Market Based Pricing

Posted in Marketing and Strategy Terms, Total Reads: 8228

Definition: Market Based Pricing

Market Based Pricing is defined as a process of setting prices of goods/services based on the current market conditions. Here, the competitor’s products are compared with one’s products and then prices are accordingly determined. If the features of a product are more than that of competitor’s, then company may set prices same to provide better value to the customers or may set high to account for additional feature.

Market conditions not only involves competitor’s products but also the perception of customers. If more customers are willing to buy a product(more demand), then that product is priced high by the company and if demand is low, price is decreased by providing discounts, rewards etc. in order to get hold of customers. From above we can conclude that in Market Based Pricing, prices are set according to mutual decision between sellers and buyers.

While proceeding for Market Based Pricing, following things are kept under consideration:

  • Customer Needs
  • Competition
  • Price Sensitivity

The main advantage of Market Based Pricing is that one can get hold of his customers and maintain sales which would have affected a lot in its absence of implementation.


Consider tickets for a newly released bollywood movie. People go crazy to watch new movie at the earliest and are ready to pay high prices. As a result, they are highly priced during first week of the release but later on the price of the ticket comes down. So we can see that based on demand, the prices of tickets are determined. This involves a market based pricing strategy.

Hence, this concludes the definition of Market Based Pricing along with its overview.

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