What is a typical challenge of competitive pricing?

The challenge of competitive pricing primarily revolves around the need to balance pricing strategies with profitability, particularly to avoid underpricing products, which can lead to significant profit loss. When businesses set their prices too low in an attempt to compete with rivals, they might attract customers but ultimately struggle to cover their costs, leading to reduced margins or even financial losses. Maintaining competitive pricing requires careful analysis of both competitor prices and internal cost structures to ensure that while prices remain attractive to consumers, they still allow for sustainable profit margins.