Which pricing strategy focuses on adjusting prices based on market conditions and competitor pricing?

The chosen answer pertains to a pricing strategy that involves setting prices primarily based on the analysis of what competitors are charging as well as prevailing market conditions. Competitive pricing is designed to position a product or service attractively within the market by aligning its price point closely with similar offerings from other businesses. This approach enables a company to remain relevant and appealing to consumers amidst competition.

By utilizing competitive pricing, businesses are equipped to respond swiftly to changes in the market, ensuring that their pricing remains favorable compared to rivals. This strategy is particularly beneficial in highly competitive markets where consumers have various options, and pricing can heavily influence their purchasing decisions. It helps businesses maintain market share and can attract price-sensitive customers while also preventing price wars by keeping prices in check relative to competitors.

In contrast, other pricing strategies like penetration pricing aim to enter the market at a low price to attract customers, cost plus pricing determines prices based on production costs plus a markup, and psychological pricing takes into account the psychological factors affecting consumer purchasing behavior rather than competitive dynamics.