Definition of Competitor-based Pricing
It’s a pricing strategy that takes advantage of rival’s prices by pricing close to or exactly as they’ve priced their item.
Description of Competitor-based Pricing
Here, companies fixate on the data received from the market instead of on production expenses or what the value of the item is. A benchmark price is decided based on what your rival is selling the item at. If, for example, you price yours higher, then you’ll probably make more money but you may not sell as much. The exact opposite occurs if you price your item lower.
Advantages of Competitor-based Pricing
This strategy doesn’t require any complicated calculations. All you have to do is monitor either the market price, or the price that a top rival has given to the item.
Disadvantages of Competitor-based Pricing
There’s no guarantee that the top rivals are actually doing the right thing. Following them may not help you maximize your profits and instead, you may end up missing out on some easy money.