Competition-based pricing is a strategy that sets prices primarily by referencing what rival companies charge for similar offerings. Instead of starting with your costs or your customer’s perceived value, you benchmark the market and decide where to sit.
Companies using this approach typically choose one of three positions:
- Undercut the market to win on price
- Match competitors to signal parity
- Premium above the market to signal quality or service
The model is fast, easy to defend internally, and useful in commoditized categories where buyers run direct line-item comparisons. As one input among several, competitive data has a place.
As a primary strategy, it breaks down in three ways:
- Your margin gets capped by competitors’ logic, not yours. If rivals are underpricing the category, you inherit their ceiling.
- Willingness to pay disappears from the equation. What buyers will actually pay is shaped by outcomes, switching costs, and alternatives, none of which appear on a competitor’s price sheet.
- The category drifts downward. When everyone benchmarks everyone else, someone always cuts, and margins compress across the market.
There is also a practical issue in B2B. Posted prices rarely reflect real prices. Discounts, bundles, multi-year terms, and negotiated concessions move the actual deal far from the public number, so you are often benchmarking a fiction.
The stronger play: use competitive intelligence to position, not to set the ceiling. Anchor price to the value you create first, then check the market to refine where you sit.
Curious how your pricing compares to the value you deliver? Schedule a discovery call with Acustrategy.
