Samkeppnisverðlagningu

Samkeppnisverðlagningu, or competitive pricing, is a pricing strategy where businesses set the price of their goods or services based on the prices of their competitors. This approach is common in markets with many similar offerings, where consumers can easily compare prices across different providers. The goal of competitive pricing is often to attract customers by offering a price that is perceived as attractive relative to the competition, rather than solely based on production costs or perceived value.

There are several forms of competitive pricing. One common method is matching a competitor's price. If a competitor lowers their price, a business using this strategy will also lower its own price to remain competitive. Another approach is pricing slightly below competitors to gain market share, or pricing slightly above if the business believes its product offers superior quality or features that justify a higher price. Penetration pricing, where a new product is initially priced low to attract customers and gain a foothold in the market, is also a form of competitive pricing, as the initial low price is set in relation to existing market prices.

The effectiveness of samkeppnisverðlagningu depends on various factors, including the nature of the market, the price sensitivity of consumers, and the business's cost structure. While it can be an effective way to compete, it can also lead to price wars, eroding profit margins for all businesses involved if not managed carefully. Businesses must balance the need to be competitive with the necessity of maintaining profitability.