Competition oriented pricing

Competition-oriented pricing is a strategy where a retailer sets prices based on competitors’ pricing rather than solely on costs or consumer demand. This approach is used to remain competitive in the market and attract customers by offering better perceived value.

1. Pricing Above the Competition

• Definition: Setting prices higher than competitors.
• When Used: This approach is used when a retailer offers additional value that justifies a higher price, such as superior quality, brand reputation, or excellent customer service.
• Example: Tiffany & Co. prices its jewelry above competitors, leveraging its brand reputation, premium quality, and customer service as value-adding features.

2. Pricing Below the Competition

• Definition: Setting prices lower than competitors to attract cost-conscious consumers.
• When Used: Effective for discount retailers who focus on high volume sales and low prices as their primary competitive edge.
• Example: Walmart often prices its products lower than competitors to attract price-sensitive customers, emphasizing its Everyday Low Pricing (EDLP) strategy.

3. Price Matching

• Definition: Matching the prices of nearby competitors to maintain competitiveness.
• Purpose: Builds customer trust by assuring them that they are receiving fair and competitive pricing.
• Example: Many large retailers, such as Target, offer price matching guarantees where they match or beat a lower advertised price from certain competitors&.

4. Collecting Competitor Pricing Data

• Purpose: Gathering competitor price data is essential to adjust and remain competitive.
• Methods: Price data can be collected manually by store personnel or through third-party services that offer regular competitive pricing analysis.
• Example: Services like Nielsen and SymphonyIRI provide retailers with data on competitors’ prices, enabling them to make informed adjustments.

In competition-oriented pricing, retailers set prices with a focus on competitive positioning. Whether setting prices above, below, or at par with competitors, this strategy requires continual monitoring and adaptation to ensure the retailer remains attractive in the market. This approach helps meet customer expectations while aligning with the retailer’s brand and strategic goals.