Compare supplied competitor offers with the prices your customers actually pay. This worked example standardizes package sizes and delivery terms, then tests the margin impact of matching a competing offer.
A useful competitor pricing example compares the delivered cost of the same basket, then shows what matching that price would do to your own margin. Package prices alone can reverse the apparent ranking. Use supplied offers and your actual invoice and cost records before deciding whether to change a price.
The US Small Business Administration includes what potential customers pay for alternatives among the questions in market research and competitive analysis. For a pricing team, the next step is to make those alternatives comparable.
Consider Ridgeway Industrial Supply, a fictional US distributor. A business customer needs 1,000 microfiber shop towels. The names, offers and internal costs below are invented teaching figures, not current market quotes.
The buyer has supplied two competing quotes. Procurement confirms that both cover the same towel dimensions, material, weight and quality specification as Ridgeway's product. All offers deliver to the same US location within five business days, require no ongoing commitment and provide the same return rights and net 30 payment terms. Each supplier permits the basket quantity shown.
Those conditions are assumptions to verify in a real comparison. A lower offer tied to a larger annual commitment belongs in a separate scenario. A different product grade needs a buyer's assessment before it enters the comparable group.
All prices below exclude sales tax on the same basis. No early-payment discount or later rebate applies. Shipping charged to the buyer is included in the delivered comparison; the seller's own delivery expense is examined separately.
Ridgeway's invoice register contains a recent sale of the same basket. Its list package price was $48, but the customer received a $24 invoice discount across the order. The competing offers use different package sizes.
| Offer | Towels per package | Price per package (USD) | Packages | Goods before discount (USD) | Order discount (USD) | Shipping charged (USD) | Delivered total (USD) | |---|---:|---:|---:|---:|---:|---:|---:|---:| | Ridgeway realized sale | 100 | 48 | 10 | 480 | 24 | 0 | 456 | | Supplied quote A | 50 | 22 | 20 | 440 | 0 | 6 | 446 | | Supplied quote B | 200 | 85 | 5 | 425 | 0 | 20 | 445 |
The calculations follow the same order for every row:
Basket units = Units per package × Packages
Delivered total = Package price × Packages − Order discount + Shipping charged
Delivered price per unit = Delivered total / Basket units
| Check | Ridgeway | Quote A | Quote B |
|---|---|---|---|
| Basket units | 100 × 10 = 1,000 | 50 × 20 = 1,000 | 200 × 5 = 1,000 |
| Delivered total (USD) | 48 × 10 − 24 + 0 = 456 | 22 × 20 − 0 + 6 = 446 | 85 × 5 − 0 + 20 = 445 |
| Delivered price per towel (USD) | 456 / 1,000 = 0.456 | 446 / 1,000 = 0.446 | 445 / 1,000 = 0.445 |
Quote B has the highest package price and the lowest comparable delivered price. Ridgeway is $11 above it: 456 − 445 = 11. Relative to quote B, the premium is 11 / 445 × 100 = 2.47%.
Per-towel prices are shown to three decimals; percentages throughout are rounded to two decimals after calculation. Retain the full values when calculating totals. This basket comparison answers a specific buying question; a pricing dashboard tracks realized prices and margin across the wider sales file.
The lowest competing price is only part of the decision. Ridgeway's invoice and product cost records show the following economics for its existing sale:
| Internal item | Amount (USD) | Calculation or source |
|---|---|---|
| Goods before discount | 480 | 10 packages × 48 |
| Invoice discount | 24 | Invoice discount field |
| Net goods revenue | 456 | 480 − 24 |
| Product cost of goods sold | 300 | Matched cost record for 1,000 towels |
| Gross profit | 156 | 456 − 300 |
| Outbound delivery expense | 24 | Carrier bill allocated to this order |
| Amount after product and delivery costs | 132 | 156 − 24 |
Here, product cost includes the cost of acquiring the towels, including inbound freight. Outbound delivery is kept separately under Ridgeway's reporting policy. The IRS guidance on cost of goods sold and gross profit includes freight-in in merchandise cost and calculates gross profit by subtracting cost of goods sold from net receipts. Use your finance team's cost classification consistently when rebuilding the comparison.
Gross margin is 156 / 456 × 100 = 34.21%. The amount after product and delivery costs is 132 / 456 × 100 = 28.95% of revenue. That second measure still excludes sales compensation, administration and other costs; it is not operating profit.
The gross profit margin calculation uses revenue as its denominator. Do not substitute cost: markup and margin answer different questions.
Sales proposes matching quote B's $445 delivered basket. Keep the quantity, list package price, product cost, delivery expense and buyer shipping charge unchanged. Change only Ridgeway's order discount from $24 to $35.
| Measure | Current offer | Revised discount | Calculation |
|---|---|---|---|
| Goods before discount (USD) | 480 | 480 | 10 × 48 |
| Order discount (USD) | 24 | 35 | Single changed input |
| Net revenue (USD) | 456 | 445 | 480 − discount |
| Product cost (USD) | 300 | 300 | Unchanged cost record |
| Gross profit (USD) | 156 | 145 | Net revenue − 300 |
| Gross margin | 34.21% | 32.58% | Gross profit / net revenue |
| Outbound delivery expense (USD) | 24 | 24 | Unchanged carrier expense |
| Amount after product and delivery costs (USD) | 132 | 121 | Gross profit − 24 |
| Percentage after those costs | 28.95% | 27.19% | Amount / net revenue |
The extra discount is 35 − 24 = $11. Revenue, gross profit and the amount after delivery each fall by that same $11. The reconciliation closes: 445 − 300 − 24 = 121, and 132 − 121 = 11.
Matching the offer therefore reduces the amount after product and delivery costs by 11 / 132 × 100 = 8.33%. A modest price gap can consume a larger share of the dollars left to cover other expenses.
This calculation does not predict additional demand. Sales must supply evidence about lost orders, retention or expected volume before finance evaluates an offsetting benefit. If different customer groups receive different terms, assess those groups separately using a segmented pricing strategy.
Bring your supplied competitor-price workbook, invoice export and matching product costs to Covirage. Covirage maps the columns, and its tools compute and check comparable prices and your own margins; the external AI model explains the results with every figure traced to its rows. Create a free Covirage account, which takes about a minute, and bring a sample of your own data after setting up your business.
See file-based spreadsheet analysis for the supporting approach.
Record the product specification, package size, quantity, quoted price, discounts, shipping charge, payment terms, delivery commitment and quote date. Keep the source document. Mark offers with different service or purchase commitments as exceptions rather than treating every visible price as comparable.
Use list price to explain your discount policy, but compare offers with the realized price for the same customer basket. Invoice discounts, rebates and credits can make the amount collected different from the published price. Keep tax and shipping treatment consistent across offers.
A lower comparable offer identifies a pricing decision, but it does not settle it. Check your product costs, delivery costs and customer requirements first. A price reduction lowers profit on existing sales unless additional volume or another documented benefit offsets the reduction.
No. A supplied price does not reveal the competitor's purchase costs, fulfillment costs, rebates or overhead. Calculate margin only for your own business using your own cost records. Treat a competitor's profitability as unknown unless reliable evidence establishes those costs.