Factors to consider when pricing a product
Competitor prices
Competitor prices are the prices that other businesses charge for similar products. When you set a price, customers often compare your price with rival prices to judge whether it seems fair. For example, if three shops sell similar personalised water bottles for £12 to £16, a price of £14 feels reasonable, but £24 may look expensive unless your bottle is clearly different or better quality.
Researching competitor prices helps you understand the market price range – the range of prices that rival businesses charge for similar products. You can check rival websites, market stalls or shops to see what customers are already used to paying. This research stops you pricing too far above or below competitors without a reason.
Pricing above, below or matching rivals
| Your price choice | Possible effect |
|---|---|
| Higher than competitors | Can lose price-sensitive customers – buyers who care a lot about price and switch to a cheaper option. It may work if your product is clearly different or offers better value. |
| Lower than competitors | Can attract customers, but you earn less profit per sale. Rivals may cut their prices too, starting a price war where businesses keep undercutting each other and everyone's profit can fall. |
| Matching competitors | Reduces the risk of losing customers on price alone, but your product may not stand out from the crowd. |
Pricing below competitors is not automatically the best choice, and matching is not automatically the safest. Each choice has a trade-off between attracting customers and protecting profit. A start-up selling printed tote bags might find rivals charge £9 to £13. Setting £11 matches the middle of that range and keeps your price within the range customers already expect, but it gives no strong reason to choose the bags over another stall's.
Practise this
Cambridge National Enterprise & Marketing · 4.9 Factors to consider when pricing a product