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What Is a Market Price Analysis?

Maggie Worth
Maggie Worth

A market price analysis is a current evaluation of the pricing associated with specific products and services in a particular market. Such an analysis is often conducted as part of a larger business analysis and is generally intended to help determine whether a company's pricing strategy is viable. It can be conducted at any stage of a company or product life cycle and may be a required step in creating a business plan. The process usually includes identifying competitors and uncovering their pricing and terms.

Businesses can conduct an informal market price analysis at any time. For consumer product goods manufacturers, this can be as simple as going into a store and checking the prices on comparable products. Other companies can research pricing via the Internet, and still others request information by phone or mail, sometimes by posing as customers or by hiring individuals to do so as "secret shoppers."

Businesswoman talking on a mobile phone
Businesswoman talking on a mobile phone

In a more formal market price analysis, similar activities will be conducted, but will be carried out according to a specific plan. Results will be carefully documented and, when possible, more details will be elicited and recorded. These details can include warranty terms, return options and pricing for add-on or auxiliary products and services.

Once all data is assembled, the results of a market price analysis are frequently displayed in a chart or spreadsheet. The conducting company's price is usually included in the field of results. This allows for easy comparison of price points. An analyst can evaluate all the pricing data and discover where his company falls within the market.

A company sometimes conducts a market price analysis before it even has a product or service ready to go to market. Companies might do this as a part of creating a business plan because a business plan that includes a pricing analysis is frequently needed to solicit investors or to obtain financing from a bank or lending company. Even if the data is not needed for credit purposes, it is generally wise for a new company to know where it stands among its competitors. This allows it to set pricing that will be attractive to the customers it most wants to serve.

For other companies, a market price analysis is a first step toward introducing a new product or product line. Much like a new company entering the market, an existing company with a new product will want to make sure that it implements a pricing strategy that will attract customers. Conducting a price analysis can help determine what that pricing should be.

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