What pricing strategy involves using competitors' pricing to determine price levels?

The pricing strategy that involves using competitors' pricing to determine price levels is known as "follow the leader." This approach requires businesses to closely monitor the prices set by their key competitors and often match or set their own prices in relation to those benchmarks. By aligning their prices with those of the market leader, businesses can remain competitive and attract customers who are price-sensitive.

This strategy is especially prevalent in markets where products are perceived as similar or where price is a significant factor influencing consumer choice. Following the leader allows companies to avoid price wars and stabilize their profit margins while still being responsive to the competitive landscape.

In contrast, cost-plus pricing focuses on adding a standard markup to the cost of goods sold, value-based pricing is determined by the perceived value of the product to the customer, and dynamic pricing involves adjusting prices in real time based on demand and market conditions, which are distinctly different methodologies.