2.3 Competition-based pricing Competition-based pricing means setting a price based upon the prices of competing products.
Competing products can be classified as:
§ The same type of product – easily distinguished from one’s own products:
- price changes by competitors will not have a material impact.
§ The same type of product – not easily distinguished from one’s own products:
- price changes by competitors will have a material impact.
§ Substitute products that may be bought instead of your type of product (e.g. buy ice cream instead of soft drinks on a hot day).
Impact of price changes will depend on relative price/performance of substitute.
Illustration 3 – Important factors
Made-to-measure shoes and mass-manufactured shoes are examples of products that can be easily distinguished and where the price of one has little impact upon the price of the other.
If, however, one is a mass manufacturer of shoes it is very difficult to distinguish one’s product from that of other mass manufacturers. The prices of competitors will have a material bearing on one’s own prices.
Test your understanding 1
Of the three approaches to pricing discussed above:www.Examw.com
§ cost based
§ customer based
§ competition based,
which are most likely to maximise profits?
发表于 2012-2-23 17:09:42
