There are about 359 million businesses worldwide, with an average of 10 million new businesses annually. Let that sink in. Competition is rife in every industry, making standing out much harder. This reality burdens every business with the responsibility to find unique ways to attract more eyes, engagement, and sales for their products and services. Competitive pricing, strategic marketing, and strong branding all play a role in attracting and retaining customers.
However, with about 50% of new businesses failing within five years, it’s clear that some organizations’ positioning efforts regularly fall short, while some others have become success stories.
Can competitive Pricing work as a strategy for emerging brands?
It would seem the no-brainer strategy for applying to an emerging brand would be to offer better prices that will ultimately get it noticed. However, each brand has a different context that needs to be comprehensively considered first. In the wrong context, any strategy can be counterproductive.
For instance, charging competitive pricing in a saturated market has several implications. How will it affect your bottom line? Does your competitive pricing give off an assumption of quality or otherwise? Is maintaining your pricing causing you to compromise on product quality and customer satisfaction?
eCosmetic’s success in the online beauty retailer space is an adequate case study. For a company founded in 2019, its story is instructive in this regard. It’s worth noting that, like with eCosmetics’ story, sometimes no one strategy is the answer; it’s a well-thought-out mix of strategies that gives the best results.
According to Andres Morales, eCosmetic’s Chief Operating Officer, “The industry was already bustling with competition when we launched in 2019, so we knew it was going to be an uphill battle. We aimed to make our luxury and indie brand product lineup available to people with a limited budget. We had to design a competitive pricing strategy without sacrificing customer satisfaction. We answered this by investing in technology to streamline order fulfillment, prioritizing customer service, and building strong relationships with beauty brands.”
The company reports impressive year-on-year growth with its differentiation strategy. The first quarter of the year was its most successful, even outperforming its record in the Christmas holiday period.
How partnerships help sustain competitive pricing strategies
Strategic partnerships with other brands in the right setting can be a solid boost for many brands, helping them introduce and maintain competitive pricing while boosting brand reputation.
How this is implemented varies across industries, but the result is the same: it helps brands stand out and improves their chances of reaching their bottom line.
In eCosmetics’ case, the beauty retailer focused on building strong partnerships with the brands selling products. This allowed them to present themselves as partners instead of just another B2B customer. “The way we present our brand allows us to offer value propositions to our customers and these luxury beauty brands by cultivating strong partnerships with the brands whose products we sell.” Morales explains, “This significantly improves our brand’s perception, which has bled into our ROI. Our strong partnerships ensure the authenticity of our products and convey that same perception to our customers.” Morales concludes.
Customers are more trusting due to abundant social proof and the unspoken endorsement of business alliances. This strategy is essential in getting many customers over the line, especially in an online-based industry. Strategic partnerships are essentially the equivalent of a blue tick or badge on a social media profile,
The power of technology
The importance of a tech-reliant brand in a digitally dependent world goes without saying. Organizations can hire only for essential roles, saving money on payroll and other internal operations costs. Technology can automate specific tasks and troubleshoot operational designs before they’re implemented, helping to ensure efficient, non-disruptive operations.
Morales highlights how having an efficient tech-enabled process helps beauty retailers offer swift delivery and efficient customer service without hiring more employees. As he puts it, “One of the perks our customers enjoy is the free shipping feature we offer for purchases of at least $49 within the continental US. Essentially, technology has simplified our process and allowed us to save money, which means we can offer a relatively fairer price. This also translates to us being able to spend a bit more to cover costs like shipping, which in turn saves our customers some money and contributes to customer satisfaction while boosting our ratings and positive brand perception. A good differentiation strategy always comes full circle.”
Adequate deployment of inexpensive technology is a change maker in the business space. Brands should ask how they can leverage the Internet, tech-driven service delivery startups, and other relatively inexpensive technologies to ensure they keep prices competitive without compromising quality. In many cases, the industry-standard tech solution may be too expensive, but smaller brands often provide tech solutions with surprising efficiency.
Conclusion
Competitive pricing will always be a useful tool for customer satisfaction in the right context, but it is rarely a black-and-white situation for businesses. The right strategy or strategy mix should complement and benefit both brands and their customers.
It isn’t a decision to take lightly because, as Morales explains, striving to differentiate one’s brand from the crowd is a double-edged sword. It can multiply a business’s good fortune if done right or harm it if handled without proper pre-assessment.
