There are many pricing strategies your business can choose from, but only a few will actually bring growth to your business. Knowing whether or not a pricing strategy is right for you can save you a lot of time and money. In this article, we’ll be discussing competitive pricing pros and cons so that you can make an informed decision for your company. 


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Table of Contents:

I. Competitive Pricing Pros and Cons – When Is It Right For You?

II. How To Set The Most Competitive Price For Innovative Tech Products

III. Analysis of the Trend of Competitive Pricing Methods in the Airline Industry



Competitive Pricing Pros and Cons

Competitive Pricing Pros and Cons – When Is It Right For You?


Pricing strategies play an important role in the success of your product or service. A properly chosen and implemented strategy can maximise your profits and align your positioning with customer perceptions. 


Competitive pricing is one such strategy that your business can choose to employ. This is commonly used by businesses that sell similar products or services to one another where pricing has reached a level of equilibrium. 


In other words, the market has had these offerings for a long time and has developed many substitutes that customers can choose from. Therefore, this strategy is used as a way to stand out from the competition. 


If you’re unsure whether or not this sounds right for your business, continue reading. We’ll define exactly what this strategy means, how it works, and will take a look into competitive pricing pros and cons. 


What Is A Competitive Pricing Strategy?


Competitive pricing involves using competitors’ price points as a basis to position your own prices. This is a market-oriented strategy that involves a lot of research in order to gain a comprehensive understanding of your competitor’s strategies. 


Businesses that employ this type of strategy are usually in high-competition environments and are heavily dependent on customers’ perceptions of how a product should be priced. There are small margins in which you can move to increase or decrease prices that would affect your business successfully. This often involves trend forecasting to ensure your price changes match up. 



How Does It Work?


With this type of pricing strategy, businesses have three options to choose from:


– price on par with the competition

– go above the competition

– set your prices below the competition


Knowing which strategy works best for your business is incredibly important. You need to have a deep understanding of how customers perceive your brand and a great marketing department that can help align your brand with your positioning. 



Price Matching


Setting prices on par with the competition involves trust that your marketing will set you apart from the rest while accepting prevailing market prices. Businesses that match prices may also be unable to participate in price changes or improvements in product features and marketing. 


With this strategy, retailers are able to maintain the competition by acting as a substitute. When a competitor announces its prices, you might announce a price-matching scheme. Your competitors’ customers might then become aware of your brand as an alternative and may decide that they like your offering better. 


Premium Pricing


Pricing above market standards involves providing the best quality of your product. Therefore, you would be marketing your brand as a premium product and should convey this sense of luxury. This may also require you to employ value-adding techniques, such as adding extra features or services to your offering. Doing this can help increase customers’ perceptions of value. 


Loss Leaders


Pricing below the market involves ways to increase traffic based on cheaper prices alone. This strategy assumes that customers will always come back for your product based on the best value of your price. 


It also involves strategically bundling items that would encourage customers to buy more from your product range. You should be prepared to take potential losses for some discounted items. Another advantage of this strategy is that it can help move stagnant items in your inventory. 


Competitive Pricing Pros and Cons


Every strategy has its pros and cons, especially weighed against the unique situation of your business. These are the essential advantages and disadvantages you should consider so that you can make the best choice for your business:





With the right technology and the ability to use it, competitive pricing can be a great way to take control of your competition. This strategy can help prevent the loss of market shares and customers to other businesses while positioning your business better. 


Pricing is also one of the most consistently important factors in a customer’s buying decisions. In fact, customers now have a much easier time doing price comparisons. 


A common misconception is that competitive pricing is all about slashing prices to beat other businesses. However, it’s important to remember that staying on top of the competition will help you know when you can increase your margins. 


Competitive pricing helps keep your business adaptive to prices and make sure that you are always on top of trends. This way, customers will know that you will always offer the best price for value.


Likewise, competitive pricing strategies can be modified and combined with other strategies. By tailoring your methods, you can fine-tune your pricing for your specific business needs. 




With any strategy, there’s always a risk of things going wrong or applying concepts incorrectly. However, competitive pricing has a tendency to become overly focused on the competition. This can lead to your business cutting prices too far, which will then eventually eat into your margins. So, don’t forget to factor in overhead and production costs. 


As we’ve mentioned above, not all strategies are suited to every business. You’ll want to take extra care to ensure that competitive pricing is for you. Otherwise, you can risk harming customer loyalty, brand value, and good business operations. In these cases, you may benefit better by combining different strategies. Smaller businesses may also lose out on this strategy since it takes a lot of resources to continuously analyse the market and sustain it.


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Conclusion – Competitive Pricing Pros and Cons


In conclusion, there are many competitive pricing pros and cons. However, if you have determined that this strategy is suitable for your business, you can unlock incredible benefits. This can pave the way for you to become a strong competitor and industry leader. But if your business is having difficulties navigating competitive pricing strategies, consider hiring a professional pricing team that can take care of all your needs. 


