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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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.
In The Five Critical Cs of Pricing, competitive pricing is influenced by factors such as Costs, Customers, and Competition.
For Pricing Strategies for New Products, competitive pricing is often used to quickly gain market share and deter new entrants.
Ethical Considerations in Pricing include ensuring competitive pricing is fair and not predatory or anti-competitive.
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.
A pricing strategy where a company sets its initial product price high to maximize profits from customers willing to pay a premium, then gradually lowers the price over time.