Competitive pricing: using rivals as one input, not the answer

Competitive pricing sets your price by reference to what comparable suppliers charge — at, below, or deliberately above them. It is the most commonly used method in small business because it is fast, feels safe, and is easy to explain to a customer who says someone else is cheaper.

The problem is that it is usually done badly. Someone looks at three competitor websites, notes the numbers, and positions slightly under the middle one — without checking whether those prices cover the same scope, the same service level, or the same kind of customer. A price comparison between two different things is not information.

What a usable comparison records

• The competitor and the specific offer, not the company. Most sell several things at different prices.
• Headline price and the unit it is per — per user, per month, per project, per hour. Half of all apparent price differences are unit differences.
• What is included, listed in the same terms across competitors. This column is where the real work is.
• What costs extra: setup, support, minimum term, overage.
• Contract length and payment terms, since a cheaper annual price with twelve months upfront is a different product.
• Their apparent target customer, because a price aimed at enterprise buyers tells you nothing about yours.
• Where you found it and when. Prices move, and undated comparisons age invisibly.
• Your equivalent, so the sheet answers the actual question rather than requiring a second document.

Normalise before comparing. Convert everything to the same unit and period, and add the cost of anything a competitor charges separately that you include as standard. A surprising number of "they are 30% cheaper" claims disappear at this step — and the ones that survive are worth taking seriously.

Building and maintaining it

1. Pick five to eight genuine alternatives, including the ones customers actually mention rather than the ones you consider peers.
2. Include doing nothing and doing it in-house as rows. For many buyers those are the real competition.
3. Record public prices from their site, and note where pricing is hidden — that is itself a finding.
4. Normalise to one unit and period, and add a column for the total first-year cost, which is what buyers compare.
5. Note what each includes in the same vocabulary. If you cannot say what they include, you cannot claim to be cheaper or better.
6. Date every row and refresh quarterly. Monitoring more often than that is rarely worth the time for a small company.
7. Record what you actually lose deals on — price, scope, timing, trust. This beats any desk research about competitor prices.
8. Review with the sheet open before changing your own price, and write down the reason for the change.

Where competitive pricing goes wrong

Following competitors down is the classic failure: they cut, you match, margin disappears on both sides, and nobody wins share because the relative position is unchanged. It is worth remembering that a competitor's price reflects their costs, their funding and their strategy, none of which you can see — a price that is sustainable for a venture-funded rival may be suicidal for you. The other trap is the opposite: pricing above the market without being able to say, in one sentence, what the customer gets for the difference. Premium positioning is a claim that needs evidence.

Ettex Sheets is the practical home for the comparison: import an existing XLSX with formulas intact, formulas to normalise units and compute first-year cost, conditional formatting to flag where you are furthest from the market, filters to compare by segment, cell comments so a claim about what a competitor includes carries its source, and version history so you can see how the market moved over a year — which is more informative than any single snapshot. Your own prices live in Ettex Invoices with line items and rates, the pricing rationale in Ettex Docs, and public prices you publish sit in Ettex Sites.

Said plainly: Ettex does not track competitor prices. There is no scraping, no price monitoring, no alerts when a rival changes, and no market data of any kind. Somebody looks the prices up and types them in, quarterly. For a small company that is an hour every three months; if you need continuous monitoring across hundreds of SKUs, that is a specialist product. Discounting to win volume has a name and a trap: the loss leader only works if the follow-on sale exists.

Signals to watch

• Prices compared without normalising units — the most common error and the easiest to fix.
• Comparisons against companies your customers never actually consider.
• Doing nothing and doing it in-house excluded from the comparison.
• Undated rows, so nobody knows whether the data is from this year.
• Matching a competitor's cut without knowing whether it is a promotion or a permanent position.
• Pricing above the market with no articulated reason.
• Loss reasons never recorded, leaving desk research as the only input.
• The sheet built once for a pricing decision and never opened again.

Competitive pricing is only as good as the normalisation behind it. Compare like for like, include doing nothing, date every row, record why you actually lose — and do not follow a rival's cut without knowing what it is for. The same trap appears in dynamic pricing retail: a rule that wins the comparison can lose the margin.