Basing sale price on what competitors charge is known as?

• A. Market Penetration
• B. Competition Pricing
• C. Price Leadership
• D. Psychological Pricing

Answer: (B)

Competition-based pricing is when a business sets its sale price by looking at what competitors charge. The idea is to stay attractive to buyers who compare prices, using rivals’ prices as the benchmark rather than basing the price on costs or on a market demand target. This approach can involve matching or tweaking prices to sit in the same range as competitors, helping to avoid losing customers to rivals with similar offerings. It’s different from price leadership, where the market leader sets prices that others follow; from market penetration, which is a growth strategy often tied to intentionally lower prices to gain market share; and from psychological pricing, which prices to influence perceptions (like odd endings) rather than in direct reference to competitors. For example, if competing laptops are around $999, setting a similar price helps your product stay competitive.