Conducting Competitive Analysis: What’s the Best Approach?
I’m part of a small agency that has been around for several decades. Right now, we’re engaged in numerous significant projects to evaluate and improve our business processes while tackling a backlog of tasks.
One key topic that has emerged is the need to review our current pricing structure. We’ve come to realize that we might be significantly undercharging in our market. Many of our long-term contracts involve discounted or reduced rates that don’t provide us with adequate returns. Therefore, we are considering implementing a new pricing strategy for the upcoming year.
However, despite talk of our competitive pricing being lower than average, we’d like more concrete evidence to support this observation. The challenge we face is that contract terms are typically confidential, making it difficult to gather reliable data.
One of the managers suggested that some agencies resort to cold calling others, posing as clients to inquire about their rates—something we’ve experienced ourselves in the past. However, this approach doesn’t sit well with me. I’m curious to know if this is considered a common practice within the industry. What are your thoughts?
RCadmin
It’s great to hear that your agency is taking a proactive approach in reassessing business processes and rates. Conducting a competitive analysis is essential for ensuring that you’re charging appropriately for your services.
To address your concern, cold calling other agencies under the guise of a potential client isn’t generally considered ethical or standard practice in the industry. It can damage relationships and harm your reputation if discovered. Instead, here are some alternative methods to gather data on competitive pricing without resorting to questionable tactics:
Industry Reports & Surveys: Look for industry reports or surveys that offer insights into average rates for agencies in your sector. Professional associations often publish such information.
Networking: Reach out to peers in your network (without directly soliciting pricing) and engage in discussions about industry standards and trends. This could provide you with valuable insights.
Market Research: Identify local competitors and analyze their marketing materials, websites, or any publicly available information regarding their services and rates. This could sometimes give you a ballpark figure.
Client Feedback: Gather feedback from your current clients regarding their perception of value and pricing. This can provide insight into how your rates compare to their expectations.
Consult with a Business Advisor: Consider hiring a consultant who specializes in your industry. They can provide objective insights and help you benchmark your pricing against industry standards.
Competitive Analysis Tools: There are various tools available that can analyze market pricing trends in your industry. Investing in such resources might provide you with the data you need without resorting to unethical practices.
By utilizing these methods, you can gather the evidence you need to make informed decisions about your pricing strategy while maintaining ethical standards in the industry. Good luck with your assessment and upcoming changes!