Competitive Price

Posted in Marketing and Strategy Terms, Total Reads: 409

Definition: Competitive Price

When a company sets the price of its product by taking a lead from what its competitors are charging, it is called Competitive Pricing Strategy. This form of pricing is generally used by businesses selling similar products. In some industries, where the market in concentrated and is dominated by a few players, the big players act as market makers and have the power to set the prices or influence others to change theirs. Smaller companies then have to follow the leader in order to stay in the market otherwise they would get wiped out due to presence of lower cost similar products.

Competitive Pricing can be of three types:

Below Competition Pricing: When a company sets the price level of a product below that set by its competitors. This is generally done to increase market share.

Parity Pricing: When price is set at par with that of competitors’ products, it is called parity pricing. For example: Coca Cola and Pepsi are often indulged in price wars where they both try to match the price set by the other.

Above Competition Pricing: When a company sets or has the ability to set the price of its product above the market standard, it is called above competition pricing. Brands which are market leaders often do this, as they are able to leverage their brand image along with product characteristics to justify the price they charge. For example: Apple products.



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