Reference price is also known as competitive pricing, because here the product is sold just below the price of a competitor’s product. Reference price is the cost at which a manufacturer or a store owner sells a particular product, giving a hefty discount compared to its previously advertised price.

Reference pricing, in simple terms, is known as that price which users compare with the price of a competitor’s product or the previously advertised price. Here the price of the product, which is more expensive, becomes the reference price for your product.Marketers generally induce buying behaviour in customers by putting goods and services at a huge discount compared to its original price. Human beings tend to compare the price of the product with the reference price, and if the new price is heavily discounted compared to the original price, it could trigger buying.Reference pricing is also part of psychological pricing, because it is the price of the product which buyers use as a reference while making a decision to buy the product. Usually reference price is also mentioned on the product so that consumers can compare the difference in rupee value terms.Let's understand reference price with the help of some examples. Big Bazaar, India's leading supermarket store, conducts a sale around Independence Day every year. Here the price is discounted heavily which leads to an increased sales volume.
They also extend discounts to electronics like camera and mobile phones. The idea is to generate sales in that particular time frame. The consumers usually see the difference between discounted price and the original price or the reference price.

Online shopping portals such as Flipkart and Amazon also run their big billion days or festive sales on particular days, where products are sold at a hefty discount.