Definition: The market price is the amount at which a product or service can be bought or sold. To calculate the market price, balance supply, and consumer demand –as economic theory affirms that convergence is at the point where the two forces meet. Therefore, when supply and demand shift or fluctuate, the market price also changes.
I am frequently queried if we use marketplace pricing when developing our price matrix recommendations for clients. The answer to that question varies; for example, in a B2C retail or e-commerce environment, scraping the internet and building competitive pricing profiles can be useful to help refine your matrix recommendations. However, in an industrial B2B sale, the selling price never exists in isolation. The price is inextricably linked with several elements such as perceived value, completeness of solution, risk mitigation, quality of your people, subject matter expertise, services offered, credit, and a variety of other decision criteria. It’s the combination of everything you provide that determines the market price.
Generally, when it comes to pricing, your business either leads or follows. Few companies want to compete on price, yet this is the situation that many organizations
find themselves in. After over thirty years of working in distribution, here’s my advice on how to avoid the race to the bottom:
- Demonstrate a superior solution over your competition by creating direct linkages between your customer’s most mission-critical needs and your proven ability to address those needs. This is a pivotal step in value creation.
- Understand, manage, and mitigate your customer’s risks and fears better than the competition
- Recognize that change is difficult and often costly. The more you can do to ease and manage this transition process, the higher your chance of success.
- Provide clarity by proving to customers that they aren’t just buying your product or service but are also receiving the benefit of your experience and working with your best-in-class team.
By all means, compete on product and price, but make sure you win on people and purpose! Bottom line? Your selling price is the market price!
