smaller and make more people see B as the ‘obvious choice’. Whereas you come along, think they must have priced the offer at the ‘right’ price and copy it. You could find your business in a situation where you have an overpriced offer, but nothing above that you are trying to drive people into instead.

 

Another example of where copying your competitor’s prices is a dangerous strategy is where they have decided to create a loss leader, and you don’t realise it is that. I’ve written more about what the loss leader pricing is here. But essentially, a loss leader is where you have an offer that purposefully doesn’t make a profit, but it’s sold to gain new clients or customers because the business has a clear understanding of what the lifetime value of a customer or client is. A business will essentially make a loss on the first sale, knowing that once someone has bought from the business once, they’ll make more sales from them and overall, in the long-term, the original loss will be returned and then some.

 

This happens very often in the world of events. A business will put on an event and price the tickets in such a way that the revenue from ticket sales would never cover the costs of the event. However, they are willing to make a loss on the event, because during the event they will be selling something else (a group programme, a mastermind, a one-to-one service) and they know the sales from that alone will make the loss from the event worthwhile.

 

CREATE A STRATEGIC PLAN TO GROW YOUR BUSINESS OVER THE NEXT YEAR – IN JUST ONE DAY! I’m the Annual Planning Queen and I specialise in helping solo and micro service-based business owners to create a growth plan for the year ahead. Pricing is just one of the things you’ll need to get right to ensure you see year-on-year growth in your business. By booking a Strategy Day with me, I’ll ensure you have a powerful and productive annual planning day where we consider all the major elements to ensure your business grows and you achieve any other goals you set for the year ahead. All you have to do is secure your date, block it out in your diary and get ready to be guided through my signature annual planning framework that guarantees by the end of the end of our time together, you’ll have a clear roadmap to achieve your goals and be excited for the year ahead. For all the information and to book a Strategy Day click here.

 

5. You have no idea how they set their prices

You might look up to this competitor, think they are good at business and then for that reason assume they’ve have set their prices properly. But you can easily have assumed wrong.

They easily could…

• Have set their prices years ago and not changed them
• Used Ai to set their prices
• Have chosen an arbitrary number
• Been told to set their prices at a certain number by someone else and never questioned it
• Looked at another competitor
• Be afraid to raise their prices (even though they need to)

The fact you’ve taken the time to read this blog post shows you are serious about wanting to set your prices correctly, but not every business owner is that committed. Do not make the mistake of assuming someone else is better at pricing than you and therefore you should copy them. Because it might turn out they didn’t set their prices strategically in the first place.

 

What should determine how you set your prices

 

As you can see. there are numerous reasons why copying your competitor’s prices is a dangerous pricing strategy. Now, to be clear, this isn’t me saying you shouldn’t be aware of your competitors’ pricing. It absolutely makes sense when you are setting your prices to understand what other businesses are charging. But there is a difference between being aware of what your competitors are charging and copying your competitors’ pricing.

 

So if you aren’t meant to follow your competitors’ pricing, how should you be setting your prices?

• Your business goals – What are your current and future goals for the business? How much revenue and profit do you want to make?
• Your goals – What do you personally want to be able to take home? How much time do you want to be working
• Your costs – What are your fixed costs for running the business? What are the costs associated with delivering the offer?
• Your capacity – How many clients can you work with? What’s your version of fully booked if offering one-to-one?
• Your positioning – Where do you sit in the market?
• Your offer suite – What else are you selling? How does this offer sit amongst everything else? What is the average lifetime value of a client or customer?

 

HAVE COMPLETE CONFIDENCE  THAT YOU’VE SET YOUR PRICES STRATEGICALLY – BOOK A PRICING POWER HOUR I’ve helped hundreds of coaches, consultant and services providers to review, review and set their prices and I can do the same for you. I’ll ensure you have properly thought through all of the pricing, across your whole offer suite, so you can achieve your financial and lifestyle for goals. Whether you are setting your prices for the first time or want your current prices reviewed a Pricing Power Hour will help – and fast! To book, or find out more about, the Pricing Power Hour click here.

 

 

That’s it. You now know why copying your competitor’s prices is a dangerous pricing strategy.

 

Copying a competitor’s prices is a dangerous pricing strategy because you don’t understand why they have set their prices the way they have. As you’ve seen, there is a lot to consider when setting your prices. You can go onto someone’s website and see a price, but you have no idea what made them decide to choose that price. And even if you did know why they set the price at the amount they did, that doesn’t mean it makes sense for your business because there is so many things that could be different in your business (what profit you want to make, what costs you have, what other offers you have etc). Instead, you should set your prices by concentrating on your business and what you are trying to achieve in your business.

 

If you’ve found this blog post useful, please do let me know over on Instagram or LinkedIn.

 

 

And as you can see there is a lot to consider your pricing, but I’ve helped hundreds of business owners strategically set their prices.

 

If you’d like me to help you to confidently set your prices, then book a Pricing Power Hour.