If a business undercuts its competitors on price, new customers may be attracted and existing customers may become more loyal. Determining how much to charge for your product or service needs more brainwork than just counting all of your costs and adding a corresponding mark-up. This is pricing that varies in real-time to reflect on-going shifts in buying patterns, competitive pricing and contextual factors, and it is the coming thing in all categories. Understanding where your competitors stand allows you to make more strategic pricing decisions on key items, control your position in the market, and drive more revenue. Although in many cases, the products have very similar characteristics, the price varies from one company to another. Competitive pricing, as defined by Investopedia, “is the process of selecting strategic price points to best take advantage of a product or service based market relative to the competition.You typically utilize this pricing strategy amongst products that have similar attributes, benefits, or features. There are times when businesses are willing to set price below unit cost. This pricing strategy is a “no-frills” approach that involves minimizing marketing and production expenses as much as possible. One of the most likely reasons behind this is - pricing. Note that all locations in a competitive pricing strategy must use the same currency. Other benefits of setting your price at an optimal level include: Meeting & Exceeding Revenue Targets. Recent Accenture Strategy research into 7,000 companies worldwide found that those that experienced a material decline in stakeholder trust also experienced a corresponding 5.8 percent decrease in revenue growth. It is a technique that companies that sell a similar product often use. Competitive pricing is one of the popular pricing strategies. Executive A picks a number out of his/her head, proclaiming, “This is the most customers will pay.” Executive B brings out the spreadsheets and says, “After careful market and competitive analysis, I believe we should price our product at X.” The entire point of the pricing exercise is to maximize revenue vs. cost. We have gained a reputation for delivering insightful analysis, advice, and pricing support leading to improved Probability of Win. Penetration Pricing. What competitive strategy is used by Apple Inc.? A business can use a variety of pricing strategies when selling a product or service.To determine the most effective pricing strategy for a company, senior executives need to first identify the company's pricing position, pricing segment, pricing capability and their competitive pricing reaction strategy. Pricing a product is one of the most important aspects of your marketing strategy. Typically, you only use this method when comparing products rather than services. His quote here is a great reminder to look at your product from your customer's perspective. A competitive pricing strategy and tactical program are reliant on a sophisticated price ecosystem: Example: sophisticated price data architecture, centralised analytics, pricing optimisation algorithms, robust competitive intelligence tools, a sophisticated value-based segmentation framework and a high-performing pricing team. Penetration pricing is one of several competitive pricing strategies available. Let’s take a look at the advantages, disadvantages & overview of competitor based pricing. Penetration pricing is a pricing strategy where the price of the product is initially kept lower than the competitors’ products to gain most of the market share and to trigger word of mouth marketing.. Every successful company tailors its own strategy to fit its specific situation. But does this strategy work? So, using a loss leader can help drive customer loyalty. The drawback of cost plus pricing is that it may not be competitive. This strategy takes into account the cost of the product as well as labor, advertising expenses, competitive pricing, trade margins, and the overall market conditions to determine the sale price. Competitive Pricing: A Strategy to Maximize Business Profits and Achieve Growth; Competitive Pricing: A Strategy to Maximize Business Profits and Achieve Growth. Competitive pricing: Set the price equal to what your competitors are charging and win the service game Value pricing: Understand the value for your customers and their willingness to pay. Retaining & … This type of strategy is often referred to as competition-based or competitor-based pricing. 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