Question

In: Operations Management

what is competitive pricing and what kind of service does it offer? in 300 words

what is competitive pricing and what kind of service does it offer? in 300 words

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Expert Solution

Competitive Pricing is the process of selecting strategic price points to best take advantage of a product or service based market relative to the competition. It is the method usually used when the product similar to the competition. It is not commonly seen in businesses providing a service as it can vary from business to business while the attributes of a product remain the same. The price points in a service business are usually based on the quality of service. This pricing strategy is used when a product is in the market for a very long time and there are a number of substitutes available.

There are three options available to a business when fixing a price using this strategy:

  • Set the price below the competition – The focus in this type of pricing is the volume of sales. Business is ready to take a loss on its product if they believe that the customers will purchase other products from the company if they get exposed to the low prices. The profitability of the other products may then compensate for the loss taken on one product. For Eg. Cadbury chocolates and biscuits.

  • Set the price at par with the competition – The focus in this type of pricing is marketing. A business might keep similar pricing as prevailing in the market and try to differentiate themselves through marketing.

  • Set the price higher than the competition – The focus in this pricing is on the quality of the product or service. The businesses offer additional features and try to warrant a premium. For eg. Apple Products.

When a business is unable to anticipate the competitor price changes or is not equipped to make similar changes, a retailer may offer to match advertised competitor prices. This allows the retailer to maintain a competitive price point for those who become aware of the competitor's offer without having to change the price within the retailer’s system.


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