What is the primary goal of a competitor-oriented pricing strategy?

A competitor-oriented pricing strategy primarily aims to discourage competitors from entering the market by setting prices based on competitors’ actions. This approach involves monitoring competitors’ prices and adjusting one’s pricing strategy accordingly, which can create a competitive barrier. By setting prices lower than competitors or offering better value for similar prices, a company can signal that the market is fiercely competitive, deterring new entrants who may be unable to compete effectively on price.

Unlike other pricing strategies that may focus on maximizing profit margins, attracting specific customer segments, or enhancing loyalty, a competitor-oriented approach specifically targets the competitive landscape. It engages directly with rival firms, responding to their pricing decisions, and positioning the company favorably to discourage competition. This can be particularly effective in markets where entry costs are low and competitive dynamics are high.