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How To Price Competition

post #1 of 6
Thread Starter 
Hi folks! Sorry if this question is elsewhere on the forum, I tried looking and couldn't find anything. I am seriously considering starting a part time cake decorating business but, part-time or not, I want to do everything right. So I am spending the next month or two researching everything involved and determining how I would go about it. That includes doing the appropriate up front research on the market and competition pricing. Here's a question I have though: "What is the best way to approach getting pricing information from the competition?". I mean, do I just get my questions together, call them up and say 'Hey, I have a bunch of questions about pricing, what's included, etc.'? Are they that receptive to giving info to another business?

Thanks in advance!
post #2 of 6
You buy the product and eat it!!! How in the world can you judge a competitor by price alone? You must compare taste, price, convenience, style, packaging, etc.. All of the issues that go into a buying decision.

I think it's tacky and rude to waste a business person's time with our questions that don't even have relevance without taste and presentation factored in. Ask for a small, simply decorated cake or cupcakes. If you can't afford to do this, you really can't afford to "wing it" starting a business.

I have an analysis of every competitor with every flavor I have had. I list box/scratch, Crisco/buttercream, and any artificial tastes or ingredients such as sleeves, fake chocolate drizzle, cheap extracts, or fake caramel. I then note the size of the item... cupcake size, 8 or 9 inch, number of layers, fillings, etc. Packaging and presentation is also weighed, and finally price.

After all considerations of every competitor, I honestly place my products in the mix and determine exactly where they fit. Only then can any business accurately determine the market price fortheir product.

The popular idea of adding expenses and adding on time and profit is an unrealistic way of arriving at price. That is only your dream price. If the price you need to get does not align with your true market price, your business is not viable and will fail. You must have these two align. If you don't, the market will coldly put you in your proper place anyway. You will either be inundated with orders because your product is priced too low or you will have very little business because your competitors are offering a better product at or below your price. Done correctly, you should be able to have a viable business with a controlled amount of production.

If the numbers you need do not match with market price, you have three options:

1) Lower your costs in order to lower your price.
2) Increase your skill level in order to increase your price.
3) Offer some marketing advantage that sets you apart and is valuable to potential customers. For example, convenient location, convenient hours, unique items, added services... you get the idea.

This is all a critical part of a marketing plan within a business plan.
post #3 of 6
Quote:
Originally Posted by scp1127

If the price you need to get does not align with your true market price, your business is not viable and will fail. You must have these two align. If you don't, the market will coldly put you in your proper place anyway. You will either be inundated with orders because your product is priced too low or you will have very little business because your competitors are offering a better product at or below your price. Done correctly, you should be able to have a viable business with a controlled amount of production.



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Started my business legally February 2012! Commercial kitchen and all!
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Started my business legally February 2012! Commercial kitchen and all!
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post #4 of 6

She needs to research the competition for a competitive analysis in her business plan. Telling someone to just eat it and taste it, sorry just isn't enough. She needed to check on the sales figures, their pricing, their target market, etc. 

post #5 of 6

1½ year old thread!

 

Why do these old threads keep popping up?

post #6 of 6
Quote:
Originally Posted by Godot View Post

1½ year old thread!

 

Why do these old threads keep popping up?

Zombies are coming...

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