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Competitive Pricing Pros and Cons

How To Set The Most Competitive Price For Innovative Tech Products ✨


If your business is planning on launching an innovative product, chances are you will encounter dilemmas or difficulties in pricing. This is because how you price your product or service can largely influence your position in the market. In fact, setting your price point is arguably one of the most important decisions you will have to make when launching the product. In this article, we will be discussing how to set the most competitive price for your product launch.


Competitive Pricing Pros And Cons: How To Set The Most Competitive Price For Innovative Tech Products


Pricing anything is difficult enough, but even more so with new and innovative products. A large part of this difficulty comes from the fact that customers are not yet aware of the value of your product. 


Many products, especially those in tech, are priced based on the customer’s perception of how much it is worth. In fact, some pricing strategies – such as value-based pricing – are built entirely around that concept. 


Whether or not you adopt value-based pricing, perceived value plays a large role in the success of your strategy. Your business needs to understand how to maximise value and what pricing challenges you can expect. This will give you a better foundation for building your pricing strategy. 


Pricing Challenges


The general challenge in pricing lies in the attempt to find the goldilocks zone. In other words, the sweet spot. Pricing too low can erode your margins and raise questions about the quality of your product. Meanwhile, pricing too high can put off customers, causing them to turn away for cheaper alternatives. 


Likewise, mispriced technologies – especially new ones – can disrupt perceptions, supply chains, and other infrastructures. For example, low-priced breakthrough technologies can stunt profits for the entire industry and create highly sensitive and competitive environments. This leaves companies without any room to maximise profit margins. 


However, many of these challenges and consequences can be avoided by properly understanding value. 


Determining The Value Of Your Product


Determining the value of your product can be a complex task. We have broken down some of the process into more digestible sections that should be easier to follow. Take note that this process could stand to change depending on the unique factors affecting your business.


Sampling Prototypes


The first step is to allow a specific group of people to sample your product. This includes a narrow group of early adopters. These people are typically those who are forward-thinking and are interested in cutting-edge technology. Because of their predisposed interest and understanding of tech, you can get more impactful feedback. 





In conjunction with your sampling phase, you’ll want to conduct interviews with your customers. This evaluation is essential to getting the full range of insights from your customers. 


At this point, it’s critical that you address any concerns around user-friendliness. One of the most common barriers to successful adoption is frustration and difficulties in learning how to use the new tech. 


Refining Your Product


Now that you have open feedback channels for your new release, make the necessary tweaks to refine your product. During this stage, recognise which aspects of your product stand out the most to customers and utilise that to your advantage – especially when marketing. 


Pricing Strategy


After you have gone through the necessary steps to measure and test your products, you should have a general understanding of their value. At this point, you can figure out a pricing strategy that works best for your offering. 


Depending on what your product is, some strategies will allow you to maximise profit more than others. It’s critical that you choose the best strategy for your business. A competent pricing team with specialised expertise can help you navigate this process. 



Competitive Pricing Pros and Cons: Considerations Before Setting The Most Competitive Price


As you begin the process of pricing your new tech offering, there are several aspects that you’ll want to consider. These considerations will help you come up with a pricing strategy and revenue model that works for your business. 


What and When Are You Pricing?


The first aspect for you to scrutinise is the structure of your pricing strategy. This consideration is especially important for new technologies that may not fit into previously used pricing models. What may have worked for you before may no longer be compatible. 


The best example of this would be SaaS or Software-as-a-Service. Cloud-based software like Google Workspace or Dropbox would not have made a profit with a standard upfront payment. SaaS transitioned to a subscription-based pricing model which was significantly more successful. 


In this situation, what changed was what was priced (formerly product, now service) and when payments are made (one time upfront to regular subscription). 



Competitive Pricing Pros and Cons: What Is Your Relationship With Your Customers?


The relationship you have with your customers can have major implications for your pricing and revenue strategy. Depending on your offering, you can utilise the relationship your clients have with your business for profit. 


For example, a customer who buys a pair of shoes or a jacket pays upfront in what’s known as an episodic relationship. However, for connected relationships, clients pay per use or amount of use. In this case, you would use a pay-as-you-go model. 




Lastly, one aspect you may want to consider is value-adding. This is a common practice when you want to maximise margins that may otherwise be sensitive due to customer perception. By adding extra services or special features, you add perceived value to your offering. 


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Conclusion on Competitive Pricing Pros and Cons and Setting The Most Competitive Price


In summary, finding the most competitive price for your innovative tech involves a lot of analysis and strategising. However, as long as you follow a tried and tested process, you should be able to find the perfect price point and strategy for your product or service. 


