price-setter

Are You A Price Setter Or A Price Taker?

A price maker is a player who sets the price, independently from what the market does. The price setter is the firm with the influence, market power, and differentiation to be able to set the price for the whole market, thus charging more and yet still driving substantial sales without losing market shares.

Price setter vs. price taker

While the price setter influences the whole market, or it ignores it by charging premium prices without losing momentum in sales or losing market shares. On the other end, the price taker has to run behind the market, follow the trends, lower prices, just to keep up with sales momentum.

What makes the price setter different from the price taker?

Differentiation

The price setter isn’t just the dominant player in a category. Often it’s the player who has such a differentiated product, that nonetheless it charges premium prices it can still grow. Companies like Apple, Dyson, and Tesla are great examples.

They created a whole new category turned into a market itself (ex. Apple: smartphones, and tablets). And their brand is such a synonym with that category that they can retain market shares and still charge high prices.

Distribution

apple-distribution-strategy

The price setter also has a great control over distribution. A company like Apple has been able for years to charge premium prices on its iPhone because because beyond selling them in their stores, also sold them through indirect channels (carriers, cellular networks and more) who through financing also abated the cost of the device for average people, thus enabling a much wider number of people to purchase an otherwise too expensive device.

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Published by

Gennaro Cuofano

Gennaro is the creator of FourWeekMBA which target is to reach over two million business students, executives, and aspiring entrepreneurs in 2020 alone | He is also Head of Business Development for a high-tech startup, which he helped grow at double-digit rate | Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy | Visit The FourWeekMBA BizSchool | Or Get in touch with Gennaro here