Competitive pricing analysis: 6 steps to do it right

What is a competitive pricing analysis?

A competitive pricing analysis represents a strategic research process. It involves a deep examination of your market and the pricing of your rivals' products relative to your own. This goes beyond price matching, serving as a basis to benchmark and refine your pricing approach. 

Rather than simply reacting to competitors' prices, it's a thoughtful endeavor to grasp the competitive environment and position your offerings. The fundamental aim of a competitive pricing analysis is to secure an advantage in the market while reaching your desired profitability. 

Takeaway: By understanding how competitors set their prices, you can prevent potential profit loss from underpricing and uncover avenues to expand your market presence.

Read on to learn:

• How to identify the right competitors to analyze
• Effective methods for gathering comprehensive pricing data
• How to document and compare pricing structures and features
• Techniques for analyzing competitor positioning and perceived value
• A step-by-step framework to build your own competitive pricing analysis process

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Key elements of analysis

A crucial part of competitive pricing analysis is evaluating the complete value proposition of competitors, not solely their listed prices. Are they competing purely on cost, or do factors such as product features or perceived value influence their pricing decisions? 

Understanding these aspects is vital for establishing 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. 

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

Note: The strategic insights derived from competitive pricing analysis directly apply to crafting pricing and packaging strategies and informing decisions about SaaS price-increase strategies to keep a competitive edge.

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Why does pricing analysis matter for SaaS companies?

Competitive pricing analysis takes on particular importance when it comes to SaaS businesses. The dynamic nature of subscription models and the rapid evolution of customer expectations make a deep understanding of the competitive landscape essential to make a mark. 

First, it’s important to remember 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.

A 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.

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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. By examining competitors' offerings and how they are priced, you can identify opportunities to differentiate based on features, value, or support, justifying your pricing strategy.

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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.
• 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.

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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?

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6 steps to build a competitive pricing analysis framework

Building a solid framework for competitive pricing analysis involves a systematic approach. Each step provides crucial insights that will inform your pricing strategy and help you gain a competitive edge. Let’s start with the first step:

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

When gathering data, be sure to track different pricing models. 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 can also be valuable sources. Even a range or general understanding of their pricing approach can be beneficial for your competitive pricing analysis.

Step 3: Document pricing structures and features

With pricing data in hand, the next step is to document the pricing structures and the features associated with 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 the value they are perceived to offer. A useful visual tool is a mapping of competitors by price versus perceived value. 

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

A quick guide to understanding if you are overvalued or undervalued involves looking at your win/loss rates, customer churn, and feedback. 

If you consistently lose deals due to price despite strong features, you might be overvalued. Conversely, high win rates with little price sensitivity could indicate you are undervalued and have room to increase prices. Your competitive pricing analysis should inform this assessment.

Step 5: Identify gaps and opportunities

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

The analysis can also highlight areas where you might be able 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

The final step in building your competitive pricing analysis framework is making sure 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 capitalize on the insights gained from your competitive pricing analysis. 

Alignment across product, sales, and billing is crucial for successful implementation. If your stack presents limitations, factor in the time and resources required for updates or changes when considering new pricing strategies.

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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 can be invaluable 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: Several platforms are designed specifically 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: Understanding the insights from these tools is crucial when defining your pricing matrix and planning how to announce price increases to your customers.

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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 ensuring 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

Using stale or incorrect pricing information will inevitably lead to flawed conclusions. Competitor pricing can change frequently, 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

Focusing only on current prices without understanding historical trends and competitor pricing strategies over time can be shortsighted. 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. This provides a more nuanced insight for your pricing analysis.

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

Conducting a thorough competitive analysis is crucial, but ignoring your own 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.

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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.
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• 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.
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• 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.
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• Test grandfathering vs. full migrations: When considering price increases or plan changes, carefully evaluate the impact of grandfathering existing customers versus a full migration to new plans. A/B testing different approaches can help minimize churn.
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• Communicate value, not just cost: Regardless of your pricing strategy, focus on communicating the value your product or service provides. Highlight the benefits and ROI for customers, justifying your price point in the context of the competitive landscape.

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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 infrastructure built to execute your pricing vision. Orb doesn't gather pricing data — it empowers you to act on it, transforming your competitive pricing analysis into a growth engine. With Orb, you can:

• Configure new pricing logic with agility: Move beyond static limitations. Orb's flexible platform, featuring Orb RevGraph and the intuitive Orb SQL Editor, allows your business teams to define and launch pricing models — tiers, usage-based rules, bundles, and more — without waiting for 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: Eliminate revenue leakage and build trust with precise billing. Orb's architecture, powered by the robust Orb RevGraph, ensures 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 engineering bottlenecks: Stop letting rigid systems slow down innovation. 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 agility 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. 
  
  Get which pricing models drive the best results and identify areas for further refinement based on real-world performance data. This capability directly supports the ongoing competitive pricing analysis process by providing feedback on your strategies.

Ready to take your billing to the next level with Orb? Check out our flexible pricing options and find a plan that works for you.