The concept of competitive pricing in business is in most cases promoted by the availability of close substitutes of a particular product. Notably, most companies engage in this practice not only to increase their level of sales but to control a large portion of the market. For instance, substitute products such as Colgate and Pepsodent have been engaging in constant competitive pricing in the United States market. The main purpose for adopting this strategy was to help the manufacturers to put more emphasis on the commodities and to maintain stable profit margins.
Competitive pricing between the two products has increased over the last five years with each manufacturer intensifying their advertisement campaigns. In 2016, the Colgate max fresh toothpaste weighing 170g was priced at $4 while Pepsodent complete care of the same weight was costing 4.50. However, in early 2018, these products values changed as the former was priced at $4.96 while the latter at $ 4.85. However, these prices differed in different countries due to distribution expenses that are transferred to the consumers. In India for example, Pepsodent of 150g costs about $13.15 while Colgate of 200g averagely costs $15.15. The upward price changes can be linked with the growing cost of production and the need to increase respective company’s share in the market.
Generally, the competitive pricing has had a great impact particularly on the growth of Pepsodent in the United States market. While Colgate has been the market leader for many years, its rival company Pepsodent has also been recording growing profits every year. Its manufacturer, Unilever, recorded a profit increase of 2.6% representing $29 billion while Colgate stated revenue of $2.44 billion (Amigo bulls n.p). As a smaller brand, the use of this strategy has aided Unilever to penetrate the highly competitive market.
Amigo bulls. “Colgate-Palmolive Annual Revenue, Income Statement, 2017, 2016 – Amigobulls”. Amigobulls.Com, 2018, https://amigobulls.com/stocks/CL/income-statement/annual. Accessed 27 July 2018.