What pricing strategy involves setting product prices relative to competitors?

The competitive pricing strategy is focused on establishing product prices based on the prices set by competitors in the market. This approach involves analyzing the pricing of similar products offered by rival companies and determining a price point that is either aligned with, slightly lower than, or higher than those competitors, depending on the business's goals and market position.

Using a competitive pricing strategy allows companies to remain relevant in a saturated market while also appealing to price-sensitive customers. For instance, if a competitor lowers their prices, a company employing this strategy might also lower its prices to maintain customer interest and market share. Alternatively, a business might choose to set its prices higher but justify that with added value or superior quality to differentiate itself from its competitors.

The other pricing strategies mentioned, such as cost-plus pricing, involve calculations based on costs plus a standard markup, while value-based pricing focuses on the perceived value of the product to the customer rather than competitor’s pricing. Dynamic pricing, on the other hand, adjusts prices based on real-time supply and demand conditions, rather than directly relating to competitors’ pricing strategies.