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ABSTRACT
When a company starts its business, it faces the difficult task of setting prices for its products. Price is one of the crucial factors a customer will consider when making decisions about purchase. Customers are price sensitive and browse through multiple sites for price comparison and choose one that offers the best deal. When pricing its products, a company can have several problems. If prices of its products are too high, customers will not buy them. If prices are too low, profits will be negligible. The question is: How to set the most competitive price in the market and ensure a good return on investment? This paper is focused only on one of the possible pricing strategies - competitive pricing strategy. Competition starts in the moment, when two products with similar core features are produced by different companies. In pricing strategy based on competition, company sets its prices based on its competitors? prices rather than on its own cost and profit objectives. Before pricing products, company should research its competitors to figure out where it fits in or what to change. The aim of the paper is to provide extended information about competitive pricing to companies, which are considering applying this approach. The basic definitions are complemented by a model example where the principle of competitive pricing is clearly explained. Furthermore, the benefits that a company can obtain by applying this approach are provided. On the other hand, there are also problems and disadvantages that companies should take into account. Finally, there are recommendations for companies to make this pricing strategy more effectively. This paper may point out on relevant and necessary information about this pricing strategy and help companies in decision-making process to choose the right pricing strategy according to their needs.
Keywords: competition-based pricing strategy, competitive pricing, price competition, pricing strategy
1.INTRODUCTION
The price is one of the basic components of the marketing mix and pricing a product is one of the most important aspects of marketing strategy. The choice of a suitable strategy depends on many factors and the company should not forget to follow its stated goals. There exist many options. It can decide whether to enter with high price to the market and convince customers of the quality...