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. 



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.


Bottomline – 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. 


For a comprehensive view on driving pricing strategies to maximise growth,

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