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How Can A Firm Benefit From Competitive Pricing?

The practice of offering your goods and services at a price that is on par with or lower than that of your competitors is known as competitive pricing. Competitive pricing can also be achieved by giving better payment terms than the competitors.

May 21, 2022123.5K Shares1.6M ViewsWritten By: Alastair MartinReviewed By: James Smith
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  1. What Is Competitive Pricing?
  2. Pros And Cons Of Competitive Pricing
  3. Advantages Of Competition-Based Pricing
  4. Disadvantages Of Competition-Based Pricing
  5. Conclusion

Setting one's price at the same level as the competition is what is meant by competitive pricing.

This strategy is based on the assumption that the competition has already done extensive research into price.

Any market has a large number of companies selling the same or very similar products, and according to classical economics, these prices should already be at an equilibrium (or at least at a local equilibrium).

Newly founded companies can thus prevent costly mistakes in pricing setting by establishing their prices in line with their rivals.However, each businessis unique, as are its expenses.

Competitive pricing is limited in that it does not take into account the differences in expenses (production, purchasing, sales force etc.) between particular competitors in the market. "A lack of efficiency and lower earnings can arise from this pricing strategy.

Competitive Pricing - Meaning, Strategies, Advantages, and Examples of FedEx and Walmart (Video 226)

What Is Competitive Pricing?

It's a pricing strategy in which companies consider the prices of their competitors while determining their own rates.

Four retail establishments with same prices of 399.99
Four retail establishments with same prices of 399.99

Four retail establishments exemplify the effectiveness of this approach.Keeping tabs on one other's prices implies that they're all working together to ensure that their own rates are as competitive as possible.

You have a slew of rivals to watch out for as an online retailer.As a result, you'll require a reliable data collection method.

It's also critical that you can adjust your pricing in real time in response to adjustments made by your competition.

It is strongly recommended for price tracking automation because manually tracking 100 product prices from 10 competing websites takes 12,5 hours.

In order to use a price tracking and dynamic pricingtool, you can choose from the following options:

  • A position that is the most affordable in the market
  • Average position where the majority of competitors are congregated
  • Clusters of high-end brands at the top end of the market.

As a result, the dynamic pricing rules you implement influence your competitive position.

You should price higher than your competitors if you're targeting high-end customers and selling premium products.You can expect big profits but minimal conversions as a result.

As long as your pricing are reasonable, you can attract a wide audience.

So many pricing points exist in between these positions since we're talking about extremes.

It's not necessary to match the pricing of a rival in order to achieve competitive pricing.Instead, it means that when experimenting with various price points, competition prices should be taken into account heavily.

Pros And Cons Of Competitive Pricing

There is no such thing as a black-and-white situation in business.

There is no one-size-fits-all pricing plan that works for everyone.

Pricing strategies that work well for one business in one industry or market may be disastrous for a company in another.

We'll go over the benefits and drawbacks of competitor-based pricing, so you can decide if this is right for your business.

Advantages Of Competition-Based Pricing

  • It's less risky to price your product at a lower level while you're just getting started in the market.There are advantages to using established competitors' pricing, though, as they have previously spent time establishing their rates and conducting market research.
  • A straightforward technique, since you must first determine who your primary competitors are and then gather their prices before making a selection based on the information.Of course, this might be a difficult task in some businesses due to the large number of items and the frequency with which their prices vary.
  • Competition-based pricing can be used in conjunction with many other pricing schemes for maximum wiggle room.
  • Using trustworthy price tracking software will allow you to cut your rates where there is room and thereby take some clients away from your competition, but you will also be alerted to possibilities to raise your pricing and remain competitive, giving you a win-win situation.

Disadvantages Of Competition-Based Pricing

  • Missing out. You run the danger of overlooking critical information on the products of your competitors.This may result in incorrect pricing.
  • You won't be able to stand out if you follow the costs of your competitors, thus you won't be able to construct anything recognizable if you do so.
  • You can complete your competitive pricing study correctly, but what if your competitors committed some pricing mistakes?This time, you'll make the same blunders and miss an opportunity to out-price your competitors.
  • More staff and resources would be needed for smaller enterprises to collect and compare pricing.This problem can be solved by adopting pricing monitoring software, which is available for a relatively low monthly fee.


In a world where pricing is king, it's imperative that you monitor your competition at all times.You might gain a lot from having the correct price at the right time.

Because of this, a successful pricing plan is essential.Everyone, from tiny enterprises to global conglomerates like Amazon and Samsung, uses competitive pricing as one of their most effective methods.

It might be difficult to do competitive pricing correctly, which is why we advocate using tools to assist you.

For price tracking, Price2Spy is one of the best.Try it out for 30 days for free and see if it's worth the money.

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