Parity pricing strategy. With the competitive parity pricing approach, you simply match the prices ofyour competitors. The first problem is that you may ignite a price war, which no.

Parity pricing strategy

The Best Pricing Strategy - The Apple Way

Parity pricing strategy. When the price of an asset is directly linked to another price. Examples of parity price are: 1. Convertibles - the price at which a convertible security equals the value of the underlying stock. 2. Options - when an option is trading at its intrinsic value ("trading at parity").

Parity pricing strategy


The other day I heard someone refer to pricing as the bastard child of marketing. We have covered Cost Based Pricing and have come to the conclusion that it is a myopic strategy because of its failure to consider important external influences as an internally focused strategy.

In essence, we are now venturing into the marketplace and legitimizing our position versus other competitors. In this methodology, competing products are used as a benchmark for how to set your prices , rather than using your internal costs, customer demand or brand development as key factors for price determination.

This can be a simple and effective approach with the following options:. We feel able to charge some premium versus the competition because our product has attributes the purchaser values over the competition.

Presumably you have a sense of how much the attribute s are valued to enable you to set the premium. Competitive or Parity Pricing In markets where there is little differentiation or a commodity orientation, competitors are often priced the same.

Discounted Pricing Here we may adopt a price leadership strategy either because our product lacks certain attributes, or because we believe that the market is price sensitive.

Simple analysis would allow us to determine payback for this strategy. The above examples are meant to look at regular pricing versus the competition executed on a day-in-day-out basis.

Another approach to competitor based pricing would be:. This strategy positions the list price higher than the competition and discounts are later applied to tactically deliver a more competitive price point.

Purchasers tend to peg the product value at the list price and ultimately feel they are receiving tremendous value by buying at the discounted price.

While Cost Based Pricing is internally focused, Competition Based Pricing takes into consideration some important external influences. However, there are pros and cons for this approach. Competition Based Pricing is a viable option for many businesses, particularly those where there is limited differentiation between products.

I believe this approach to be superior to Cost Based Pricing as it moves us from an internal focus to more of an external or market orientation. Our pricing journey is becoming more interesting with the added complexity of external factors; we should recognize that this work is every bit as challenging as developing an advertising campaign or a new product.

And in the same way, it requires focus and process to deliver upside potential. Our next blog will take us further into a discussion of market dynamics, as we look at Customer Based Pricing strategies. Boardroom Metrics Marketing Consultants provide strategy and execution solutions for your inbound and outbound marketing objectives; including social media, branding, pricing and advertising.

Leave this field empty. It seems you have Javascript disabled in your Browser. In order to submit a comment to this post, please write this code along with your comment: What is Competition Based Pricing? This can be a simple and effective approach with the following options: Premium Pricing We feel able to charge some premium versus the competition because our product has attributes the purchaser values over the competition. Another approach to competitor based pricing would be: High — Low Pricing This strategy positions the list price higher than the competition and discounts are later applied to tactically deliver a more competitive price point.

Pros of Competition Based Pricing On the positive side, this pricing strategy is relatively simple and easy to execute. Just follow the competition and tweak as necessary. Cons of Competition Based Pricing There are also inherent weaknesses to this strategy… Who says the competition knows what they are doing?

In my experience, many marketing and sales people tend to view the competition as all-knowing, particularly in tough market conditions. For example, consult with your friends in accounting and make sure you understand your costs.

Do the competitive price points you are seeing make sense relative to costs? Are competitive prices consistent across customers in a particular geography? You need to do reality checks since this approach is akin to delegating your pricing decisions to your competition.

If the competition is also using this approach, the entire industry may have stopped thinking. Complacency will yield inadequate understanding of true market demand and ultimately missed opportunities. Of course, this kind of testing can also yield you an upside in revenue potential. Summary Competition Based Pricing is a viable option for many businesses, particularly those where there is limited differentiation between products.

By Marketing Consultant T About Marketing Consultant Boardroom Metrics Marketing Consultants provide strategy and execution solutions for your inbound and outbound marketing objectives; including social media, branding, pricing and advertising. August 2nd, 0 Comments. July 5th, 0 Comments. September 30th, 0 Comments. June 17th, 0 Comments. June 4th, 0 Comments. May 5th, 0 Comments. Leave A Comment Cancel reply.


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