Value, Pricing and Competitors

by smartamarketing

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.

Pricing objectives

* 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)