When the Companies pay less attention to its own costs or demands and bases its price largely on competitors’ prices, then it is known as :
Going rate pricing
Firms can set prices in three broad ways: cost-based (mark up on their own costs), demand-based (what buyers are willing to pay), or competition-based (what rivals charge). The stem says the company pays little attention to its own costs or demand and instead keys its price to competitors' prices - a competition-based method.
This is going-rate pricing. Here the firm bases its price largely on the prices charged by competitors, setting it about the same as, or a fixed margin above or below, the major rivals or the industry leader. Its own cost and demand curves take a back seat. Going-rate pricing is popular where costs are hard to measure or where firms want to avoid price wars, and it is common in oligopolies and for homogeneous products.
The distractors describe other methods. Value pricing sets a fairly low price for a high-quality offering based on the value delivered to customers. Image (or prestige) pricing sets a high price deliberately to signal quality or exclusivity. Psychological pricing uses price points and endings (like 99) and reference prices to influence how buyers perceive the price. None of these is driven mainly by competitors' prices.
Hence basing price largely on competitors' prices is called going-rate pricing.
Similar Questions
Find the most appropriate sequence of life-cycle of price for a product, from the initial stage to the mature stage.
After determining its pricing objectives, what is the next logical step a company should take in setting its pricing policy ?
The practice of selling below cost, with an intention to destroying the competitor is referred to as :
Cost - Plus pricing is not suitable for :
Match the items of List - I with that of List - II and suggest the correct code :
List - I (Pricing Strategies) List - II (Explanations) (a) Customary pricing (i) Ending a price with 99 paise (b) Skimming (ii) pricing a product based on perceived expectations of customers (c) Penetration pricing (iii) Setting a high price which gradually reduces as competitors enter the market (d) Psychological pricing (iv) Offering at a low price for a new product during its initial offering Code :
Find the most appropriate sequence of life-cycle of price for a product, from the initial stage to the mature stage.
The practice of selling below cost, with an intention to destroying the competitor is referred to as:
After determining its pricing objectives, what is the next logical step a company should take in setting its pricing policy?
Match the items of the List-I with those of the List-II and suggest the correct code from the following:
List-I List-II i. Loss Leader a. Locational price differentials ii. Unchanged Pricing b. Products with high initial demands iii. Basing Point Pricing c. Product line pricing iv. Skimming Pricing d. Oligopoly pricing Codes:
Which one of the following will be the appropriate pricing strategy for a new product expecting an expanding market?
Important Questions from Pricing decisions
Pricing practice of setting a price target and then developing a product that would allow the firm to maximise total profit at that price is called:
- Which of the following are the informal pricing methods ?
I. Cost plus
II. Competitive
III. Rate of return
IV. Trial and error
Codes : Which among the following is not an internal factor in pricing decisions?
Find the most appropriate sequence of life-cycle of price for a product, from the initial stage to the mature stage.
After determining its pricing objectives, what is the next logical step a company should take in setting its pricing policy ?
