Should we perform a formal competitive pricing analysis and, if so, how do we use that data? Do we aim to position ourselves as a lower-cost alternative, a premium choice, or just in the middle of the pack?

Based on the principles in our saas pricing book, Price to Scale, here’s what we advise:

Direct Answer
Yes, you should conduct a competitive pricing analysis—but view it as one piece of a broader strategic puzzle. The analysis offers insights into your competitors’ price points, packaging strategies, and market positioning. However, the data should inform rather than dictate your own pricing. Your pricing strategy must first and foremost be aligned with your product’s positioning and the specific needs and values of your target segments.
Use of Competitive Data
• The book emphasizes that pricing is intimately connected to positioning. As explained in the book’s section on “Positioning & Packaging,” you must understand what your customers value most before deciding whether to be a lower-cost alternative, a premium choice, or a middle-of-the-road offer.
• Use your competitive analysis to identify where similar products sit in the market. Then, evaluate whether you offer unique value that justifies a premium price, or if you need to take a more cost-effective route to capture market share.
• In practical terms, competitive pricing analysis helps you avoid pricing blindly in the market—it validates your assumptions but should be balanced with an in-depth look at customer segmentation, value drivers, and competitive differentiation.
Positioning Over Price War
• Our book advises against simply matching or undercutting competitors solely based on their prices. Instead, firmly establish your product’s unique selling points.
• For example, if your solution brings innovative features or a superior customer experience, positioning it as a premium option makes sense even if competitors undercut on price. Conversely, if your strength lies in operational efficiency and cost savings, being the lower-cost alternative might work—but only if you’re not sacrificing value perception.

Summary:
A formal competitive pricing analysis is a useful tool, but it should primarily serve to support your strategic positioning efforts. Always let your understanding of your customer’s needs and the inherent value of your product guide your pricing strategy. This alignment is key to the recommendations found in Price to Scale—ensure your pricing and packaging directly reflect the unique value you offer rather than simply reacting to competitors’ pricing.