Supply chain management (SCM) deals with various strategic, tactical, and operational decisions, all of which place a premium on pricing. To expand market share and combat emerging competitors, most real-world supply chain finance pricing problems consider competition a critical factor. As a result, practitioners and academics have paid close attention to competitive pricing in SCM in the last four decades.
Businesses use pricing strategies based on competition to stay afloat in the market; they typically have three options when setting prices for their products or services. To take advantage of economies of scale, businesses set lower prices than their competitors to attract new customers and increase sales. If a company provides more benefits and features than its competitors, it will charge a higher price, resulting in a premium product. Price skimming is a competitive pricing strategy used by some businesses to change prices based on their needs. Companies also tend to maintain equal prices as their competitors as a means of competitive pricing by providing unique shopping experiences and more appealing product options.
The following are some of the critical advantages of competitive pricing:
1) Incorporates discount strategies to increase traffic.
2) Prevent market share losses by keeping track of margin levels
3) Increasing profit margins
Businesses must have a streamlined way to gather and analyze data from their competition and niche markets and implement changes on the fly to implement a successful competitive pricing strategy. Instead of manually collecting and analyzing data and constantly reviewing market price fluctuations or their competitors' prices, businesses can use a platform to streamline workflows and focus on making strategic pricing decisions rather than manually collecting and analyzing data.
Companies can use cutting-edge artificial intelligence (AI) to implement omnichannel pricing strategies that keep them competitive in real-time while avoiding pricing pitfalls like over-discounting and pricing inconsistencies. Businesses can implement a competitive pricing strategy in the early stages of their business; however, it will be most profitable when they look to scale, acquire and retain customers and improve current and future profitability.
