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 :
Select the correct sequence of steps in setting a pricing policy:
(a) Determining Demand
(b) Analysing competitors' costs, prices and offers
(c) Selecting the Final Price
(d) Selecting the Pricing Objective
(e) Estimating costs
(f) Selecting a pricing method
Codes:
The price setting method most closely corresponding to the concept of product positioning is:
A company prices a 2 litre bottle of its mineral water at ₹ 30 but 60 ml of the same water in a moisturizer spray for ₹ 75. This is an example of which one of the following pricing practices?
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?
Find the most appropriate sequence of life-cycle of price for a product, from the initial stage to the mature stage.
Pricing decisions are most complex at which stage of the product life cycle?
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 is the characteristic of price?
In which of the following price adjustment strategies. a company reduces prices to reward customer responses such as volume purchases, paying early or promoting the product?
The consumer's price sensitivity is / are influenced by
A. Who bears the cost
B. What percentage of total expenditure does the product represent
C. Who bears the cost and type of retailer from where customer purchases
D. Consumption of product by the customer
E. Knowledge about the product
Choose the most appropriate answer from the options given below:
- Which of the following are the informal pricing methods ?
I. Cost plus
II. Competitive
III. Rate of return
IV. Trial and error
Codes :
