Competition-oriented pricing is a pricing method in which an enterprise determines product pricing based on its own competitive strength, reference to costs and supply and demand conditions by studying factors such as competitors’ production conditions, service conditions, and price levels. It is a pricing method that uses the pricing of similar products of competitors in the market as a reference for the pricing of the enterprise’s products. For example: a product is priced at $299.99 on the Amazon platform. The enterprise hopes that orders will come in droves, but finds that the orders are not as expected. Later, the enterprise discovered that competitors were selling the same product at $289.99, so the enterprise reduced the price to $279.99. Before long, both competing parties will reduce their profit margins to an almost negligible level due to continuous price cuts. From this, it can be seen that enterprises need to use competition-oriented pricing with caution. The purpose of the enterprise is to maximize profitability.
If cross-border sellers want to understand the sales prices of their peers, they can enter product keywords on the cross-border e-commerce platform for search, set search conditions, sort by sales volume, obtain the prices of the top 10 products in sales, calculate the weighted average of these 10 prices, and then set the listing price based on the average selling price; they can also be sorted according to the relevance of the products. Search product keywords on the Amazon platform, sort them according to relevance, and search for competitors’ pricing. If the prices of the top 10 products in sales volume vary greatly and have limited effective reference value, it is necessary to weight the average of these 10 prices to obtain the average selling price for reference. Sellers can also directly enter the Amazon best-selling list and set prices based on the product prices in the best-selling list.
Competition-oriented pricing methods mainly include market-based pricing, product differential pricing, and sealed bid pricing.
1. Market-based pricing
Under the market conditions of monopolistic competition and perfect competition, no company can gain absolute advantages in the market by its own strength. In order to avoid losses caused by competition, especially price competition, most companies adopt market-based pricing, that is, the price of a certain product of the company is kept at the market average price level, and such price is used to obtain average rewards. In addition, by adopting market-based pricing, companies do not have to fully understand consumers’ reactions to different price differences, and will not cause price fluctuations.
2. Product Differential Pricing
Product differential pricing refers to the use of different marketing strategies by enterprises to establish different product images in the minds of consumers for the same and homogeneous products, and then select prices lower or higher than competitors as the pricing of the enterprise’s products according to their own characteristics. Therefore, product differential pricing is an offensive pricing method.
3. Sealed Bid Pricing
The purchase, contracting and sale of small enterprises for many bulk commodities, raw materials, complete sets of equipment and construction projects often adopt the method of tendering by the contractor and bidding by the contractor to select the contractor and finally determine the contract price. Generally speaking, there is only one tenderer, which is in a relatively monopolistic position, while there are multiple bidders, which are in a competitive position.
The price of the subject matter is determined by each enterprise participating in the bidding under independent conditions. Among all the bidders, the lowest bidder usually wins the bid, and its bid is the contract price. Such a competitive pricing method is called “sealed bid pricing”.