Pricing is a highly visible component of a firm's marketing mix and an easy tool for obtaining a differential advantage over competitors. However, when competitors continually undercut each other to gain that advantage, it can lead to a price war that damages all companies involved. When firms have identical or very similar products and price information is readily available - for example, Coca-Cola and Pepsi - a common pricing approach to avoid price wars is:
A) competitive-parity pricing.
B) market-based pricing.
C) commodity pricing.
D) bargain pricing.

Question

Quizplus · Accepted Answer

Competitive-parity pricing involves setting prices similar to those of major competitors to avoid price wars, especially in markets where products are very similar and price information is easily accessible, like the Coca-Cola and Pepsi example. This approach helps maintain market stability and protect profit margins for all competitors involved.

Pricing Is a Highly Visible Component of a Firm's Marketing