It’s important to scrutinise your structures and be willing to make major changes when old methods are no longer serving you. Lastly, if your business is struggling to come up with the perfect solution, consider hiring a pricing team. Pricing professionals have specialised knowledge that can help you find the best method for your business.


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Analysis of the Trend of Competitive Pricing Methods in the Airline Industry 🛬


The aviation industry has been experiencing a notable decline in airline ticket prices recently. This signifies an escalation in competition among airlines. Competitive pricing method emerges as the prevailing strategy, prompting airlines to purposely adjust their fares to entice customers and maintain their foothold in the market.


Competitive pricing method, while advantageous, presents challenges for airlines. Margin pressure can arise, impacting profitability as lower fares reduce margins and pose financial challenges in covering costs and investments. Additionally, the risk of commoditisation looms, making brand differentiation difficult and potentially eroding brand value and customer loyalty in the long term. Therefore, understanding and navigating competitive pricing dynamics are essential for long-term success.


In this article, we are going to delve into the competitive pricing method within the airline industry. First, we’ll outline the current landscape of pricing dynamics among airlines, highlighting the challenges they face in maintaining competitiveness. Then, we delve into various tactics airlines can employ to navigate these challenges effectively. We argue that customer-centric decisions are key for airlines to thrive in this environment of intense competition.


At Taylor Wells, we believe that adopting strategic pricing is crucial for airlines to remain competitive and sustain profitability. By the end, you will know how airlines can effectively manage their pricing strategies to gain an edge in the market.



Current Trends in the Airline Industry: Average Ticket Price Drop and Competitive Pricing Method Competitive Pricing Pros and Cons


In the current aviation landscape, the noticeable decline in airline ticket prices serves as a visible indicator of the escalating competition prevailing among airlines. As airlines swiftly embrace competitive pricing strategies to capture market share and retain customer loyalty, strategic considerations become increasingly crucial.


According to a comprehensive analysis by Flight Centre Corporate, international airfares witnessed a substantial 13% dip in the latter half of 2023. Economy class passengers benefited from an average saving of $280 per ticket compared to the previous year, while first-class and business class tickets experienced notable reductions, averaging around 8%, translating into potential savings of up to $1280.


The relief is particularly pronounced in flights from Australia to Hong Kong, with a nearly 36% drop in economy ticket prices and almost 24% for business class. Similar trends are observed for flights to New Zealand and Singapore. However, European flights experienced more modest decreases, with Flight Centre Corporate identifying Europe as the “last frontier” for cost reductions, emphasising the need for increased flights and competition.



One primary driver behind the decrease in ticket prices is the industry’s bolstered capacity. Airlines strategically expand their operations by adding more available seats on popular routes in response to increasing demand for air travel. This augmentation not only addresses the surge in passenger demand but also triggers a ripple effect on pricing dynamics.


Strategic pricing decisions are indispensable as airlines navigate this competitive landscape. By carefully analysing market dynamics, leveraging expanded capacity, and remaining adaptable to changing demand patterns, airlines can position themselves for success amidst the evolving business landscape.


Effective Pricing Method Amid the Competitive Rivalry in the Airline Industry


In effectively managing a competitive pricing method, airlines can implement several key strategies to optimise their pricing decisions and maintain competitiveness in the market.


Dynamic Pricing Strategies


Real-time adjustments: Airlines utilise data analytics to monitor demand fluctuations continuously. By analysing real-time data on factors such as booking trends, seat availability, and competitor pricing, airlines can make immediate adjustments to their fares to reflect changes in demand. For example, if demand suddenly increases for a particular flight, airlines may raise ticket prices to maximise revenue.


Demand forecasting: Forecasting future demand is essential for airlines to anticipate market trends and adjust pricing accordingly. By utilising historical data, market trends, and predictive analytics, airlines can forecast demand for different routes and time periods. This enables them to optimise pricing decisions by adjusting fares in anticipation of changes in demand. For instance, airlines may lower prices during off-peak travel times to stimulate demand and fill empty seats.


Segmentation Tactics


Targeting different customer segments: Airlines segment their customer base based on factors such as travel preferences, purchasing behaviour, and demographics. By understanding the distinct needs and preferences of different customer segments, airlines can tailor their pricing strategies to meet the specific requirements of each segment. For example, budget-conscious travellers may be more responsive to discounted fares, while business travellers may prioritise convenience and flexibility.


Value proposition alignment: It is crucial for airlines to ensure that their pricing reflects the perceived value of their offerings for each customer segment. By aligning pricing with the value proposition of their services, airlines can justify their fares and maintain customer satisfaction. For instance, premium services such as priority boarding, extra legroom, and complimentary meals may command higher fares to customers who value these amenities.


