Competitive pricing analysis: 6 steps to do it right

Competitive pricing analysis helps SaaS firms set prices that win deals. It’s a structured process where you benchmark your prices against competitor pricing data, analyze market positioning, and fine-tune your strategy to improve profit margins and market share. 

Keep in mind that this analysis goes beyond price matching. It’s about making informed decisions that align with your business model and customer needs.

What is competitive pricing analysis?

A competitive pricing analysis is a research process where you:

• Identify who your competitors are.
• Gather competitor pricing data across different pricing models.
• Compare value propositions, pricing structures, and market positioning.
• Spot gaps in the market and opportunities to serve customer segments better.
• Align your prices with your revenue goals and product features.

This process helps you:

• Avoid underpricing that reduces your profits.
• Prevent losing customers due to overpriced plans.
• Identify where your pricing stands in the competitive landscape.
• Adjust to market shifts without waiting for a crisis.

Key elements of analysis

You must evaluate competitors’ complete value propositions, not just their listed prices. Are they competing purely on cost, or do factors such as product features or perceived value influence their pricing decisions? 

You must understand these aspects to set your own prices. Plus, a thorough analysis incorporates historical pricing information to discern competitors' overarching pricing strategies, including their deployment of promotions and seasonal adjustments. 

This long-term perspective helps you formulate a resilient pricing strategy, moving beyond just responses to immediate price changes.

Note: You can use strategic insights from competitive pricing analysis to craft pricing and packaging strategies and inform decisions about SaaS price-increase strategies to keep a competitive edge.

6 steps to build a competitive pricing analysis framework

If you’re wondering how to get competitive pricing, this process is how you start. Let’s explore how to do it in 6 actionable steps.

Step 1: Identify your competitors

The first crucial step in competitive pricing analysis is pinpointing exactly who your competitors are. 

You need to distinguish between direct competitors, who offer similar products or services to the same target market, and indirect competitors, whose offerings might address similar customer needs but in a different way. 

Remember, your customers are the ultimate guide here. Who do they actually consider as alternatives to your solution? Segmenting your competitive landscape further can provide valuable clarity. Consider grouping competitors by:

• Your ideal customer profile (ICP)
• The specific use cases your product addresses
• The industry verticals you serve

For example, a SaaS platform might have different sets of direct competitors for small businesses versus enterprise clients, or for marketing teams compared to sales teams. Grasping these nuances allows for a more laser-focused competitive pricing analysis.

Step 2: Gather pricing data

Once you know who your competitors are, the next step is to collect their pricing information. The sources for this data can be varied and require resourcefulness. Obvious places to start include competitors' pricing pages on their websites. 

Make sure to also explore review sites and industry forums where customers often discuss pricing. Information gleaned from your own customer interviews and sales conversations can also provide valuable insights into competitor pricing and perceived value.

Consider more proactive methods, such as:

• Using scraping tools (while being mindful of terms of service and legal implications)
• Conducting customer discovery specifically focused on competitor alternatives and their pricing
• Even engaging in mystery shopping to experience the sales process firsthand

Track different pricing models when you gather data. For your SaaS business, this might include flat-rate subscriptions, usage-based pricing, hybrid models that combine both, and even customer-specific quotes.

What if your competitors don't publish pricing? 

This is a common challenge, especially in B2B SaaS companies. In such cases, focus on gathering anecdotal data from customer interviews and sales teams. 

Look for pricing information in case studies, webinars, or publicly available contracts. Industry contacts and experts are also valuable sources. Even a general understanding of their pricing approach can be beneficial for your competitive pricing analysis.

Step 3: Document pricing structures and features

Once you gather pricing data, document the pricing structures and features for each price point. A side-by-side comparison table is an invaluable tool here. List your competitors and their pricing tiers, clearly outlining the features included in each.

Pay close attention to identifying pricing levers. These are the elements that influence the final price a customer pays. Common levers include the number of seats or users, the volume of API calls, storage limits, usage volume, or access to specific modules. 

Furthermore, try to capture deal-level insights. Does the competitor offer discounting? Bundled products or services? Hidden fees or add-on costs?

Information from sales conversations and customer feedback can be particularly useful in uncovering these aspects, providing a more complete picture for your competitive pricing analysis.

Step 4: Analyze positioning and value

The next step is to study how your competitors are positioning themselves in the market and how much value that others believe they offer. Map competitors by price versus perceived value to visualize the market.

