Which pricing strategy involves setting prices based on competitors?

Competitive pricing is a strategy where businesses set their prices based on the prices of their competitors. This approach is often used in markets with numerous similar products, allowing a company to remain competitive and attract customers without significantly undercutting their profits. By analyzing competitors' pricing, businesses can determine a price point that appeals to consumers while ensuring they do not stray too far from industry norms.

In competitive pricing, the focus is on market dynamics, assessing how similar products are priced, and positioning the company's offerings accordingly. It often requires continuous monitoring of competitors to adapt pricing in response to changes in the market landscape. This adaptive strategy can help businesses avoid price wars while maintaining customer loyalty through perceived value.

In contrast, cost-plus pricing involves adding a fixed percentage to the cost of producing a product, value-based pricing relies on the perceived value of a product to consumers, and skimming pricing involves setting high initial prices for new products and lowering them over time. Each of these strategies emphasizes different aspects of pricing rather than directly linking to competitor prices.