Curt Mastio
By Curt Mastio on February 23, 2021

How to Conduct Pricing Analysis in a Startup

Every startup needs to conduct a pricing analysis as frequently as possible. This is necessary to determine appropriate prices for products and services. Most times, information obtained from the pricing analysis feeds into the final pricing estimation of product offerings.

How strategic is your pricing analysis for your startup? 

What is Competitive Pricing and Pricing Analysis?

Competitive pricing strategy refers to referencing the competitors’ prices to fix a startup’s products or services’ prices. Other names for this strategy are competitor-based pricing or competition-based pricing. Most businesses resort to using this strategy when the regular “cost-plus” plan ceases to be relevant.

Pricing analysis evaluates the reaction of the consumers to new product or service prices. Such data is collected via a poll, consumer history or by research. Usually, this strategy focuses on consumers’ responses without looking at costs or potential business profits.

Why Is a Competitive Pricing Strategy Important for Pricing Analysis?

It is no secret that consumers will always check for a better bargain. Forrester Consulting‘s study shows that about 81 percent of consumers run price comparisons across stores before making purchases.

The retailers that collect market data and analyze it to offer better prices than their competitors, attract buyers first. This isn’t even farfetched. Would you purchase a more costly item when there is a cheaper close substitute?

This attraction is the chief reason for competitive pricing. It makes it possible for startups to compare their prices with those of their competitors. They can now use the resulting data to optimize the costs of their products or services to attract customers. 

And the result?

  •       Better sales
  •       Improved supplier cooperation
  •       Higher revenue, to mention a few

Completing a Startup Pricing Analysis

Completing your pricing analysis as a startup isn’t as difficult as you think. In this section, we will show you the steps to achieve this aim with ease. Let’s get started.

Determine Quality of Data

To get the best analysis of your competitors, you must make use of accurate and complete data. Below are a few criteria to help you determine if the data is high-quality or not.

  • Percentage errors: A lot of the data used in matching is collected via automation. This means that it is prone to a certain degree of error. One way to get better results is also to employ manual data comparison.
  • Frequent data updates: It is no secret that the business environment and the market is ever-evolving. Because of this, retailers must make use of the most current pieces of data. In this case, you can consider using data that isn’t more than two hours old for your price analysis.
  • Comparison depth: When gathering information for the analysis, you must consider everything. This means that you must consider parameters like the product’s technical details, color and any other attribute.
  • Delivery time: As we mentioned above, the retailer needs to gather data as frequently as possible. Updated data is vital to this process. As such, the startup should receive pricing and product data at least every 30 minutes. Having this in your system helps to make the analysis a lot more effective.

Categorize Competitors

Gathering high-quality data is just one step of the process. Several other factors contribute to achieving a dependable pricing analysis. One such factor is information on your competitors.

It is the responsibility of the startup to classify each competitor. 

This classification should be based on specific but relevant parameters such as product quality and target audience. You can split your competitors into three major groups regardless of the parameters you use in categorizing. 

They are:

  • Primary competitors: These are competitors that pursue the same customers or target audience as your business.
  • Secondary competitors: The competitors in this category focus on either the upscale or downscale versions of your assortment. When you analyze the data from these competitors, you can easily define their market position. It also helps your business to boost its strategic skills to your benefit.
  • Tertiary competitors: Competitors in this category sell products or deliver services that are indirectly related to yours. However, it would be best if you analyzed them to help you expand your business assortment.

There are several advantages of splitting your competitors into categories. First, it reduces the time you will spend analyzing the market. Second, you can focus your efforts on the right competitors.

When categorizing your competitors, you must adopt a data-driven approach. For mono-brand retailers, it is best to employ a manual method of classifying competitors. Larger businesses should opt for a smart competitors’ analysis method.

It is important to note that each product has an unstable competitive landscape. This is because retailers will always alter their strategies while there will always be new market entrants. In a nutshell, the categorization process should be ongoing along with the competitive analysis.

Historical Pricing Data

Trying to keep track of your competitors’ prices can be stressful, costly and time-consuming. However, doing this is highly beneficial to your business. After you collect such data for a while, it will reveal specific patterns and trends in the competitors’ behavior.

From this data, you can decipher their most-discounted products, how they increase prices and their discount calendar. This information makes it easy to react to your competitor’s changes in prices without experiencing loss.

Also, you need to analyze your business’ historical price data. Check for what prices attracted the most customers, the products with more elasticity and changes in competitive strength. Ask several questions and you can bet that you will get sufficient answers to influence your pricing analysis.

Track Competitors’ Activity

When you track the activity of your competitors, it gives a clearer picture of the market. Track the activity on their social media accounts, websites and other platforms. 

Some of the aspects that you must consider include:

  •       Visual presentation
  •       Response rate
  •       Product descriptions
  •       Customer support/feedback options
  •       Social media activity
  •       Responsiveness of their websites

An excellent way to track your competitors is to sign up for their newsletters. You can also follow their social media handles. The whole idea revolves around trying to understand what makes their products attractive to the target market.

Use the Data to Forecast

Now that you have gathered all this data, it shouldn’t just lie there. You must use it to your advantage. Work with your team to forecast what the most accurate prices will be for your products or services.

Ensure that your forecast beyond the current year will remain competitive as the years go by. Note that there are several forecasting situations to consider, especially when the market situation is inconsistent. Always consider the effects of the other factors when putting your analysis together. An effective way to do this is by using a control tester.


So far, in the post, we explained the importance of conducting a competitive pricing analysis for startups. We also took a look at the steps to take when creating your analysis. 

If this is a lot of information to handle, you can seek the help of an accounting service like Founder’s CPA that understands the startup industry. We can help with putting together your forecasts after conducting an efficient pricing analysis.

Published by Curt Mastio February 23, 2021
Curt Mastio