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When the companies pay less attention to its own costs or demands and basis its price largely on competitors’ price then it is known as:
- a)Going rate pricing
- b)Psychological pricing
- c)Image pricing
- d)Value pricing
Correct answer is option 'A'. Can you explain this answer?
Verified Answer
When the companies pay less attention to its own costs or demands and ...
- In case of high competition or new launch of product or new entry in the existing market, companies do not consider their own pricing but they follow the pricing of their competitors. This is also a strategy to survive in the market.
- In such case there may be the possibility of high margin, Low margin or companies may sell on breakeven point if they are new entrant. Going rate pricing is often done in perfect competition.
Most Upvoted Answer
When the companies pay less attention to its own costs or demands and ...
- In case of high competition or new launch of product or new entry in the existing market, companies do not consider their own pricing but they follow the pricing of their competitors. This is also a strategy to survive in the market.
- In such case there may be the possibility of high margin, Low margin or companies may sell on breakeven point if they are new entrant. Going rate pricing is often done in perfect competition.
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When the companies pay less attention to its own costs or demands and ...
This strategy is known as price-based competition or competitive pricing. When a company focuses primarily on its competitors' prices rather than its own costs or customer demands, it sets its prices to match or undercut the prices of its competitors. The goal is to attract customers by offering lower prices than the competition, assuming that price is a significant factor in customer decision-making.
While price-based competition can be effective in certain situations, it has several drawbacks. Firstly, it can lead to a race to the bottom, where companies continuously lower prices, resulting in decreased profitability for all players. Additionally, relying solely on price as a competitive advantage can weaken a company's brand image and diminish the perceived value of its products or services. Moreover, this strategy may not consider the unique costs and demands of the company itself, potentially leading to unsustainable pricing decisions.
It is crucial for companies to strike a balance between competitive pricing and considering their own costs and customer demands. A comprehensive pricing strategy should incorporate factors such as value proposition, differentiation, production costs, and customer preferences to ensure long-term profitability and sustainable growth.
While price-based competition can be effective in certain situations, it has several drawbacks. Firstly, it can lead to a race to the bottom, where companies continuously lower prices, resulting in decreased profitability for all players. Additionally, relying solely on price as a competitive advantage can weaken a company's brand image and diminish the perceived value of its products or services. Moreover, this strategy may not consider the unique costs and demands of the company itself, potentially leading to unsustainable pricing decisions.
It is crucial for companies to strike a balance between competitive pricing and considering their own costs and customer demands. A comprehensive pricing strategy should incorporate factors such as value proposition, differentiation, production costs, and customer preferences to ensure long-term profitability and sustainable growth.
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When the companies pay less attention to its own costs or demands and basis its price largely on competitors’ price then it is known as:a)Going rate pricingb)Psychological pricingc)Image pricingd)Value pricingCorrect answer is option 'A'. Can you explain this answer?
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