What does competitive pricing involve?

Competitive pricing is a strategy where a business sets the price of its products or services based primarily on the prices charged by competitors. This approach helps businesses remain relevant in a competitive marketplace by ensuring their pricing aligns with the market average, making it easier to attract and retain customers. By analyzing competitors’ prices, a company can strategically position its own pricing to either draw more customers or maintain market share.

For instance, if a competitor lowers their price, a business using competitive pricing may choose to adjust their own prices accordingly to remain appealing to customers. Conversely, if a business has a strong brand or unique features, they might decide to price slightly higher than their competitors, but this decision still stems from a thorough understanding of those competitors’ pricing strategies. This method does not typically focus on setting uniform prices across markets or solely on customer demand, which involve different pricing strategies that consider factors beyond competition.