When you enter a new market, you don’t usually know how to price your startup. You don’t want your company to look ridiculous compared to similar offers.
So you look left to find the lowest price, then you look right at the highest price and take a safe place somewhere in between. That means, your monetization is competitor-based.
The main advantage of the strategy is, again, simplicity.
It takes half an hour to browse the competitors’ websites and a bit of math in your head (or a spreadsheet for advanced users) to have the price ready.
So my competitor’s price is $3. And I would change the same because they probably did their homework and know how that $3 is what the market used to sustain, right? Yes and no.
On one hand it’s a good idea to bear in mind what your competitors charge since it lowers your risk of surprising customers with your price point.
On the other hand, this strategy kills your unique selling proposition.
No one ever made a major breakthrough by copying someone else’s (not necessarily correct) decisions.