Consider the impact of pricing psychology. Elements like using an anchor price, employing freemium models, or leveraging prices ending in $99 can shape customer perception. Understanding these tactics in your competitors' strategies is important.

Price sensitivity reveals your market position. Strong features don't help companies that lose deals consistently to cheaper competitors. High win rates with little price pushback mean you can raise prices.

Competitive pricing analysis shows where you stand. Track how often prospects reject your offers based on cost alone. Monitor which competitors win deals when price becomes the deciding factor.

Your win rate tells the real story. Teams that close 70% of qualified leads at current prices have room to increase rates. Teams that lose half their deals to cheaper alternatives need pricing adjustments.

Use this data to find your pricing sweet spot. Test higher prices with new prospects while tracking conversion rates. Adjust based on real market feedback, not internal assumptions about value.

Step 5: Identify gaps and opportunities

When you execute competitive pricing analysis well, you reveal market gaps and opportunities for your business. For instance, you may discover that no competitor offers a specific plan tailored to a particular segment, such as the mid-market. 

Your analysis will reveal where you need to improve your pricing strategy. Consider if you could:

• Upsell existing customers more effectively?
• Introduce usage-based overages?
• Adjust pricing to be more attractive to light users?

Recognizing these gaps allows you to refine your pricing to better capture different customer segments and boost revenue.

Step 6: Align with product and billing execution

Finally, confirm that your product and billing infrastructure can support pricing changes. Assess whether your current systems can handle the new pricing structures, features, or models you are considering. Ask critical questions about your systems:

• Can they handle tiered pricing?
• Do they support usage-based billing?
• Can they manage complex discounting rules?
• How quickly can you test or roll out a new pricing structure?

Inefficiencies or limitations in your product and billing system can hinder your ability to act on competitive pricing analysis insights.

Alignment across product, sales, and billing is crucial for successful implementation. Your team should factor in the time and resources for updates if your stack limits pricing changes.

Why does pricing analysis matter for SaaS companies?

Competitive pricing analysis takes on particular importance when it comes to SaaS businesses. Periodic changes in subscription models and the rapid evolution of user expectations make a deep understanding of the competitive landscape vital to make a mark. 

First, it’s important to remember that SaaS companies often use various pricing structures, including:

• Subscription-based models: Customers pay recurring fees for access to the software.
• Usage-based models: Pricing is tied to consumption metrics.
• Tiered pricing: Different feature sets are offered at varying price points.
• Hybrid models: Combinations of the above.

Thorough competitive pricing analysis helps SaaS businesses understand how competitors are packaging and pricing their offerings within these models. It reveals which models are prevalent in the market and how different pricing tiers are structured.

Adapt to shifting buyer expectations

Buyer expectations in the SaaS space can change quickly. Customers are often well-informed and compare various solutions before making a decision. Factors influencing their choices extend beyond just the price tag. They consider:

• Features offered: The specific functionalities and capabilities of the software.
• Perceived value: The overall benefit and return on investment they expect.
• User experience: How easy and intuitive the software is to use.
• Customer support: The quality and availability of assistance.

Competitive pricing analysis allows SaaS companies to stay abreast of these evolving expectations. Examine competitors' offerings and pricing to identify opportunities to differentiate based on features, value, or support, justifying your pricing strategy.

Price as a growth and retention tool

Pricing in the SaaS industry is also a critical component of growth and retention strategies. Let’s zoom in on these two strategies:

• Customer acquisition: Competitive pricing can be a powerful tool for attracting new customers. Understanding where your pricing stands relative to competitors helps you position yourself as a cost-effective or premium solution, depending on your strategy.
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• Customer retention: Pricing influences customer satisfaction and the likelihood of renewal. If your pricing is perceived as unfair or not aligned with the value provided compared to competitors, you risk losing subscribers.

Competitive pricing analysis informs decisions around upgrades, downgrades, and the introduction of coupons or discounts, all of which impact customer retention.

Compete on features and perceived value

In the SaaS market, companies compete on the richness of their features, the quality of their service, and the overall value they deliver. Competitive pricing analysis should therefore extend beyond simply comparing price points. It involves assessing:

• Feature parity and differentiation: What features do competitors offer, and where do your offerings stand out?
• Value communication: How do competitors communicate the benefits and return on investment of their solutions?
• Market perception: How are competitors perceived in terms of quality, reliability, and customer satisfaction?

