How to Create a Competitive Pricing Strategy
How to Create A Competitive Pricing Strategy
Definition
Competitive pricing is a strategy used to attract and retain customers. In most markets, there are a number of things that affect pricing. Entrepreneurs have to set prices for their products and services that will result in profit. Proper pricing strategies have an enormous impact on a businesss profits and can be one of the most difficult decisions that business owners have to make.
Summary
How To Create A Competitive Pricing Strategy
This article discusses strategies used to create competitive pricing in new and existing markets. According to the article economics of competition comes down to the gap between price and costs. It is common for business to what to limit or even alleviate their completion. So a strategy comprised of ways to introduce superior products and services that warrant the prices being charged verses cutting prices is implemented. Over a period of time, the market dictate pricing for existing products and services. However, that is not the case for new markets. So, new entrants have to strategize to cover cost and still turn a decent profit. In an effort to introduces a new product or services, businesses may try starting out with a low introductory price as a promotional tactic. There are several perks to a low introductory price because if the cost of a product decreases as more is sold, then a low price to attracts more sales can quickly increase profits.
This article also addresses anti-trust laws. Even though a business can set prices to whatever it chooses to entice customers, it cannot drastically reduce prices in order to force out the competition. Anti-trust laws, such as price fixing can lead to criminal punishment to include hefty fines and even prison. Price fixing includes anything from healthcare organizations colluding with insurance companies, to lodging associations agreeing to not post signs with room rates. The article is summed up by saying that it is good to know what the competition is doing, but stay clear of industrial espionage.
Discussion
Most consumers create a theory surrounding why certain products and services that are similar have a price difference. For instance, when shopping for clothes a person sees two identical shirts in the same store but with different prices makes the assumption that one shirt is more expensive or least expensive because they are different name brands or because of the color for the season. A proprietor has to make their products or services more desirable to customers in order to set pricing. When deciding what is unique and valuable about the goods and services being provided and focusing on pricing based on