The good news is that getting this information is pretty easy. It’s just a matter of doing a little legwork. If you’re working with a physical product, like the organic cookie example from the previous article, this would mean checking out the prices of similar snacks at grocery stores in your region. It might also mean reaching out to friends in different markets, and having them send you photos of products and prices from their supermarkets.
Depending on the nature of your business, this might also mean spending some time researching the competition online, and looking at prices on Amazon or eBay for comparison. For some industries, like Software as a Service (SaaS), it might even involve a little investigation to find out exactly what your competition is charging. The goal is to get as detailed a picture as possible about what the space looks like, and where your business falls within it.
Once you have all that information, the next step is to put together a graphical overview of the data. It’s called a “competitor matrix,” and it’s a simple, visually intuitive way to easily compare the products or services. A competitor matrix is no more difficult to put together than a typical spreadsheet, and often a simple chart is all that’s needed.
Most competitive matrices work like this: You list the key features of your product or service going down the far left column, and then make additional columns for each of your competitors. You fill in each column with the relevant data from your competition, noting the differences as you go. You can arrange a competitor matrix by almost any metric, but it works particularly well for comparing price.
One of the most effective ways to use a competitor matrix is for understanding price ranges within a category. Most lower-priced or higher-priced products within a category will share similar traits, like having high-quality ingredients or more durable packaging. Another example is portion size, which tends to be very similar in food pricing.
Putting all of this data into a matrix allows you to see the differences at a glance, and without having to do a lot of heavy lifting in the process. It can also allow you to see what’s missing in the market. Gaps in pricing and quality can become obvious when you’ve arranged all the options in a matrix. There are few better opportunities than a gap in pricing.
A matrix also helps you to consider some “How will my product perform if …” scenarios. In our organic cookie example, for instance, it becomes possible to see the difference in pricing between marketing to the high-end market by using only the finest ingredients and packaging versus using the lowest-priced organic ingredients and aiming for broader market. By making relatively minor changes in the model, you can see vastly different results.
Armed with these insights, you will be able to make pricing decisions with a new degree of confidence.