Wednesday, January 20, 2010

Competition-based pricing

Setting the price based upon prices of the similar competitor products.

Competitive pricing is based on three types of competitive product:

  • Products have lasting distinctiveness from competitor's product. Here we can assume
    • The product has low price elasticity.
    • The product has low cross elasticity.
    • The demand of the product will rise.
  • Products have perishable distinctiveness from competitor's product, assuming the product features are medium distinctiveness.
  • Products have little distinctiveness from competitor's product. assuming that:
    • The product has high price elasticity.
    • The product has some cross elasticity.
    • No expectation that demand of the product will rise. Ref: http://en.wikipedia.org/wiki/Pricing_strategies

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