Question

• How do the concepts of Markdowns and Variable Pricing affect each strategy and provide a competitive advantage?

Answer 1

Competitive advantage : This can be defined as a relatively better performance of a company with respect to the performance of companies in the same industry or the industry average.

Different components that add the competitive edge to a company are high return on investment ( ROI ) , high profits , brand name.
To achieve this advantage the company can choose 2 paths : differentiation advantage and cost advantage.

1. Cost Advantage is where the company is able to provide the goods and services at a lesser price than the competitors.

2. Differentiation Advantage is when the company is able to charge a premium on the products it sells as it offers something unique or the company has a brand image.

Markdowns : A temporary reduction in the selling price of the product to induce demand for the product.

This is a kind of cost advantage, since the price the product is being sold at is relatively lesser than the other similar products in the market. So, the consumers will tend to buy the cheaper product.Hence, the company will be successful in achieving higher sales and  maybe better profit margins.

Variable Pricing : Changing the price of the product depending on the location, time etc.

This is also one way of leveraging prices to attract customers and gain the competitive advantage. It is one way of cost advantage.