What is competition-based pricing?

Competition-based pricing is a pricing strategy where the price of a product or service is set based on competitors' prices. Instead of focusing solely on own costs or customer value, the company analyzes the market and sets the price roughly at the level of competitors, or slightly higher or lower to remain competitive.

For example, if most smartphone manufacturers sell devices in the range of $300–$400, a company might set its smartphone price within this range to attract buyers and not lose market share.

This approach helps respond quickly to market changes but requires constant monitoring of competitors and may limit opportunities for price differentiation.