Imagine you and your friends have lemonade stands. You want to sell your lemonade at a price that’s fair and attracts customers. Here’s how you can do a simple competitive pricing analysis.

Check Your Friends’ Prices:

First, find out how much your friends are charging for a glass of lemonade. This helps you understand what people in your neighborhood are willing to pay.

Compare Quality:

See if your lemonade is similar in taste and quality to your friends’ lemonade. If yours is better, you might be able to charge a little more. If it’s similar, your prices should be close.

Consider Costs:

Think about how much it costs you to make each glass of lemonade. This includes lemons, sugar, cups, and your time. You need to make sure you’re covering your costs, at least.

Set a Price:

Based on what your friends are charging, the quality of your lemonade, and your costs, decide on a price that’s competitive and makes you a little profit.

Test It:

Try selling your lemonade at that price and see if people buy it. If they do, great! If not, you might need to adjust your price to find the sweet spot where customers are happy to pay, and you’re making money.

That’s the idea behind competitive pricing analysis: finding the right price for your product by looking at what others are charging and considering your costs and quality.