Connect with us


Implementing A Competitive Pricing Strategy

Last updated by


competitive pricing strategy

Setting the price of your products and services is a critical business component and a task that requires experience and confidence.

Your pricing strategy will be determined by customer demand, target market, competitors, and the business to ensure the price is just right.

This business blog considers competitive pricing strategies and software.

What is Competitive Pricing?

Competitive pricing is one of the four main pricing strategies, and it is applied in saturated markets, i.e., many suppliers. The other three types of pricing are:

  • Cost-Plus Pricing: You add a set margin to the cost of the product. The cost takes into account manufacturing and other overhead expenses. You then raise the price by a set margin.
  • Markup Pricing: This is applied by adding a percentage to the wholesale price
  • Demand Pricing: As the name says, it is decided by the market demand for the product. Gauging the demand lets you weigh the pros and cons of opting for a profit margin or sales volume. If there is a massive demand for that product and you are sure you can make a lot of sales, a small profit margin might be enough. You can make up for it in sales volume.

With that said, how can competitive pricing work for your business?

Where ample supply and product price have thus stabilized, the focus turns to increasing sales. Updating the volume of business pricing is one of the factors that can set your company apart from its rivals. Set your price above or below your significant competitors, or choose to go with the crowd and match prices with your main competitors.

To implement competitive pricing, consider competitors and their strategies and how the price will impact company profitability.

Another consideration for this strategy is whether you
will buy the product from you if you increase the price.

Pricing Options

However, the price can also decrease, or you can price-match rivals.

Higher Price

Setting a price higher than the average price of the product is considered premium pricing. This provides the perception of luxury or that your business is a premium brand.

The higher price for your product may be justified by its inclusion of added features or add-ons, i.e., particular features or services. Unlike competing products, your product might not have a feature or extended warranty. Other add-ons can include free delivery and after-sales service.

Justify the higher price, and the product will sell.

Lower Price

If your product is similar to others on the market, you may want to compete by setting a lower price to higher sales volume.

Do your homework. Can your business make a profit with a lower profit margin? Work out the volume of sales required to make it a successful strategy. You should also avoid a race to the bottom of the barrel in price wars.

Price Matching

When confident that your brand reputation will secure sales, matching prices with your competition is a safe strategy.

Implement a dynamic pricing solution to adjust prices, or you can offer discounts if the customer finds the same product or service for less elsewhere.

The customer is responsible for proving the product is available at a lower price elsewhere. With this knowledge, your business can make the adjustments. It will be cheaper to reduce the product price by 10 or 15% and then engage a researcher to continuously gauge the market.



Competitive pricing allows you to leverage competitor prices to your advantage.

Premium Prices

By setting premium prices, you draw attention to your product or service and highlight its advantages to the customer to convince them to accept the higher price.

Low Prices

With low prices, you can attract more customers by letting them save money by buying a product with features similar to those of the competition at a lower cost.

Match Competitors Pricing

Price matching prevents the competition from luring your customers away with their lower prices.


Competitive pricing can lead to price wars, and you can then get involved in a race to the bottom.

Set pricing rules so that prices aren’t so low that even a vast sales volume may not be enough to recover costs.

Price optimization, which involves incredibly competitive pricing, is complex to implement manually. You have to consider many different factors within your own business and also take into account external elements, like competitor strategies.

AI Price Management Software

One way around the challenge is to implement a price management solution that uses AI so your business can maximize profitability yet remain competitive.

Here are some providers of price management software that were presented on Google’s Gemini:

  • ProfitWell is a SaaS subscription solution that features price optimization for standard pricing plans and uses a subscription-based solution.
  • Zillions is cloud-based, and you can track your competitors’ pricing and the usual standard features.


  • Fintfox – non-industry specific, use it for retail, distribution, production
  • Pricefx – another AI-powered price management software.  It can track customer demand, competitor pricing, and market conditions using machine learning.

For simplicity and efficiency, these systems streamline the process of collecting and analyzing data from many channels so you can adjust prices within the parameters set for your business. Using software for data capture, measurement, and personalization makes sense, particularly in a saturated market.

Gartner goes further with software reviews and ratings for profit optimization software, including the price, which is front and center.