The best tools for pricing intelligence and data gathering

Conducting a thorough competitive pricing analysis relies on having the right tools to gather intelligence and analyze data effectively. These tools can range from manual methods to software solutions:

• Manual data gathering and analysis: Tools like Google Sheets are good for creating comparison tables and performing basic analysis. 
  
  Direct engagement through customer interviews and analysis of support tickets can also yield qualitative pricing insights and reveal user perceptions of value relative to price.

• Pricing intelligence and analytics platforms: You can use several platforms built for pricing intelligence and analytics. Tools like Kompyte offer features for tracking competitor pricing, analyzing market trends, and understanding price elasticity. 
  
  Amplitude can provide insights into user behavior and how pricing impacts adoption and retention. Gong.io can be used to analyze sales conversations for pricing discussions and competitor mentions.

• Pricing execution tools: While the above focus on analysis, other tools are geared towards pricing execution, taking the insights and implementing pricing changes. 
  
  While not mentioned in the prompt's examples, platforms in this category help automate repricing, manage discounts, and ensure pricing consistency across channels.

• Orb, the action layer: Think of Orb as a layer that can act upon the data uncovered by your competitive pricing analysis. It’s a platform that allows you to execute complex pricing models, track usage, and manage billing in alignment with your strategy. 

Note: Your team must understand these tools' insights to define your pricing matrix and plan how to announce price increases to your customers.

6 common mistakes in competitor pricing analysis

Even with a well-defined framework, several pitfalls can undermine the value of your competitive pricing analysis. Recognizing these common mistakes is key to making sure your insights are accurate and actionable.

Mistake 1: Focusing solely on price

Many businesses make the error of only comparing price points without considering the complete value proposition. Ignoring factors like features, quality, service, and brand perception leads to an incomplete and potentially misleading analysis.

Solution: Adopt a holistic view. Analyze not just what competitors charge, but what customers receive for that price. Evaluate their features, perceived quality, customer support, and overall brand messaging. 

Mistake 2: Analyzing the wrong competitors

Another frequent misstep is analyzing competitors who aren't truly relevant. Focusing on very large players or those with a significantly different target audience can skew your understanding of the competitive landscape that directly impacts you.

Solution: Clearly define your direct and indirect competitors. Prioritize those who serve a similar customer base and offer comparable solutions. Remember to consider who your customers actually compare you to, as this is the most relevant competitive set for your competitive pricing analysis.

Mistake 3: Relying on inaccurate or outdated data

Stale or incorrect pricing data leads to flawed conclusions. Competitors often change their pricing, especially in dynamic markets. Manual data collection, if not done regularly, can quickly become outdated.

Solution: Implement a system for continuous monitoring of competitor pricing. Explore pricing intelligence tools that provide real-time updates. Verify data from multiple sources and establish a regular schedule for updating your competitive pricing analysis to maintain accuracy.

Mistake 4: Taking a short-term view

Teams that focus only on current prices miss key historical trends and competitor pricing strategies. Competitors may have seasonal promotions or strategic pricing shifts that a snapshot analysis won't reveal.

Solution: Analyze historical pricing data to identify patterns and understand competitors' long-term pricing strategies. Consider how their prices have changed in response to market events or competitive moves. These insights give you a more nuanced understanding of pricing.

Mistake 5: Ignoring different sales channels

Failing to account for price variations across different sales channels (e.g., online vs. in-store) can lead to an incomplete picture. Competitors may have different pricing strategies for different channels.

Solution: Make sure your competitive pricing analysis includes all relevant sales channels your competitors operate in. Recognize that online-only offers or in-store promotions can significantly impact the competitive landscape.

Mistake 6: Not aligning with internal costs and goals

You must conduct a competitive analysis, but also consider that your cost structure and business objectives can lead to unsustainable pricing decisions. Simply undercutting competitors without considering your profitability isn't a winning strategy.

Solution: Integrate your internal cost analysis and revenue goals with your competitive pricing analysis. Understand your margins and confirm your pricing strategy aligns with your overall business objectives for growth and profitability.

