Principles of Marketing

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Competitive Pricing

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Principles of Marketing

Definition

Competitive pricing is a pricing strategy where a business sets its prices based on the prices charged by its competitors in the market. The goal is to match or undercut the prices of rival products or services to remain competitive and attract customers.

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5 Must Know Facts For Your Next Test

  1. Competitive pricing is a key consideration in the Pricing and Its Role in the Marketing Mix, as it helps a company position its offerings relative to the competition.
  2. In The Five Critical Cs of Pricing, competitive pricing is influenced by factors such as Costs, Customers, and Competition.
  3. For Pricing Strategies for New Products, competitive pricing is often used to quickly gain market share and deter new entrants.
  4. Ethical Considerations in Pricing include ensuring competitive pricing is fair and not predatory or anti-competitive.
  5. In Retailing Strategy Decisions, competitive pricing is crucial for brick-and-mortar stores to match or beat online competitors.

Review Questions

  • Explain how competitive pricing relates to the Pricing and Its Role in the Marketing Mix
    • Competitive pricing is a key element of the pricing component within the marketing mix. It involves setting prices in relation to competitor offerings to remain competitively positioned in the market. Competitive pricing helps a company balance factors like costs, customer demand, and competitor actions to determine the optimal price point for its products or services.
  • Describe how the Five Critical Cs of Pricing influence a company's approach to competitive pricing
    • The Five Critical Cs of Pricing - Costs, Customers, Competition, Channels, and Company Objectives - all play a role in shaping a company's competitive pricing strategy. Costs and customer demand set the boundaries for pricing, while competitor prices and actions directly inform the competitive positioning. The chosen pricing channels and the company's overall objectives, such as market share or profitability, also factor into how a business approaches competitive pricing.
  • Evaluate the ethical considerations a company must make when implementing a competitive pricing strategy for new products
    • When using competitive pricing for new product introductions, companies must carefully consider the ethical implications. Pricing new offerings significantly below competitors could be seen as predatory, aimed at driving rivals out of the market. Conversely, pricing new products at a premium compared to the competition may be viewed as anti-competitive, limiting consumer choice. Ethical competitive pricing requires balancing factors like fair value, customer affordability, and maintaining a healthy competitive landscape in the long run.
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