Introduction
Prices are an important factor in determining the value of things in the economy. But when it comes to setting the price of a certain product, it can be a difficult process. In most cases, sellers have to determine the right price based on the cost of production, supply and demand and the competitive market. This article will compare and contrast the two main pricing strategies adopted by sellers: the comparative non-controlled price and the controlled price.
Comparative Non-Controlled Price
The comparative non-controlled price is a pricing strategy that is based on the cost of production of a product, the demand for it in the market and the prices of comparable products from competitors. In this strategy, sellers use a “price match” method, which involves the seller researching their competitor’s prices for a similar product and then matching or beating it. This is done to ensure that the seller can remain competitive in the market and ensure that their product remains profitable.
The advantages of using a comparative non-controlled price is that it allows the seller to respond quickly to changing market conditions or changes in the pricing of their competitors and adjust the price accordingly. It also has the potential to maximize profit as the seller is able to set a price that is just high enough to remain competitive, but not too high so as to discourage potential buyers.
The disadvantage of using a comparative non-controlled price is that it can lead to price wars. If the seller’s competitors decide to “price match” to compete with the seller, they could end up decreasing the price of the product and severely damaging the seller’s profit margins. It is also important to note that the comparative non-controlled price is more reactive than proactive, meaning that the seller does not have much control over the setting of the price.
Controlled Price
Controlled price is a pricing strategy in which the seller sets the price of a product based on its market value. This strategy relies on the seller having a good knowledge of their market and their customer base. The seller would have to keep an eye on the market trends, customer preferences and competitor’s prices in order to determine a price that is not only profitable but also meets the needs of the customer.
The advantages of using a controlled price is that it can be used to differentiate certain products, resulting in a higher profit margin. This approach also allows the seller to maintain control over the price, as they are the ones who are setting the prices in the first place. It also allows the seller to use a more proactive approach when it comes to setting the prices and take more risks if necessary.
The disadvantage of using a controlled price is that it is difficult to get the pricing just right. The seller might end up setting a price that is too low or too high, resulting in a loss in sales or profit. Additionally, the seller must keep up with the latest market trends in order to ensure that the pricing is still relevant.
Conclusion
In conclusion, the two pricing strategies of comparative non- controlled price and controlled prices are both valuable tools that can be used by sellers in the market. While the comparative non-controlled price is more reactive, the controlled price can be used in a more proactive manner. It is important for the seller to consider their options and determine which pricing strategy is best suited to their needs.
