Competition-Driven Pricing

DEFINITION of 'Competition-Driven Pricing'

A method of pricing in which the seller makes a decision based on the prices of its competition. Competition-driven pricing focuses on determining a price that will achieve the most profitable market share and does not always mean the price is the same as the competition, it could be slightly lower. Research is done in an attempt to eliminate the competition and it is important to accurately interpret communication signals in order to prevent a price war.

BREAKING DOWN 'Competition-Driven Pricing'

Determining how to profitably achieve the greatest market share without incurring excessive costs requires strategic decision making. As such, the focus of the firm should not solely be on obtaining the largest market share, but in finding the appropriate combination of margin and market share that is most profitable in the long run.

RELATED TERMS
  1. Market Value

    The price an asset would fetch in the marketplace. Market value ...
  2. Low-Hanging Fruit

    A commonly used metaphor for doing the simplest or easiest work ...
  3. Customer-Driven Pricing

    A method of pricing in which the seller makes a decision based ...
  4. Marketing Mix

    Usually referring to E. Jerome McCarthy's 4 P classification ...
  5. Predatory Pricing

    The act of setting prices low in an attempt to eliminate the ...
  6. Price War

    When companies continuously lower prices to undercut the competition. ...
Related Articles
  1. Stock Analysis

    Delta Bets On Its Punctuality. Will it Work? (DAL)

    Examine Delta's new marketing effort based on its on-time performance in terms of how much it is likely to benefit the airline.
  2. Fundamental Analysis

    Key Players In Mergers And Acquisitions

    Strategic acquisition is becoming a part of doing business. Discover the different types of investor groups involved.
  3. Personal Finance

    Antitrust Defined

    Check out the history and reasons behind antitrust laws, as well as the arguments over them.
  4. Entrepreneurship

    How to Run a One-Person Business

    Learn how to get a successful one-person business up and running with a business plan, financing, time-management tricks and delegation of tasks.
  5. Entrepreneurship

    Top Legal Tips for Starting a Business

    Before you launch a new business, make sure you're on top of the key issues that most startups face.
  6. Investing

    3 Healthy Financial Habits for 2016

    ”Winning” investors don't just set it and forget it. They consistently take steps to adapt their investment plan in the face of changing markets.
  7. Investing

    How to Ballast a Portfolio with Bonds

    If January and early February performance is any guide, there’s a new normal in financial markets today: Heightened volatility.
  8. Economics

    The Truth about Productivity

    Why has labor market productivity slowed sharply around the world in recent years? One of the greatest economic mysteries out there.
  9. Investing News

    The 10 Fastest Growing Green Startups in 2016

    These social entrepreneurs adopt triple bottom lines that champion urgent environmental problems while generating returns for shareholders.
  10. Retirement

    Roth IRAs Tutorial

    This comprehensive guide goes through what a Roth IRA is and how to set one up, contribute to it and withdraw from it.
RELATED FAQS
  1. How does the role of Medicare/Medicaid affect the drugs sector in the U.S.? (UNH, ...

    Medicare and Medicaid have enormous influence on the pharmaceutical, or drugs, sector in the United States. For instance, ... Read Full Answer >>
  2. How does DuPont Analysis measure operating efficiency?

    The basic DuPont analysis formula, sometimes called the three-step DuPont model, uses net profit margin as its measure for ... Read Full Answer >>
  3. What are the risks of investing in smaller regional airlines versus national or international ...

    The major risks of investing in smaller regional airlines versus national or international airlines are concentrated exposure ... Read Full Answer >>
  4. Why do we need a secondary market?

    In secondary markets, investors exchange with each other rather than with the issuing entity. Through massive series of independent ... Read Full Answer >>
  5. What are the main arguments in favor of the privatization of public goods?

    Public goods are defined by two characteristics. One is non-excludability, which means that even those who don't pay for ... Read Full Answer >>
  6. How can an investor profit from the increase in popularity of discount brokerages?

    Discount brokers generally don't improve profits by generating higher returns, although many purport to do just that. Rather, ... Read Full Answer >>
  7. Does perfect competition exist in the real world?

    First, let's review what economic factors must be present in an industry with perfect competition: 1. All firms sell an ... Read Full Answer >>
Hot Definitions
  1. Harry Potter Stock Index

    A collection of stocks from companies related to the "Harry Potter" series franchise. Created by StockPickr, this index seeks ...
  2. Liquidation Margin

    Liquidation margin refers to the value of all of the equity positions in a margin account. If an investor or trader holds ...
  3. Black Swan

    An event or occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult ...
  4. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  5. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
Trading Center