Question

Pricing is not an end in itself but a means to achieve marketing objectives of the firm. How does pricing aid in meeting or prevent competition?

Answer 1

In a market characterised by cut-throat competition, firms often make pricing decisions to meet or present competition. An established firm may cut prices drastically to prevent competitors from entering a market. Some firms match competitors' prices to maintain the status quo within an industry. This objective may also be adopted while introducing a new product. Sometimes, a company adopts below-cost pricing to fight competition. But in the long run, a firm cannot survive by charging less than the total cost of the product.