“When it comes to pricing and value propositions for our association’s products, do our competitors matter?”

That’s a question associations often ask. For many, a key pricing strategy is to analyze the competition and make decisions based on what they see. More specifically, associations don’t always have a pricing strategy that is internally driven. Rather, they look at their closest competitors and the products that they offer, determine how they are pricing and positioning those similar products, and then compete on that price by positioning theirs at a similar value with a similar price, lower value with a lower price, higher value with a higher price, or similar or higher value with a lower price to drive market share.

Why to Avoid Looking at Competitors

While using price comparison to determine a product’s price is often done, it’s not a pricing strategy. It is an easy way to price your products, but there are many reasons this does not work. Let’s look at just the top two reasons.

First, when you are pricing based on what your competition is doing, you do not have a full understanding of their products or their own strategy. Why did they make the pricing decision that they made? Does this even relate to what you're doing? The reality is that you do not sit in their board meetings, you're not on their leadership team, you’re likely not a member of their organization, and you probably have not gone through the product or service yourself. How can you properly gauge what the value is and what the pricing strategy should be within a broader product landscape in comparison to your own products and strategy? You’ll be left making a lot of assumptions, and we all know what making assumptions will do.

When you copy your competitors, you're assuming that they have a great pricing strategy, that they've done their own market research, that they've done the heavy lifting for you as a competitor, and that you can just borrow—or interpret—what is public-facing.

Second, how do you know that they even have a pricing strategy themselves? Unless you work for the organization, you do not know what their costs are, if this product is a loss leader to gain money in other areas, or if they’re simply copying you right back. Talk about a race to the bottom.

When you copy your competitors, you're assuming that they have a great pricing strategy, that they've done their own market research, that they've done the heavy lifting for you as a competitor, and that you can just borrow—or interpret—what is public-facing. However, there are several reasons not to do this. What if your costs are higher than theirs? What if you have healthier margins? What if their goal right now is market acquisition? If you already have a healthy market share and your goal right now is to grow loyalty and profit, following their strategy will not meet your goals. What if they're offering something for a lower cost or for free to upsell people into another offer—and it’s that other offer that allows them to be profitable? What if they're overpriced and barely making any sales? Pricing to match them might give you similar results.

Takeaways From Your Competitor’s Pricing

Given what I’ve shared, you may be wondering if your competitor’s prices and value propositions matter. They’re something to look at, but not what you should be basing your prices on.

I like to correlate your competitor’s prices and value with receiving relationship advice: Everybody has an opinion. Everybody thinks that they're right. But what might work for them does not automatically mean that it will work for you or your specific circumstances. Also, do not assume that it is to be 100 percent replicated.

So, how do I recommend looking at your competitors’ prices and values?

Review them—see what they're doing and if it inspires ideas—but you should have your own concrete, internal pricing and value strategy that you can then filter those ideas through to ask:

• Is this something that we can offer?
• Is this a direction that we should even be going in?
• How does this fit into our own strategy?
• How might this look for us?

If you simply copy what other people are doing, you will be in a race to wherever the wind blows.