Value, Pricing and Competitors
Dr Brian Monger
In the modern marketplace customers are faced with a wide choice of products that potentially offer it is important that an organisation understands the influence that competitors have on customers.
Value is comparison-based. That is, value is perceived in terms of competitive offerings.
For a competitive advantage to eventuate, an organisation must be perceived to provide better value than its competitors. This requires a good understanding of the competitors’ strengths and weaknesses, their capabilities and, most importantly, the customer’s value perception of their offerings.
* Profit oriented Objectives – prices are set to maximise profits (maximise long-run profit or maximise short-run profit
* Sales Oriented objectives – prices are set to maximise sales volume (increase sales volume quantity; increase dollar sales; increase market share
* Survival – low prices, even under cost are set to create needed cash flow in the short term to ensure the survival of the firm
* Status quo objectives – prices are set to match and not exceed competitors’ prices
* Obtain a target rate of return – on investment (ROI) or rate of return on sales
* stabilise the market or stabilise market price – this objective aims to stabilise price in the marketplace and too compete on non-price considerations. The manager attempts to maintain the same margin regardless of changes in cost.
* Maintain price leadership
* Desensitise buyers to price
* Discourage new entrants into the market – encourage the exit of marginal firms from the industry
* Avoid government investigation or intervention
* Obtain and maintain the loyalty and enthusiasm of distributors and sales personnel
* Enhance image – of the firm, and brand
* Social, or ideological objectives – be seen as honest and fair by customers and potential customers
* Build store traffic
* Prepare for the sale of the business (harvesting)