Pricing strategies are often based on what other people in the industry are doing.  Typical pricing strategies used are charging an hourly rate, a fixed price rate, a per PC or server rate, or some combination of the three.  Before you decide on your pricing strategy, however, you are wise to check out what your competitors are doing and then try and emulate them.

Before you start your analysis of your competitors’ pricing strategy you have to be very sure you have identified your true competitors.  A big, and common, mistake is tying to emulate a supposed competitor’s pricing strategy only to have it fall flat because that company is not a competitor at all.

There are lots of quasi-competitors out there but you don’t necessarily want to use their pricing strategy as a basis for your own.  The acid test for determining if a business is a true competitor is this:

Does Company X see YOU as a direct competitor?

When you turn the question around the answer is much clearer.  You might start off thinking Dell is a direct competitor, but when you ask yourself whether Dell sees you as a direct competitor, suddenly you realize that you are not even on Dell’s radar screen.  Dell would consider the collective of small business systems integrators as a competitor - but one company out of those hundreds of thousands?  Not likely.  

Copying Dell’s pricing strategy would be disastrous.  The influences on their pricing strategy decisions are vastly different than yours as a small business owner.  

The other issue to consider when deciding which competitors’ pricing strategy to follow is their level of IT business knowledge.  You don’t want to emulate people with low skills or poor business sense.  Ask yourself:

  • Do they really know what they’re doing?
  • Do they have a history of running a profitable business?
  • Do they have a sustainable business?  
  • Do they have a scalable business?  
Bottom Line on Pricing Strategy
Before setting a pricing strategy you should check out what your competitors are doing.  The key, though, is to make sure you are analyzing the pricing strategies of true competitors and worthy competitors.  If you want to put yourself in the top echelon you need to emulate those who are already there.

In this article, you’ve been introduced to Pricing Strategy. To learn more about how you can improve your knowledge about Pricing Strategy, just click here now to get access to a free one-hour audio training program on 5 Easy Ways to Grow Your Computer Consulting Business.