Competitive pricing is one of several pricing strategies that businesses can employ. For instance, cost-plus pricing involves adding a fixed percentage to the production cost, while value-based pricing sets prices based on the perceived value to the customer. Unlike these methods, competitive pricing focuses primarily on the prices set by competitors.

Understanding price elasticity is crucial for a competitive pricing strategy. Price elasticity measures how sensitive customers are to price changes; knowing this helps businesses predict how changes in pricing might affect demand. Market penetration pricing, another related strategy, involves setting low prices to attract customers quickly, which can be a form of competitive pricing to quickly gain market share.

Dynamic and algorithmic pricing are modern approaches that can enhance competitive pricing strategies. These methods use technology to automatically adjust prices in real-time based on various factors, including competitor prices, demand, and market conditions. This allows businesses to stay competitive more efficiently.

Price matching and freemium pricing are customer-centric strategies that can complement competitive pricing. Price matching involves promising customers that they will match a lower price found elsewhere, thus retaining customer loyalty. Freemium pricing offers a basic product or service for free while charging for premium features, which can attract a large customer base and then convert some of them into paying customers.

Competitive analysis is essential for effective competitive pricing. This involves a thorough examination of competitors' strengths, weaknesses, and pricing strategies. Price skimming, where prices are initially set high and then gradually lowered, can also be considered a form of competitive pricing, especially in markets where new products are introduced frequently.