Competitor indexing
Encyclopedia
Competitor indexing is a price setting
technique used by marketers
. Generally, it involves using the price
of competitors' products
in determining the price of your own products.
Variations of this strategy include:
This strategy is typically used by fringe firms, in an industry with one or two dominant companies (in fact, it is sometimes referred to as the "follow the leader strategy").
Its main advantage is ease of use. Extensive marketing research and statistical analysis are not required. The main disadvantage is that it is purely reactive. Price cannot be used as a variable when constructing a marketing mix
: it becomes a constant over which the firm has no control.
Pricing
Pricing is the process of determining what a company will receive in exchange for its products. Pricing factors are manufacturing cost, market place, competition, market condition, and quality of product. Pricing is also a key variable in microeconomic price allocation theory. Pricing is a...
technique used by marketers
Marketing
Marketing is the process used to determine what products or services may be of interest to customers, and the strategy to use in sales, communications and business development. It generates the strategy that underlies sales techniques, business communication, and business developments...
. Generally, it involves using the price
Price
-Definition:In ordinary usage, price is the quantity of payment or compensation given by one party to another in return for goods or services.In modern economies, prices are generally expressed in units of some form of currency...
of competitors' products
Product (business)
In general, the product is defined as a "thing produced by labor or effort" or the "result of an act or a process", and stems from the verb produce, from the Latin prōdūce ' lead or bring forth'. Since 1575, the word "product" has referred to anything produced...
in determining the price of your own products.
Variations of this strategy include:
- matching competitors price
- setting price at an amount above competitors' price (say $5 more)
- setting price at an amount below competitors' price (say $4 less)
- setting price at a percentage above competitors' price (say 3% more)
- setting price at a percentage below competitors' price (say 10% less)
- setting price within a range of the competitors' price (say no more than 5% more and no less than 8% less than competitors price)
This strategy is typically used by fringe firms, in an industry with one or two dominant companies (in fact, it is sometimes referred to as the "follow the leader strategy").
Its main advantage is ease of use. Extensive marketing research and statistical analysis are not required. The main disadvantage is that it is purely reactive. Price cannot be used as a variable when constructing a marketing mix
Marketing mix
The term "marketing mix" was coined in 1953 by Neil Borden in his American Marketing Association presidential address. However, this was actually a reformulation of an earlier idea by his associate, James Culliton, who in 1948 described the role of the marketing manager as a "mixer of ingredients",...
: it becomes a constant over which the firm has no control.
See also
- PricingPricingPricing is the process of determining what a company will receive in exchange for its products. Pricing factors are manufacturing cost, market place, competition, market condition, and quality of product. Pricing is also a key variable in microeconomic price allocation theory. Pricing is a...
- Competitor analysisCompetitor analysisCompetitor analysis in marketing and strategic management is an assessment of the strengths and weaknesses of current and potential competitors. This analysis provides both an offensive and defensive strategic context to identify opportunities and threats...
- MarketingMarketingMarketing is the process used to determine what products or services may be of interest to customers, and the strategy to use in sales, communications and business development. It generates the strategy that underlies sales techniques, business communication, and business developments...
- Marketing mixMarketing mixThe term "marketing mix" was coined in 1953 by Neil Borden in his American Marketing Association presidential address. However, this was actually a reformulation of an earlier idea by his associate, James Culliton, who in 1948 described the role of the marketing manager as a "mixer of ingredients",...