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Role of Competitive Pricing for Business Development

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Competitive Pricing

In organizing a new business, managers have to make many decisions. One of the crucial decisions is pricing strategy that includes price policy and price level. Price policy consists of pricing method, target customer group, and geographical segmentation. Pricing level involves setting a specific price for a product or service. Several aspects like use of custom cartridge packaging contributes for making the product a tough price competitor in the market.   

Price levels are generally classified as competitive or non-competitive prices. A competitive price is a market-driven price, while non-competitive prices are called cost-plus prices. In this paper we will define competitive pricing and try to answer the question: can it help a company’s staff get closer to customers and increase their sales volume and revenues from them?

Competitive vs. Non-competitive Prices

At a competitive price, a company sets its products and services prices by other suppliers on the market. This policy results in achieving the maximum volume of sales and income. It is thought that reducing prices to cost level can help business. It makes it easier for people who buy the goods to buy them, so the company doesn’t lose money.

Companies set prices that are not competitive based on what they pay to produce their product, plus a little bit more. In these cases, the profits are high because there is not a lot of competition between producers. But there are often few sales, which affects the company’s reputation and also makes it hard for other companies that deal with this supplier. This means that the markup rate might be current or suggested. It depends on the market situation.

Benefits of Competitive Pricing for Your Business

1) Increased Customer Attraction:

By offering lower prices than your competitors, you attract more customers, increasing sales. This way, you make your business attractive to potential investors.

2) Improved Reputation:

When people know about your business, they will be happy. This is because other people might want to work with you. If you help suppliers increase their sales, then you will be more competitive with other businesses. This is because your target market becomes bigger and generates greater sales. This also allows you to make a higher profit.

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3) Reduced Costs:

Competitive prices help enterprises reduce costs linked with highprice policy (advertising campaigns, sponsorships, etc.). It is possible to sign agreements with suppliers on particular price terms. If you agree to buy lots of things, then you can get them at a better price. Or if your company buys many things instead of just one, then they can get a better price and so will you.

4) Reduced Turnover Volatility:

Good relationships with clients and suppliers can result in them offering you price discounts on goods you purchase regularly. This enables enterprises to reduce the risks associated with price fluctuations for these goods.

5) Greater Competitiveness:

When your company prices items at a competitive rate, it will have more opportunities to sell things. This is because it reduces the cost of making things, which is especially important for companies that are young and inexperienced in this area.

6) Improved Efficiency:

Price discrepancies between companies generate sales uncertainties and opportunities for fraud (e.g., short deliveries). Competitive prices may help you prevent such issues and increase the efficiency of operations.

7) Increased Profitability:

You will be able to use the full potential of your business if you minimize risks. You won’t have to worry about other people having a better idea or another company working harder.

8) Improved Productivity:

If you lower the price of your product, you will be able to sell more. You can do this because it is cheaper for you if people buy more things. This could help you to make your business better. It can make it more profitable and productive.

9) Higher Market Share:

Competitive pricing can help you gain a larger market share and even monopolize it if applied correctly. Adopting this practice may significantly contribute to increasing sales revenues and decreasing expenses due to lower competition intensity, among other factors.

10) Calculation Efficiency:

Pricing is a key factor in how people feel about the product or service that they get from companies. The goal of fair and competitive pricing is to make sure that people are not charged too much for something. You want them to be happy with the price they pay, which means that you should make sure it is at a good value.

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Benefits of Non-Competitive Prices

1) Market Segmentation:

A non-competitive price policy can be profitable for companies or businesses that prevent sales to a specific market segment. In this case, a company that is in a monopolistic position can set prices below the marginal cost and thus create a larger profit by restricting its supply of products/services without losing other customers.

2) Reserving Units:

A company may want to restrict the supply of units for its own sake and not for a specific market niche or market segment, but this is still considered a form of non-competitive pricing. However, this strategy can be profitable when the demand for units is high while supply remains constant; by setting prices higher, the company can reserve units for its most valuable customers.

3) Collusion with Competitors:

The companies would create an agreement to raise prices of goods/services across the board to achieve maximum profits by restricting supply. So, this will cause an increase in prices paid by consumers. The agreement would stop when companies feel that they can maximize profits through pricing above the market.

4) Price Leadership:

The company with the most dominant market share in a particular industry sets prices for all to follow. In this strategy, no competition arises between brands, and therefore, there is little incentive to increase supply or reduce costs. The company is exposed to new competition. Some brands also use wholesale custom printed packaging boxes to make their products superior to others. It is helpful techniques for your business. 

Why Go for Competitive Pricing?

Competitive pricing is used to compete with the market by providing the same or even better products at lower costs. In addition, it can help develop or retain business relationships with other companies.

With the above-mentioned benefits, it’s not just the company benefiting from lower prices. Customers also benefit because they get better products at cheaper rates and consider their options for further purchases.

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