Semester-vi elective II a apparel marketing

Competition-based pricing

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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 long 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.

Market Creaming or skimming

Initially set high prices to "skim" revenue layer by layer from the market. Works when: 

These early adopters are relatively less price sensitive because either their need for the product is more than others or they understand the value of the product better than others. This strategy is employed only for a limited duration to recover most of investment made to build the product.
Market Penetration

The price is deliberately set at low level to gain customer's interest and establishing a foot-hold in the market. It works when: 

  • Market is highly price sensitive

  • Production and distribution costs fall as sales volume increases

  • Low price must help keep out the competition

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