Competitive Pricing

Evaluation of competitive offers of value

In most cases, marketers are in a better position to establish the prices of their value offerings when they know the prices charged for competing value offers.  Learning competitors’ prices should be a regular function of marketing intelligence

Marketers in an industry in which price competition prevails need competitive price information to be comparable with its competitors’ prices.  In some instances, an organisation’s prices are designed to be slightly above competitors’ prices to give its products an image of better/best value.

Competition oriented pricing

In using competition-orientated pricing, an organisation considers costs and revenue to be secondary to competitors’ prices.  The importance of this method increases if competing products are almost homogeneous and the organisation is serving markets in which price is the key variable of the marketing strategy.  A firm that uses competition-orientated pricing may choose to be below competitors’ prices, above competitors’ prices, or at the same level.  Competition-orientated pricing should help meet a pricing objective to increase sales or market share.  Competition-orientated pricing methods may be combined with cost approaches to arrive at price levels necessary for a profit.

Customary PricingFor some products where tradition, a standardised channel of distribution, or other competitive factors dictate the price, customary pricing is used.

Above-, At -, or Below-Market Pricing – For most value offerings it is difficult to identify a specific market price for a product or product class. Marketing managers often have a subjective feel for the competitors’ price or market price. Using this benchmark, they then may deliberately choose a strategy of above-, at-, or below-market pricing.

Loss-Leader Pricing – For a special promotion many retail stores deliberately sell a product below its customary price to attract attention to it. The purpose of this loss-leader pricing is not to increase sales but to attract customers in the hope they will also buy other products, particularly discretionary items carrying larger mark-ups.

Brian Monger

Follow us on Twitter – SmartaMarketing

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