Question

Agatha's Inc. is about to introduce a new product in the market, but is not sure as to how it should price the product. The company is facing intense competition from five other companies. In such a situation, what should be Agatha’s Inc. pricing objective? Provide an explanation for your answer.

Answer 1

For the assessment, I am going to explain the pricing objective the Agatha incorporation should have as they are facing intense competition when introducing new products in the market.

In my opinion, the company should go for competition-based pricing objectives under which the business would set the prices according to the competitors, which would appeal to the customers.

The competitor's based pricing objective would include the setting of the prices of the product after considering the amounts laid down by the competitors in the market to achieve a competitive edge over the customers based on the prices.

It would not only include setting lower prices from the competitors. A business can also set higher rates from that of its competitors to give it a feeling of superiority over the other competitor's product in the market and make it look appealing.

When considering competition-based pricing objectives, the businessmen would have to consider the cost incurred to him at the time of production. He will set up a price that would cover his overall cost. Next, the company would try to consider the amount charged by the competitors.

The businessman would like to know about the price sensitivity in the target market regarding the product. It would include researching whether the demand for the product will get lower or higher than the price charged.

If the consumer has a perspective that the high price symbolizes superiority and better quality, then the business should go for charging higher prices than its competitors.

In the opposite case, where I prefer to buy a good which is cheaper, then the business should go for setting prices lower than that of its competitors.