What to do after your analysis

The competitive pricing analysis is not the end; it's the beginning of informed action. Here are several steps to consider after you've completed your analysis:

• Pricing experiments (A/B testing new plans): Use the insights to formulate hypotheses about optimal pricing. Test these hypotheses with A/B experiments on different customer segments to see which pricing structures and levels perform best.
• Launch a new usage-based tier: If your analysis reveals an opportunity to cater to specific usage patterns, consider introducing a usage-based pricing tier to capture a wider range of customers.
• Bundle features differently: Based on competitor offerings and customer preferences, experiment with different feature bundles at various price points to maximize value and appeal to different segments.
• Test grandfathering vs. full migrations: When considering price increases or plan changes, evaluate the impact of grandfathering existing customers versus a full migration to new plans. You can A/B test different approaches to minimize churn.
• Communicate value, not just cost: Regardless of your pricing strategy, focus on communicating the value your product or service provides. Show customers the benefits and ROI to justify your pricing in a competitive market.

Real-world example of competitive pricing analysis

A standout example of competitive pricing analysis is Slack's early freemium strategy. Slack noticed that enterprise messaging platforms often required full-company rollouts and upfront payments. Slack took a different approach: they let individual teams start for free.

Their competitive cost analysis showed that reducing the barrier to entry for small teams would lead to organic adoption. 

Slack collected competitive pricing data and discovered that many competitors overlooked this segment. Slack's competitive analysis pricing introduced a free tier that encouraged viral growth within organizations.

As teams grew, they naturally moved to paid plans to unlock advanced features and admin controls. Using internal data and competitive pricing analysis software, Slack fine-tuned pricing tiers and feature gates to maximize conversions. 

What are the 4 P’s of competitive analysis?

The 4 P’s help structure your competitive pricing analysis:

• Product: What features and qualities differentiate your solution?
• Price: What does your competitor price analysis tell you about your pricing compared to rivals?
• Place: Which channels do you sell through (direct sales, marketplaces, partners)?
• Promotion: How do you explain your product's value and pricing to customers?

Effective pricing analysis methods evaluate all four. Weakness in any area can undermine your pricing strategy. A strong competitive pricing analysis reveals how each 'P affects your market position.

How to analyze pricing model performance without engineering help

Your team can analyze pricing without waiting for engineering. With modern competitive pricing tools, business teams can:

• Use tools like Orb to create, launch, and iterate on pricing models without code changes.
• Apply analytics platforms like Amplitude to track usage and plan upgrades.
• Use billing dashboards to monitor revenue trends and churn by pricing tier.

Use these pricing analysis methods to test your competitive pricing insights in the market. Plus, competitive pricing analysis software lets you simulate new plans before launch.

Turn pricing insights into more revenue with Orb

You've done the hard work of analyzing the competitive landscape. You understand where you stand and have identified opportunities. 

Now, turn those insights into reality with Orb, the billing infrastructure built to execute your pricing vision. Orb empowers you to act on your pricing data, transforming your competitive pricing analysis into a growth engine. With Orb, you can:

• Configure new pricing logic with agility: Move past the limitations of legacy billing systems. Orb's flexible platform allows your business teams to define and launch a variety of pricing models, including tiers, usage-based rules, bundles, and more, without engineering. 
  
  Experiment with different structures and adapt to market demands at your speed. This agility, a key differentiator of Orb, lets you fine-tune your monetization strategies based on your competitive pricing analysis findings.

• Bill accurately on any metric: Orb's architecture, powered by Orb RevGraph, provides accurate tracking and billing on any metric that matters to your business: API calls, seats, GBs transferred, custom events, and more. 
  
  Bill your customers based on the true value they receive, aligning your revenue with usage data. This accuracy, a core benefit of Orb, confirms that the insights from your competitive pricing analysis translate into correct and auditable invoices.

• Launch pricing experiments without risking revenue: Pricing innovation doesn’t have to be risky. Orb Simulations, built on top of your real usage data, allows you to model and test new pricing strategies risk-free, before making them live. 
  
  Accurately forecast revenue impact and launch with confidence, iterating on your pricing based on data-driven simulations, not guesswork. This empowers you to act swiftly on the opportunities identified in your competitive pricing analysis.

• Track usage and revenue performance by segment or SKU: Gain deep visibility into how your pricing performs. Orb's built-in revenue analytics and customer usage dashboards allow you to track key metrics by customer segment. 
  
  Understand which pricing models drive the best results and identify areas for further refinement based on real-time data. This capability directly supports the ongoing competitive pricing analysis process by providing feedback on your strategies.

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