What Your Competition Has To Do With Your Pricing Practices

When it comes to your company's success almost nothing figures more predominantly than your pricing practices. Why? Because if you're pricing your goods and services way over your competition and your consumers find out about it the piper's going to be asking for more than his due. That's why it's important to keep your competition in mind when you're choosing your pricing.

When a new product hits the market many uneducated companies think they have carte blanche when it comes to pricing-after all, they don't have any competition. They can start out with a bang and then lower their prices when a pricing war begins. Unfortunately, it doesn't work like that. Regardless of what product or service you're releasing you're always going to have competition of one type of another. Forgetting that is almost always the first nail in your coffin.

Is it really fair to do that to your business before you've even had a chance to get started?

What you have to remember is that not all competition is direct. Apple may have been the first to offer the iPod, but that doesn't mean they weren't competing with laptops, Walkman and CDs for their fair share of the music industry. If their iPods had been ludicrously priced they wouldn't have even had the chance to get out of the starting gate, much less dominate the digital music industry the way they do today despite the attempts of their competition. They took into account what people were already paying and kept that in the back of their mind during their production process.

The result? The iPod was a little more expensive than the average music player, but not so much that people weren't willing to pay for the novelty. That's the kind of ideal you want to keep in mind when establishing your own pricing practices.