Posted in Marketing and Strategy Terms, Total Reads: 942
Definition: Competition-Oriented Pricing
In a competition oriented pricing strategy the company sets its price based on the price of the competitors. A company decides upon it prices based on the pricing of its present competitors. The company then analyse the value of its products and services. After this step comes the crucial stage of setting the price higher, lower or on-par with the competitors considering the expected response from the competitors. In a market with few competitors the response from the competitors is very important to analyse the profits and product positioning. In such a market, if one competitor lowers its price, the others would have to lower their prices as well.
This pricing policy is easier as compared to other policies like demand pricing because in this the requirement of accurate market data is not important. This strategy is also helpful for the distributors as they are already comfortable handling the products in that price range. Customer’s perception can be analysed by setting the prices in the range of the competitors. The managers generally get passive with this approach as they lose sight of their pricing responsibilities and just monitor and adjust the prices as per the competitors’ price. Though this is a low risk strategy but sometimes the managers can’t handle the prices.
If A sets its price higher than its competitors than it is generally assumed that A is having better quality. This strategy has been adopted by many fashion brands as well as automobile companies.
Like Harley Davidson is using the similar parts and technology as other competitors like Kawasaki, Yamaha, Honda still it is priced higher. With the experience of the quality the customers have become loyal and established a reputation for high end bikes.