Route-Specific Pricing


Route analysis: Airlines conduct comprehensive analyses of each route to understand demand patterns, competitive landscape, and operating costs. By evaluating factors such as passenger demand, competition from other airlines, and operating expenses, airlines can identify opportunities for pricing optimisation.


Pricing optimisation: Based on route-specific data and analysis, airlines adjust fares to maximise revenue and maintain competitiveness. For example, airlines may offer lower fares on routes with high competition to attract price-sensitive travellers, while pricing higher on routes with limited competition and high demand.


How can airlines improve their competitive pricing method and decisions?


The effective management of pricing strategies is essential for airlines to maintain competitiveness and maximise revenue. By implementing various initiatives aimed at improving pricing decisions, airlines can optimise their positioning in the market and enhance profitability.


Competitive benchmarking serves as a fundamental aspect of refining pricing strategies. By analysing competitor pricing tactics and positioning, airlines gain valuable insights into market dynamics. Understanding competitor fares allows airlines to identify trends and adjust their own pricing strategies accordingly to remain competitive.


Moreover, by adopting best practices observed from competitors, airlines can incorporate successful pricing strategies into their own approach. For instance, replicating successful promotions or fare structures observed from competitors can help airlines attract customers and stimulate demand.



Promotional pricing strategies play a crucial role in driving sales and filling empty seats, particularly during off-peak periods. Airlines can implement targeted promotions to stimulate demand and incentivise travellers to book during low-demand seasons.


Strategic discounting on less popular routes or flights with low occupancy rates enables airlines to fill capacity and maximise revenue. By adjusting fares based on demand and route performance, airlines can optimise pricing decisions to drive profitability.


Effective communication of the value proposition is another vital component of pricing strategy enhancement. By highlighting the benefits and unique features of their offerings, airlines can justify pricing differentials and persuade customers to choose higher-priced fares.


Educating customers about the value they receive with higher-priced fares through targeted marketing campaigns and clear communication channels is essential. This helps customers understand the additional services, amenities, and conveniences included in higher-priced tickets, thereby justifying premium pricing.



The Pros and Cons and the Key to the Success of a Competitive Pricing Method in Airlines


Effective pricing management is critical for airlines to maintain profitability and competitiveness in the dynamic aviation industry. However, this task comes with its own set of challenges and requirements that must be carefully navigated.


Margin protection is a fundamental concern for airlines. Balancing competitiveness and profitability is essential, requiring fares to cover costs while remaining competitive in the market. Airlines must analyse cost structures and market dynamics meticulously to strike the right balance.


Furthermore, maintaining revenue integrity is paramount. Airlines should avoid excessive discounts that may erode margins without driving sufficient demand, ensuring sustainable profitability in the long term.


The importance of pricing expertise cannot be overstated in weighing the competitive pricing pros and cons in the airline industry.


Skilled pricing teams are essential, as they possess expertise in revenue management and analytics necessary for making informed pricing decisions. These teams play a vital role in optimising revenue and maximising profitability. Investing in training and development initiatives is crucial to keep pricing teams updated on industry trends and best practices, ensuring they have the knowledge and skills needed to excel in their roles.


Our findings show that with the right set-up and pricing team in place, incremental earnings gains can begin to occur in less than 12 weeks. After 6 months, the team can capture at least 1.0-3.25% more margin using better price management processes. After 9-12 months, businesses often generate between 7-11% additional margin each year as they identify more complex and previously unrealised opportunities, efficiencies, and risks.


Embedding commercial capability is another key consideration. Cross-functional collaboration is critical, as pricing decisions should be integrated with other departments such as marketing, sales, and operations. Collaboration fosters synergy and ensures a cohesive approach to pricing.


Additionally, organisational alignment is essential. Pricing strategies should align with the airline’s overall business objectives and customer value proposition. By ensuring organisational alignment, airlines can deliver consistent value to customers while maximising revenue and profitability.


Our findings show that when a business builds and embeds commercial capability across the business; bolstering its internal pricing skills and capabilities to build a sustainable pricing system, it can generate at least 3-10% additional margin each year while protecting hard-earned revenue and volume. This is at least a 30-60% profit improvement straight to the bottom line.


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Bottom Line


A competitive pricing method in the airline industry poses challenges such as margin pressure, commoditisation risks, and pricing complexity. Strategic responses like dynamic pricing, segmentation tactics, and route-specific pricing are essential.


It’s crucial for airlines to proactively manage pricing, balancing competitiveness with profitability. Continuous improvement is key, refining pricing strategies to adapt to market changes. Looking ahead, shifts in consumer behaviour, regulatory changes, and technological advancements will shape the pricing landscape. Airlines must anticipate future challenges and opportunities to stay ahead in the competitive market.


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Competitive Pricing Pros and Cons