Products Pricing Strategy in the Face of Competition

When you are in the market to sell goods, you have to decide on a price at which they need to be sold. The price of a product is a key determining factor for a consumer. While catering to the consumers with a tempting price, you also need to ensure that you can make sufficient profit through the sale. At the same time, the price must be in line with that of the competing products. In short, the price must maximise revenue while adopting competitive pricing strategies that still keep the sale profitable.

The marketing strategies of a business are highly correlated with pricing. To choose the price of the product, a business can adopt one of the many pricing strategies available. These depend on several factors such as your standing in the market, whether you are a new entrant, or have an established business. You can also choose one to prevent the entry of competitors, to gain a share in the market, or just manage to stay on in the game.

Pricing in eCommerce

eCommerce has seen a tremendous rise in the past decade and has only grown in the past COVID period. While the consumers are turning to it to meet their needs, the businesses have turned to eCommerce to survive in the market. With a rise in the number of participants in the field of eCommerce, businesses have to ensure that they price their goods competitively. This is imperative as the consumers have access to several buying options and can compare the prices of all available options in real-time.

Important Factors for Pricing

The selling price of a product must take into account several factors as below:

  • Production cost
  • Overhead costs
  • Profit margin

After the costs have been taken care of, you need to look at the factors of competitor pricing and price sensitivity. The pricing strategies that are commonly followed by businesses are varied and are described below for your understanding:

Cost Plus Strategy

If you are looking for a simplistic strategy for deciding the prices of your products, this is the strategy to follow. Adding a fixed profit margin to your total cost defines the selling price of the product. While it is simple, it is not the best strategy as it does not involve research of any kind and does not account for competitor’s prices and the demand for the product.

Demand-Based Pricing

This kind of strategy entails the modification of pricing with the changing demand to maximise revenue. When there is a rise in demand, service providers tend to raise the prices. When the demand drops, they reduce the prices to attract more consumers to avail the services. This strategy is often applied in service industries such as airlines and hospitality.

Penetration Pricing 

When a business intends to enter a market, which is already established, the new entrants mark the price lower until they can establish themselves and build a loyal consumer base. The prices are then increased slowly to match those of the competition.

Competitive Pricing

This strategy is becoming increasingly popular with the ever-growing competition. For this strategy, the most important factor is the purchase habits and behaviour of the consumers. To understand this, you would need to have relevant data and data analysis software. As the market for a product category matures, the competition becomes tougher. The price is then severely impacted by the strategies and actions of your key competitors. You have to then consider their prices when deciding your own to prevent from losing out on revenue and profit. 

You can choose to go higher, lower or sell your product at the same price as the competition. If you choose the first option of going higher, you must have enough reasons to justify the same. You could do so by introducing additional benefits and features for the consumer. In the second scenario of selling at a cheaper price than the competition, the profit margins will reduce and you will have to convince the consumers of the same quality standards as the competitor. At the same price, the quality of the product takes over and the consumer can make a fair choice.


Irrespective of the pricing strategy you choose, you must ensure that you do not go into losses over a price battle. This could be tough to recover from and could potentially lead to bankruptcy. Be wise when deciding the selling price of your goods and services.

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